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Gennari Consulting, Inc. v. Wellington Corp., LLC

United States District Court, D. Maryland

December 13, 2019

WELLINGTON CORP., LLC, et al., Defendants.


          Ellen L. Hollander United States District Judge

         This Memorandum Opinion concerns a suit filed by Gennari Consulting, Inc. (“Gennari”), plaintiff, on June 24, 2019, against defendants Wellington Corp., LLC (“Wellington”) and its sole owner, Robert Kundel, Jr. ECF 1 (the “Complaint”); id. ¶ 8. Gennari alleges that defendants breached a profit-sharing agreement with Gennari by terminating the agreement without cause via an email to Gennari's owner, Matthew Gennari (“Mr. Gennari”). Id. ¶¶ 6, 26. Further, plaintiff asserts that defendants sought to “cut Gennari off from all customers and vendors, with respect to the sale of the Restorer product, which is the subject of this dispute.” ECF 1 at 1.[1]

         The Complaint, which is supported by several exhibits, contains nine counts, as follows: “Breach of Contract” against Wellington (Count I); “Civil Conspiracy” against Wellington and Kundel (Count II); “Unjust Enrichment” against Wellington (Count III); “Tortious Interference with Contractual and Economic Relationship” against Wellington and Kundel (Count IV); “Conversion” against Wellington and Kundel (Count V); “Fraud” against Wellington and Kundel (Count VI); “Defamation” against Kundel (Count VII); “Injurious Falsehood” against Wellington and Kundel (Count VIII); and “Tortious Interference with Prospective Advantage” against Wellington and Kundel (Count IX). Plaintiff seeks a total of $81, 000, 000 in compensatory damages, $105, 000, 000 in punitive damages, as well as attorneys' fees, interest, and costs. Id. ¶¶ 28‒75.

         Subject matter jurisdiction is premised on diversity of citizenship. See Id. ¶ 4; 28 U.S.C. § 1332. Defendants have moved to dismiss. ECF 4. Pursuant to Fed.R.Civ.P. 12(b)(2), they claim lack of personal jurisdiction. And, pursuant to Fed.R.Civ.P. 12(b)(3), they claim improper venue. The motion is supported by a memorandum of law (ECF 4-1) (collectively, the “Motion”), and the affidavit of Kundel (ECF 4-2). Gennari opposes the Motion (ECF 7, the “Opposition”), supported by the affidavit of Mr. Gennari. ECF 7-1. With their reply (ECF 10, the “Reply”), defendants submitted another affidavit from Kundel. ECF 10-1.

         Upon review of the submissions, this Court issued an Order asking the parties to address the possible transfer of this case to the Northern District of Ohio (ECF 12), where a related suit, initiated by Wellington, is now pending. See ECF 11. Wellington's response is docketed at ECF 13 (the “Wellington Memoradum”). It is supported by several exhibits. ECF 13-1 to ECF 13-3. Gennari's response is docketed at ECF 14 (the “Gennari Memorandum”), along with one exhibit. ECF 14-1.

         No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall transfer the case to the Northern District of Ohio, pursuant to 28 U.S.C. § 1404(a). Therefore, I shall deny the Motion as moot.

         I. Background[2]

         Gennari is a Maryland corporation with its principal place of business in Cockeysville, Maryland. ECF 1, ¶ 2.[3] Wellington is an Ohio limited liability corporation with its principal place of business in Vienna, Ohio. Id. ¶ 3. Kundel is the sole shareholder of Wellington and its principal officer. Id.[4] He is a citizen of Ohio. ECF 4-2, ¶¶ 1, 4.

         Plaintiff alleges that Wellington does business throughout the United States and “[w]orldwide.” ECF 1, ¶ 3. Moreover, Gennari claims that this Court has subject matter jurisdiction, and that venue is proper in this District, because the contract in issue was executed in Maryland. Id. ¶ 5. Gennari also avers that “the course of dealings and business occurred in Maryland, and the acts complained of by the Plaintiff arose and caused damage to the Plaintiff in Maryland. . . .” Id.

         In 2010, Mr. Gennari, a power tool executive, formed Gennari and began working as a paid consultant with Jinding Electric Tool Company (“Jinding”), located in Changzhou, China. Id. ¶¶ 6, 7. Gennari manufactures for Jinding “over one hundred million dollars in products sold globally to Stanley Black & Decker” (“SBD”). Id. at 7. Through May 2019, Gennari worked as a consultant for Jinding “with specific directives to grow” Wellington's power tool business, until defendants caused Gennari's “relationship [with Jinding] to end.” Id.

