United States District Court, D. Maryland
Catherine C. Blake, United States District Judge
This case involves a West Virginia summer camp; the companies that own and manage the camp, Timber Ridge, Inc. (“TRI”) and Youth World, Ltd. (“YWL”); and the failed business relationship between plaintiff Luis Rullan, a Spanish national, and defendants Jill Goden and her father, Fred Greenberg. Now pending before the court are TRI’s motion to dismiss for lack of personal jurisdiction, TRI and YWL’s motion to dismiss for insufficient service of process and failure to state a claim, and Greenberg and Goden’s motion for a show cause order. The issues have been fully briefed, and no hearing is necessary. See Local R. 105.6 (D. Md. 2014). For the reasons stated below, TRI’s motion to dismiss for lack of personal jurisdiction will be denied; TRI and YWL’s motion to dismiss, construed as a motion for summary judgment, will be granted in part and denied in part; and Greenberg and Goden’s motion for a show cause order will be denied. Much of the factual background and legal analysis in this memorandum was already set forth in the opinion issued September 23, 2015 resolving earlier motions for partial summary judgment. It is repeated here for ease of reference.
In 1955, Greenberg established the Timber Ridge Camp (the “Camp”) in High View, West Virginia, as an overnight summer camp for children. (Greenberg Decl. ¶ 1, Defs.’ Reply Ex. 19, ECF No. 249-19.) Prior to Rullan’s involvement with the Camp, Goden and Greenberg each owned 50% of the companies that own and manage the Camp: TRI and YWL. (See Greenberg Decl. ¶¶ 2-3.) As of August 2014, YWL no longer operates the Camp and has filed a complaint in Maryland seeking judicial dissolution. (Greenberg Decl. ¶ 3.)
Around 2010, Greenberg decided to “get out of the Camp business” and thought about “adding a European partner” because “Goden could not manage the Camp alone and needed help.” (Greenberg Decl. ¶¶ 5-7.) He wanted a partner who would increase the number of international campers and “who was relatively wealthy who could capitalize the business.” (Greenberg Decl. ¶ 7.) In late 2010, Greenberg contacted Rullan, who Greenberg believed came from a wealthy family. (Greenberg Decl. ¶¶ 7, 9, 11.) Rullan began attending the Camp in 1990 when he was 6 years old, and he and his four siblings attended the Camp as campers and counselors for about 20 years. (Greenberg Decl. ¶ 8.) Greenberg and Goden “became very close friends with Rullan and his family.” (Greenberg Decl. ¶ 9.)
On December 7, 2010, Rullan and his father met with Goden and Greenberg at the St. Andrews Country Club in Florida, where they discussed Rullan’s possible involvement with the Camp. (Greenberg Decl. ¶¶ 12-13; Rullan Decl. ¶ 5, Pl.’s Opp’n Ex. 10, ECF No. 229-9.) Rullan presented a PowerPoint to Goden and Greenberg that included his understanding of the Camp’s liabilities, based in part on information Goden and Greenberg previously provided him, but that information did not accurately portray the extent of the Camp’s debt, liabilities, and size. (Rullan Decl. ¶ 5; St. Andrews Presentation, Mot. Dismiss Ex. H, ECF No. 204-10.) Neither Goden nor Greenberg corrected Rullan’s misunderstanding. (Rullan Decl. ¶ 7; Greenberg Decl. ¶ 13.)
The parties disagree about what was said at the meeting. Rullan claims that Goden and Greenberg entered into an oral employment agreement with him in which they would pay him $72, 000 annually to recruit European campers. (Rullan Decl. ¶¶ 8-11.) Part of the agreement, Rullan alleges, was that if he and Goden “worked well together during the first year, Greenberg would sell his half of the Camp and Goden would make [Rullan] her partner.” (Id. at ¶ 8.) He also claims that Greenberg authorized Goden to make Rullan her full partner at any time during his first year. (Id.)
