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Proffe Publishing, Inc. v. Lindner

United States District Court, D. New Hampshire

November 22, 2016

Proffe Publishing, Inc.
Wolfgang Lindner, et al. Opinion No. 2016 DNH 211

          David K. Pinsonneault, Esq., Jeremy David Eggleton, Esq.


          Joseph N. Laplante United States District Judge.

         This case concerns a contract dispute between plaintiff Proffe Publishing, Inc. (PPI), a financial newsletter publisher, and defendant Wolfgang Lindner, whom PPI hired as its assistant editor in 2011. PPI alleges that Lindner, once ensconced in his new position, executed contracts that purported to serve PPI but which, in reality, improperly enriched Lindner and various associates. PPI has sued Lindner, two German-based companies Lindner allegedly controls, x-services, UG and J.L. Consult, GmbH, and two of Lindner's hires, Peter Kunze and Egbert Woelk. Alleging diversity jurisdiction, 28 U.S.C. § 1332, Proffe asserts six causes of action: 1) conversion (against Lindner); 2) fraudulent concealment (against all defendants); 3) breach of fiduciary duty (against Lindner, Kunze and Woelk); 4) civil conspiracy (against all defendants); 5) breach of the covenant of good faith and fair dealing (against all defendants); and 6) breach of contract (against all defendants). The defendants have moved to dismiss the case in its entirety, arguing: that this court lacks subject matter jurisdiction to hear the case due to a contractual forum selection clause; that the plaintiff's claims are barred by New Hampshire's three-year statute of limitations; and that all of plaintiff's claims fail to state a claim for which relief can be granted. See Fed.R.Civ.P. 12(b) (1), (6). The court has reviewed the parties' submissions, and heard their oral arguments. As a general matter, the parties' disagreement over which of several disputed contracts control this litigation makes resolution of the case on a motion to dismiss difficult. More specifically, the court finds that neither of the potentially operative forum selection clauses are mandatory and that the Complaint sufficiently alleges both monetary damages that exceed the jurisdictional threshhold and facts that support each cause of action. Finally, because the defendants' statute of limitations defense targets plaintiff's claimed damages, rather than its asserted causes of action, the court need not resolve that issue at this early stage of litigation. Accordingly, defendants' motion is denied.

         I. Background

         The court culls the following facts from plaintiff's first amended Complaint and from information contained in documents on which the complaint relies. Haley v. City of Bos., 657 F.3d 39, 46 (1st Cir. 2011).

         PPI publishes several weekly financial newsletters. One such newsletter is Proffe's Trend Portfolio, of which Michael Proffe is editor-in-chief. Defendant Lindner holds 15% of PPI's stock and served as a director.[1] In December 2011, PPI contracted with Lindner to pay him 5000 euros per month to serve as Trend Portfolio's assistant editor. Lindner's responsibilities included submitting weekly market reports to Michael Proffe concerning PPI's own investments. Although Lindner never returned a signed copy of the contract with PPI, the parties acted in accordance with its terms until May 2015.

         In November 2015, PPI and defendant x-services agreed to an oral contract, pursuant to which x-services would provide PPI with information technology, administration, bookkeeping and customer relations services for a fee of 4500 euros per month. PPI alleges that Lindner is the sole member of x-services. Both Lindner and x-services were required to submit monthly invoices as a prerequisite to payment. Lindner's role gave him access to PPI's financial accounts and information technology systems.

         In August 2013, Lindner retained defendant Kunze, a friend with software (but no management) experience, to act as CEO of PPI and assume some of Lindner's responsibilities. Kunze was to be paid $3000 per month. Lindner's fee remained unchanged.

         In May 2015, Proffe met with Lindner, Kunze and PPI's accountants to address Proffe's concerns that Lindner wasn't performing his contractual obligations and that neither Lindner nor Kunze were properly submitting documentation of PPI's revenues and accounting. In particular, Kunze authorized Lindner to be paid for providing services as a vendor even though Lindner hadn't submitted invoices. The failure to document expenses prevented PPI's accountants from generating balance sheets or profit and loss statements. PPI subsequently discovered that these failures concealed numerous payments to Lindner or entities he controlled (defendants x-services and J.L. Consult) totalling $82, 000 more than what they were due under their agreements with PPI.

         As a result of the May 2015 meeting, Lindner and Kunze provided assurances that the Lindner-controlled entities would not be paid without first submitting invoices. In addition, they assured Proffe and the PPI accountants that they would timely provide revenue information, bank and credit card statements and vendors' invoices so that accurate financial information could be made available to PPI management.