         Plaintiff recounts that defendants had invented “a crude non commercially viable prototype, non-sellable power tool known as the Rola-brader.” Id. ¶ 9. In February 2015, Wellington “reached out to Gennari via email at the encouragement of John Cunningham from SBD who was the President of consumer products of SBD and a lifelong friend and colleague of [Mr.] Gennari, ” with the goal of developing the “Rolabrader.” Id. ¶ 11. Thereafter, Gennari sought “to get the product designed, manufactured and sold globally.” Id. ¶ 12. Gennari introduced the Rolabrader to Jinding in February 2015 and “drew up a Joint Development Agreement. . . between Wellington and Jinding.” Id. ¶ 13; see ECF 1-2 (the “Agreement”).[5] Kundel signed the Agreement for Wellington on March 12, 2015, and Gennari signed it on May 14, 2015. ECF 1, ¶ 13.[6]

         The Agreement does not specify where it was executed. Gennari alleges that he executed the Agreement in Maryland. ECF 7-1 ¶ 11. Kundel avers that he executed the Agreement in Ohio. ECF 4-2, ¶ 15. And, it contains an Ohio choice-of-law provision. ECF 1-2 at 3. The provision states, id. ¶ 10: “This agreement will be governed in all respects by the law of the State of Ohio.”

         Under the Agreement, Wellington is required to pay 50% of all design and tooling fees. Id. ¶ 13. However, plaintiff claims Wellington has failed to do so. Id. Moreover, Wellington “contributed no capital investment in production inventory, ” which is “a value of approximately” $1, 000, 000. Id. ¶ 14. According to Gennari, it negotiated favorable terms with Jinding to cover the project's costs because Wellington had no funding. Id.

         Gennari also claims that it “alone united the SBD sales, marketing and engineering teams into the project.” Id. ¶ 15. Further, Gennari maintains that it “alone managed and perfected the design and product development process between Jinding and SBD in both China and Maryland, USA.” Id. Gennari allegedly made the first presentation of the Rolabrader to SBD on or about April 11, 2016. Id. ¶ 16. The plan was for Jinding to manufacture the product and for “SBD to source it and sell it globally.” Id. Wellington was to receive a 10% royalty. Id.

         In addition, Gennari alleges that it created a licensing agreement “whereby Wellington would license the Porter Cable brand from SBD and pay them a royalty. In turn, Wellington would be responsible for all distribution.” Id.[7] Gennari claims that it “alone secured a vendor, Lowes. . . .” Id. ¶ 17. Gennari also claims that it “created the Restorer brand name” because Lowes did not approve of “the Rolabrader name.” Id. ¶ 18. Further, plaintiff alleges that Wellington “later fraudulently trademarked the Restorer brand solely in its own name without giving joint credit to Gennari.” Id. According to plaintiff, Gennari enlisted other companies to “handle the e-commerce sales of the Restorer. . . .” Id. ¶ 19.

         In August 2016, Wellington and Gennari entered into a profit-sharing agreement, by which Wellington was to receive 65% of the profits and pay 65% of expenses, and Gennari's share would be 35%. Id. ¶ 20; see ECF 1-1 (the “Profit Agreement”). The Profit Agreement was to remain in effect for the duration of the licensing agreement “with SBD for the Porter-Cable and Black & Decker brands providing that Matthew Gennari is openly and actively managing these . . . accounts.” ECF 1-1.

         The Profit Agreement contains no choice of law provision, nor does it specify where the contract was to be performed. See Id. Gennari contends that the two companies agreed to split the workload at the same percentages as the profits and expenses. ECF 1, ¶ 22. Gennari also alleges that it secured additional retailers for the Restorer, including Home Depot, Walmart, and Amazon USA. Id. ¶ 21. Moreover, plaintiff “continued to manage product development, marketing, finance, supply chain management, sourcing, commercial execution and planning of the Restorer project.” Id. ¶ 22.

         According to plaintiff, Kundel agreed to devote all of his time to the Restorer project. Id. ¶ 20. Yet, he continued to work on unrelated business matters. Id. ¶¶ 20, 22.