Greenberg maintains that he and Goden told Rullan he would need to work successfully with Goden for at least a year and recruit European campers before it could be determined whether Rullan could buy Greenberg’s interest in TRI and YWL. (Greenberg Decl. ¶¶ 15-16, 18.) After the meeting, Rullan drafted a document titled “Minutes meeting December 7, 2010 - St Andrews” and emailed it to Goden. (Rullan Decl. ¶ 12.) The document states that Rullan will work as an employee for one year, beginning in January 2011. (St. Andrews Minutes, Defs.’ Reply Ex. L at 2, ECF No. 249-3.) Further, “[a]fter year one there will be a meeting to evaluate the year and see the results obtained as well as setting the partnership agreement that better suits everyone’s needs. If everything goes well the idea is to obtain shares of the company, ” and Rullan would “have to invest [i]n the company, the basis [to be] set after year one.” (Id. at 2-3.) Rullan began working for the Camp soon after the meeting in Florida, and Goden referred to Rullan as her “partner” just days after the meeting. (Rullan Decl. ¶ 10; Goden December 13, 2010 Email, Defs.’ Reply Ex. M, ECF No. 249-4.)
In January 2011, Rullan and Goden formed a company called Youth World International, Ltd. (“YWI”). (Goden Decl. ¶ 41, Defs.’ Reply, ECF No. 249-20.) The purpose of the company was to recruit campers from Europe, and Rullan and Goden each owned half of the business. (Id.)
On January 29, 2011, Greenberg executed a promissory note in which Greenberg and TRI borrowed $350, 000 from Lawrence Phillips. (Rullan Decl. ¶ 17.) Rullan claims that neither Goden nor Greenberg disclosed the loan to him. (Id.) Greenberg says, however, that he actually borrowed the money in 2009, and the promissory note merely documented this prior loan. (Greenberg Decl. ¶ 30.) Rullan states that he would not have continued to pursue the business venture had he known of this liability, unrelated lawsuits against the defendants and the Camp, the Camp’s cash flow issues, the actual acreage of the Camp, the extent of the defendants’ commingling of funds, or that Goden “apparently had no intention of allowing [Rullan] to co-manage the Camp or to act as her full partner. . . .” (Rullan Decl. ¶¶ 14, 17.)
Rullan alleges that he and Goden agreed to become full partners in February 2011 when they went on a recruiting trip together in Europe. (Rullan Decl. ¶ 18.) Goden denies talking about a partnership during this time and claims that she and Rullan only discussed recruiting campers and YWI. (Goden Decl. ¶ 42.)
After the recruiting trip, Rullan and Goden met with Richard Gershberg to help Rullan get an E-2 visa to work in the United States. (Goden Decl. ¶ 46; Rullan Decl. ¶¶ 21-22.) Gershberg advised Goden and Rullan to contribute $55, 000 each to YWI. (Rullan Decl. ¶ 23.)
Rullan invested $55, 000 in YWI, but Goden contributed nothing. (Id.) Goden and Rullan each received half of YWI’s total shares. (Rullan Decl. ¶ 24.) Within a few days, Goden transferred the $55, 000 to YWL’s bank account, telling Rullan she had to borrow the money to pay Camp bills and she would repay the YWI account. (Rullan Decl. ¶ 25.) Goden never repaid the money to YWI. (Id.) Instead, she and Greenberg later “agreed in writing that the $55, 000 would be credited toward [Rullan’s] purchase of Greenberg’s stake in the Camp.” (Id.)
Rullan worked at the camp during the summer of 2011. (Greenberg Decl. ¶ 37.) Greenberg claims that “Rullan did not demonstrate . . . that he was ready or capable to run and manage the day to day activities of the Camp.” (Id.) Specifically, Greenberg says that Rullan “gave preferential treatment to the European campers over the American campers, ” “came off as pompous, ” and did not do the “menial labor” that is required to run a summer camp. (Id. at ¶¶ 37-38.) During that summer, Rullan learned that two separate companies, YWL and TRI, owned and managed the Camp, and Camp bills were sometimes paid late. (Rullan Decl. ¶ 29.)
On June 4, 2011, Rullan met with Goden and Greenberg at Goden’s house at the Camp to “discuss committing [his] partnership agreement with Goden into writing and to identify any outstanding issues about [their] partnership.” (Id. ¶ 30.) During the meeting, Goden and Greenberg “continued to refer to [Rullan] as Goden’s full partner in the Camp.” (Id.) Rullan claims that Goden said the Camp had enough money to pay each of them an annual salary of between $72, 000 and $100, 000, and neither Greenberg nor Goden disclosed to him the extent of the Camp’s liabilities. (Id. ¶¶ 30-31.)