         Proffe also agreed -- on behalf of PPI -- to Lindner's request to modify Lindner's independent contractor agreement. The new agreement provided that J.L. Consult would assume Lindner's obligations under the 2011 contract, and increased the monthly fee for vendor services from 5, 000 to 7, 000 euros. Proffe signed the new contract on behalf of PPI and delivered it to Lindner. As with the earlier contract, Lindner did not return a signed copy. Nevertheless, PPI and Mr. Lindner acted according to its terms for about six months.

         Roughly six weeks after his May 2015 meeting with Proffe, Lindner and the accountants, Kunze resigned from PPI citing a conflict of interest. Nevertheless, in August 2015 Kunze signed an agreement, in his role as CEO of PPI, to retain defendant Woelk as an independent contractor to take over Kunze's responsibilities under his vendor agreement with PPI.[2] Woelk was paid $3, 000 per month to work 4 hours per week under the August 2015 agreement.

         Proffe first suspected during October 2015 that something was awry at PPI when an x-service employee resigned and informed Proffe that Lindner was engaging in questionable business and accounting practices. Upon further examination, Proffe discovered that neither Lindner nor Kunze provided PPI's accountants with any financial information after June 30, 2015, and that J.L. Consult and x-services continued to receive payments without first submitting invoices. Additionally, Proffe discovered that Lindner, Kunze and Woelk had concealed the unauthorized payments to Lindner, J.L. Consult and x-services in amounts totaling at least $82, 000, and that x-services failed to maintain software systems and provide accountants with financial information, in contravention of its agreement with PPI. Lindner, Kunze and Woelk concealed the unauthorized payments by limiting the paper trail. One method they employed was to list PPI's accounts payable in lump sums by aggregating multiple vendors in a single ledger entry, thus hindering the discovery of improper payments. In addition, while bank statements revealed the precise amounts paid to vendors, only Lindner, Kunze and Woelk had access to them.

         On November 21, 2015, Proffe ordered the suspension of payments to J.L. Consult and x-services until Lindner provided a satisfactory explanation for these vendors' failure to submit invoices before being paid and for the failure to provide PPI's accountants with the financial information promised at the May 2015 meeting. Proffe gave Lindner a December 10, 2015 deadline to comply. Lindner did not meet the deadline, and on December 18, 2015, made arrangements for PPI to pay x-services 6, 250 euros despite Proffe's order to suspend payments to it. Lindner proceeded to make it difficult, if not impossible, for PPI to operate without his direct involvement. He blocked Proffe's access to PPI bank accounts and refused to turn over corporate documentation, passwords for servers and firewalls, and information to access PPI's account with its internet service provider. PPI spent a substantial amount of time and money retaking control of its accounts. On January 17, 2016, Lindner accessed the PPI accountants' servers and downloaded all of PPI's bookkeeping information. He also accessed PPI's accounts at a financial institution at around the same time.

         In January 2016, PPI shareholders holding 85% of PPI's stock voted to remove Lindner as a PPI director and to terminate PPI's agreements with Lindner, J.L. Consult and x-services effective January 18, 2016. These shareholders also resolved to initiate legal action against Lindner to recover PPI's property. At around the same time, PPI terminated Woelk's vendor agreement and demanded that he return all PPI property. A few weeks later, Woelk turned over some of PPI's property in a meeting with Proffe. PPI alleges on information and belief that Woelk failed to bring with him several binders of financial information that PPI needed to file its tax returns. Consequently, PPI was forced to incur the expense of recreating its 2015 financial records.

         At the same time, Woelk also delivered to Proffe papers that purported to be PPI contracts[3] with J.L. Consult and x-services bearing dates of May 20, 2015, and signatures by Lindner and Kunze (“the Woelk contracts”). PPI argues that these purported contracts are invalid because Proffe neither approved of nor signed them, and did not even know about them until February 1, 2016. The Woelk contracts differ from the revised contracts bearing Proffe's signature in ways that are disadvantageous to PPI but highly favorable to J.L. Consult and indirectly to Lindner. For example, the contract increases the fees to be paid to J.L. Consult while reducing its obligations to PPI. In addition, the J.L. Consult contract was backdated to 2010, contained no non-compete provision, gave J.L. Consult a unilateral right to increase the fees charged by up to 5% per year and provided J.L. Consult with broad indemnification rights and highly favorable termination rights.

         The Complaint alleges that Lindner continues to submit “worthless” copy for weekly newsletters despite PPI's termination of its contracts with J.L. Consult and x-services and denial of access to records of PPI's investments that form the basis for the newsletters. In addition, Lindner continues to send invoices on behalf of J.L. Consult and x-services in the amounts specified in the contracts delivered by Woelk.

         II. Applicable ...

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