         Gennari contends that in May 2017, it “reached out to Wellington concerning the inequity of workload division, ” because plaintiff was “doing 95% of the work rather than the agreed upon 35%.” Id. ¶ 23. Gennari claims that it “built the Restorer project from the ground up, with little to no involvement from Wellington. Wellington and Kundel had little to no interaction with the vendors, suppliers and manufacturers of the Restorer project; never met with Jinding. . .and only made one trip to SBD.” Id. Revenue “doubled.” Id. ¶ 24. Further, Gennari contends that in April 2019, it “received confirmation from Lowe's” as to an agreement for quantities of product recommended by Gennari. Id. ¶ 25. But, it “was forced to create and present the [brand transition plan] on its own, to the supply base without the help and assistance Wellington had promised.” Id. ¶ 25.

         On May 10, 2019, Mr. Gennari received an “unexpected” email from Wellington and Kundel (ECF 1-3 at 2), “unilaterally terminating their long-standing profit-sharing agreement, without notice, without cause, and in breach of the profit-sharing agreement for the sole purpose of diverting funds rightfully due and owing to Gennari.” Id. ¶ 26. According to plaintiff, the email was defamatory, and was sent to Gennari's business contacts “for the sole purpose of unlawfully destroying Gennari's business contacts and eliminating it from the Restorer project so that Wellington and Kundel would not have to pay Gennari its 35% of profits.” Id.

         In the email, Kundel stated that his intent was to “raise funds to build the pastoral retreat center and be able to pass down our company to our son, ” and he needed his company “to be a transferrable entity.” ECF 1-3 at 2. As a result, he was “terminating [the] contract between Wellington Corp LLC and Gennari Consulting. . . .” Id. Notably, Kundel said: “[W]e can no longer have financial ties between us and our companies . . . [Wellington] will be working directly with Jinding and all accounts.” Id.

         Wellington and Kundel allegedly withheld receivables and “directed all parties involved to disengage with Gennari. . . .” ECF 1, ¶ 27. They also allegedly “refused to release funds belonging to Gennari” and instructed other parties “to remove Gennari's access to data regarding the sales and expenses of the Restorer project.” Id.

         In addition to claiming breach of contract, Gennari alleges that defendants engaged in defamatory and tortious conduct. According to plaintiff, defendants “purposefully and maliciously sabotag[ed] Plaintiffs [sic] business and economic relationships.” ECF 1, ¶ 47(a). Further, defendants tortiously interfered with plaintiff's business by “[d]efaming and providing false information about Gennari to Vendors, customers and manufacturers about his position, employment and ability to actively participate in the business, for the sole reason of damaging Gennari's business and stealing business from Gennari for personal financial gain, ” and making “defamatory statements about Gennari's employment status, financial abilities, business capacity and future viability, to multiple individuals and businesses. . . .” Id. ¶¶ 47, 59.

         This suit followed on June 24, 2019. Gennari attached to its Complaint a copy of the Profit Agreement between itself and Wellington/Kundel (ECF 1-1), the Agreement between Wellington/Kundel and Jinding (ECF 1-2), and an email dated May 10, 2019, from Mr. Gennari to Kundel, in reply to the email sent on May 10, 2019, from Kundel to Mr. Gennari, terminating the Profit Agreement. ECF 1-3.

         Of import here, Wellington sued Gennari and Mr. Gennari in an Ohio state court on June 3, 2019. ECF 4-2; see also ECF 13-1. The suit alleges breach of contract by Gennari with respect to the Profit Agreement, as well as tortious interference with a business relationship. Id. As noted, Gennari filed the case sub judice on June 24, 2019. And, one day later, on June 25, 2019, Gennari and Mr. Gennari removed the Ohio state case to the United States District Court for the Northern District of Ohio.[8] Id. ¶ 21; see Wellington Corp., LLC v. Gennari Consulting Inc., et al., Case No. 4:19-cv-01464.[9] Notably, on August 12, 2019, the Ohio federal court denied the Gennaris' motion to dismiss for lack of personal jurisdiction and improper venue. ECF 11-1 at 13.

         In its answer to the Ohio suit, Gennari raised, among others, the following affirmative defenses: “Wellington's claims are barred, in whole or in part, by Gennari Consulting's compliance with contractual obligations”; “Wellington's claims are barred, in whole or in part, by Wellington's failure to meet its conditions precedent for a claim on [sic] breach of contract”; “Wellington's claims are barred by Wellington's own breach of the [Profit] Agreement”; “Wellington's claims are barred by its own comparative and/or contributory negligence”; and “Wellington's claims are barred, in whole or in part, by the applicable doctrines of waiver, laches, unclean hands, accord and satisfaction, and/or estoppel.” ECF 13-3 at 7‒8.

         Additional facts are discussed, infra.

         II. ...

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