On August 8, 2011, Rullan says Goden asked him to lend $50, 000 to the Camp to cover a cash flow shortage. (Id. ¶ 32.) Rullan claims Goden told him that as her full partner and co- owner of the Camp, he had co-equal financial responsibility for the Camp. (Id.) In reliance on this statement, he wired $50, 000, the remainder of his life savings, to YWL the next day. (Id. at ¶¶ 32-33.)
Rullan alleges that on August 15 and 18, 2011, he met with Goden and Greenberg “to discuss various issues regarding the partnership, including . . . assuming Greenberg’s equity stake in the Camp (TRI and YWL).” (Id. ¶ 35.) Rullan says that during these meetings, Goden and Greenberg continued to refer to him as Goden’s partner. (Id.) On August 24, 2011, Rullan says that he, together with Greeberg and Goden, drafted a document at the Camp titled “Partnership agreement August 24th, 2011 - Timber Ridge Camp, HV, WVA.” (Id. ¶ 36; Partnership and Stock Agreement (“PSA”), Mot. Dismiss Ex. C, ECF No. 204-5.)
Greenberg’s account differs. He claims that in August 2011, “Rullan became increasingly concerned [Greenberg] would never sell Rullan [his] interest in the Camp.” (Greenberg Decl. ¶ 39.) Greenberg alleges that Rullan’s concerns were based on his “failure to recruit enough European campers and his poor performance at Camp that summer.” (Id.) According to Greenberg, “Rullan was adamant about having a letter of intent that he would have the opportunity to purchase [Greenberg’s] interest in the Camp the next spring.” (Id. ¶ 40.) Greenberg claims he told Rullan that “formalizing an agreement would take years, ” “attorneys would need to handle any contract, ” and Gooden and Greenberg “still needed to evaluate the companies and [Rullan’s] involvement.” (Id. .) Nevertheless, Greenberg says, on August 18, 2011, Rullan presented Goden and Greenberg with a set of proposed terms to a deal to purchase Greenberg’s interest in the Camp. (Id. ¶ 41.) Greenberg claims he “did not want to sign” the document because “Rullan had not even completed the one year vetting period, nor had he demonstrated that he was capable of managing the Camp and working with Goden, nor did [Greenberg] know if he could even afford to support the Camp and to pay off any of the debts that [Greenberg] had amassed on behalf of TRI and YWL to support the Camp.” (Id. ¶ 42.) Greenberg says that Rullan assured him that the terms were “only a letter of intent” meant to “document the general terms of a possible agreement” to be agreed upon in the future if Goden and Greenberg “agreed to have Rullan proceed with purchasing [Greenberg’s] interest in the Camp.” (Id.)
There is no dispute that on August 24, 2011, Greenberg, Goden, and Rullan signed the PSA, which states that “Fred Greenberg, Jill Goden and Luis Rullan, agree to the following:”
• Fred Greenberg as the founder of Timber Ridge he will always have the recognition from Luis Rullan. His thoughts and ideas to improve the business will be always taking into consideration and will always be welcome.
• At this point Fred Greenberg, owns 50% of the stock in the company “Youth World LTD T/A Timber Ridge Camps” and Jill Goden owns the remaining 50%. Jill Goden also owns 50% of Timber Ridge Inc. and Fred Greenberg owns the remaining 50% of Timber Ridge Inc.
• Fred Greenberg sells to Luis Rullan 50% of the total stock of both companies, 50% of Youth World LTD and 50% of Timber ridge Inc. That will be paid as per 50, 000 USD per year during a 10 year period (starting 2011) for a total amount of 500, 000 USD.
• If Fred dies before the obligation is finished, the obligation remains to whom he decides.
• There is the intention of pay 2 times per year during the total period of the agreement (10years starting 2011). One in January and the second one in July.
• We agreed that we will set an equal salary between Jill Goden and Luis Rullan.
• Jill Goden and Luis Rullan will relegate Fred Greenberg from his debt obligations related to the company (Youth World LTD.)
• As soon as the market conditions allow it, without an extra cost for the company, Jill Goden and Luis Rullan will assume Fred Greenberg’s personal guaranties in the company.
• Both partners will have the first right of refusal in the case that a partner has the intention to sell any of their stock.
• When the stock is to be transferred to a family member (only son or daughter of a partner) of any of the stockholders it is only allowed to transfer 49% of the stock. The remaining ...