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Brooks v. JCS Logistics, Inc.

United States District Court, M.D. Pennsylvania

July 20, 2018

JAMES BROOKS, Plaintiff,
v.
JCS LOGISTICS, INC., and MICHAEL J. CARTY, Defendants.

          MEMORANDUM

          A. RICHARD CAPUTO UNITED STATES DISTRICT JUDGE

         Presently before me is the Motion to Dismiss (Doc. 6) filed by Defendants JCS Logistics, Inc. (“JCSL”) and Michael J. Carty (“Carty”) (collectively, where appropriate, “Defendants”). Plaintiff James Brooks (“Brooks” or “Plaintiff”), a minority JCSL shareholder, commenced this action against JCSL and Carty asserting claims for violation of § 1508 of the Pennsylvania Business Corporation Law, 15 Pa. C.S.A. § 1101 et seq., and breach of fiduciary duty. Defendants have now moved to dismiss this action. Because Plaintiff fails to state a claim under 15 Pa. C.S.A. § 1508, Defendants' motion to dismiss will be granted in part and Count I of the Complaint will be dismissed without prejudice.

         I. Background

         The facts as alleged in the Complaint are as follows:

         JCSL is a closely-held Pennsylvania corporation. (See Doc. 1, ¶ 16). Brooks is the President of JCSL and a minority shareholder, owning twenty-five percent (25.00%) of all outstanding shares of JCSL stock. (See id. at ¶ 17). Carty is the Secretary and Treasurer of JCSL and owns a majority of all outstanding shares of JCSL stock. (See id. at ¶ 18).

         JCSL and Carty have failed and/or refused to adhere to certain corporate formalities such as: (1) failing to hold meetings of all JCSL shareholders on a regular basis, whether annually or otherwise; (2) refusing to distribute JCSL's profits to its shareholders; and (3) refusing to provide JCSL shareholders with annual financial statements. (See id. at ¶¶ 20(a)-(c)). Despite demands by Plaintiff, Defendants: (1) withheld distributions from Plaintiff and/or adopted a “no-dividend” policy; (2) denied Plaintiff access to corporate records and information; and (3) refused to furnish Plaintiff with annual financial statements. (See id. at ¶¶ 21(a)-(c)).

         By letter dated July 26, 2016, Brooks, through his counsel, demanded Defendants furnish him with certain information regarding JCSL's corporate affairs and financial condition. (See id. at ¶ 23). Plaintiff's First Demand was sent to both Defendants simultaneously by regular and certified mail to JCSL's Registered Office. (See id. at ¶ 24). The regular mailing was returned and marked with “Not Deliverable as Addressed.” (See id. at ¶ 24(a)). The certified mailing was delivered on August 4, 2016. (See id. at ¶ 24(b)).

         Brooks sent a Second Demand to Defendants, again through counsel, by letter dated September 12, 2016. (See id. at ¶ 25). Plaintiff's Second Demand was sent simultaneously by regular and certified mail to JCSL's Registered Office. (See id. at ¶ 26). The regular mailing was not returned. (See id. at ¶ 26(a)). The certified mailing was returned and marked with “Not Deliverable as Addressed.” (See id. at ¶ 26(b)). Plaintiff also forwarded a copy of his Second Demand to Defendants' counsel by facsimile. (See id. at ¶ 27).

         Both of Plaintiff's written Demands state the purpose for which the inspection was sought, which purpose was related to Plaintiff's interest as a JCSL shareholder. (See id. at ¶ 28; Exs. “A”-“B” (requesting “full information regarding the status of JCSL and its financial condition” and noting that Defendants had “withheld distribution of profits”)). Defendants refused Plaintiff's written Demands and/or failed to respond within five (5) business days as required by the Pennsylvania Business Corporation Law. (See Doc 1, ¶ 29).

         Based on the foregoing, Plaintiff commenced this action against Defendants on January 12, 2018. (See id., generally). Plaintiff asserts claims for inspection of corporate records pursuant to 15 Pa. C.S.A. § 1508(c) (Count I) and breach of fiduciary duty (Count II). (See id.). Defendants filed a motion to dismiss on May 21, 2018. (See Doc. 6, generally). The motion to dismiss is now fully briefed and ripe for disposition.

         II. Legal Standard

         Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). “Under the ‘notice pleading' standard embodied in Rule 8 of the Federal Rules of Civil Procedure, a plaintiff must come forward with ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 147 (3d Cir. 2014) (quoting Fed.R.Civ.P. 8(a)(2)).

         When resolving a Rule 12(b)(6) motion, “a court must consider no more than whether the complaint establishes ‘enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary elements' of the cause of action.” Trzaska v. L'Oreal USA, Inc., 865 F.3d 155, 162 (3d Cir. 2017) (quoting Connelly v. Lane Constr. Corp., 809 F.3d 780, 789 (3d Cir. 2016)). In reviewing the sufficiency of a complaint, a court must take three steps: (1) identify the elements of the claim; (2) identify conclusions that are not entitled to the assumption of truth; and (3) assume the veracity of the well-pleaded factual allegations and determine whether they plausibly give rise to an entitlement to relief. See Connelly, 809 F.3d at 787 (citations omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

         III. ...


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