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G&R Live, LLC v. Janese

United States District Court, E.D. Michigan, Southern Division

January 16, 2020

G&R LIVE, LLC, Plaintiff,
v.
CHRIS JANESE, Defendant.

          OPINION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT (ECF NO. 18)

          Paul D. Borman United States District Judge

         In this action, Plaintiff G&R Live, LLC (“G&R Live”) alleges that its former employee, Defendant Chris Janese (“Janese”), used his position of trust and confidence to misappropriate funds and wrongfully remove G&R Live's property. As a result, G&R Live terminated Janese's employment “for cause” and now asserts claims for (1) breach of fiduciary duty, (2) fraud and misrepresentation, (3) statutory and common law conversion, (4) unjust enrichment/quantum meruit, and (5) breach of contract. Now before the Court is Defendant's motion to dismiss Plaintiff's conversion, unjust enrichment/quantum meruit, and breach of contract claims pursuant to Fed.R.Civ.P. 12(b)(6), and to dismiss the entire complaint pursuant to Rule 12(b)(1) for failing to meet the $75, 000 jurisdictional requirement, or, in the alternative, an order allowing jurisdictional discovery. The matter is fully briefed and the Court held a hearing on January 9, 2020. For the reasons that follow, the Court DENIES Defendant's Motion to Dismiss Plaintiff's First Amended Complaint without prejudice.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Plaintiff's First Amended Complaint

         1. Janese's Employment with Gail & Rice/G&R Live

         Gail & Rice, Inc. (“Gail & Rice”) is a Michigan-based corporation engaged in the business of experiential marketing. (ECF No. 17, First Amended Complaint (“FAC”) ¶ 8.)[1] In 2005, Gail & Rice opened a satellite office in San Diego, California (“San Diego Office”), supported by administrative, accounting, creative and other staff located in Gail & Rice's Farmington Hills, Michigan offices. (Id. ¶ 9.) On January 1, 2017, Plaintiff G&R Live became successor in interest to the business conducted by Gail & Rice from the San Diego Office. (Id. ¶ 17.)

         Defendant Janese became employed with Gail & Rice starting in 2005 as Manager of the San Diego Office. (Id. ¶ 10.) As Manager of the San Diego Office, and later President of G&R Live, Janese was entrusted with the authority to control company funds, direct the payment of company funds for business expenses incurred for customers, and direct the actions of G&R Live employees. (FAC ¶ 16.)

         On January 1, 2007, Janese executed a Promissory Note in favor of Gail & Rice in the amount of Ninety Thousand Dollars ($90, 000.00). (Id. ¶ 11; Ex. 1 to FAC, Promissory Note, PgID 94-95.) G&R Live states in its Response brief that the Note was related to attorney fees and costs which Gail & Rice advanced on behalf of Janese in connection with a lawsuit filed against him by a third party. (Pl's Resp. at 2, PgID 140.)

         On December 11, 2012, the parties entered into an Employment Agreement (“2012 Employment Agreement”), pursuant to which Janese continued to serve as Manager of the San Diego Office. (FAC ¶ 12; Ex. 2 to FAC, 2012 Employment Agreement, PgID 97-103.) The term of Janese's employment under the 2012 Employment Agreement was to run from April 1, 2012 to December 31, 2020. (FAC ¶ 13; 2012 Employment Agreement ¶ 2, PgID 97.)[2] In addition to a base salary and performance bonuses, Janese's compensation under the Agreement included the forgiveness of all principal and interest owed to Gail & Rice by Janese under the 2007 Promissory Note. (FAC ¶ 14; 2012 Employment Agreement ¶ 4(c), PgID 98.)

         Specifically, the 2012 Employment Agreement provides:

(c) Forgiveness of Note. The Company will forgive all principal and interest owed to it by Employee under the Promissory Note dated January 1, 2007, in the principal amount of $90, 000, issued by Employee to the Company (the “Note”). The Company shall deliver the Note marked “Paid in Full” to Employee upon the execution of this Agreement. In addition, the Company will withhold an amount the Company reasonably determines is sufficient to cover the federal and state taxes imposed on Employee in connection with the Company's forgiveness of the amounts owing to it under the Note.

(2012 Employment Agreement ¶ 4(c) (emphasis added).)

         In addition, the 2012 Employment Agreement permitted Gail & Rice/G&R Live to terminate Janese's employment for “cause, ” defined, in relevant part, as:

(i) any act or omission of [Janese] which constitutes fraud, theft, dishonesty or the violation of any statutory or common law duty of loyalty to the Company;
(ii) [Janese's] conviction of, or plea of nolo contendere to, a felony or any crime of moral turpitude; [or]
(iii) any willful, intentional or grossly negligent act or omission by [Janese] which, in the Board's reasonable determination, materially injures the Company's business or reputation.

(FAC ¶ 15; 2012 Employment Agreement ¶ 7(c)(i)-(iii).)

         2. Janese's Alleged Misappropriation of G&R Live's Funds and Property

         In 2019, G&R Live discovered that Janese was improperly using his position of trust and confidence to misappropriate company funds by, among other things, fraudulently charging personal expenses to customer accounts, fraudulently issuing credits to customer accounts in exchange for the receipt of personal goods, fraudulently allocating travel costs for his personal benefit to customer accounts, and improperly forcing G&R Live's Michigan-based employees to perform personal services for him during work hours. (FAC ¶ 18.) G&R Live claims that Janese actively attempted to conceal his fraudulent conduct from oversight by G&R Live's Michigan-based owner and from its administrative, accounting and support staff, and that these wrongful activities damaged its profitability. (Id. ¶¶ 18-19.)

         Specifically, on October 9, 2018, Janese misused his authority to direct a wire transfer in the amount of $162, 500 to be paid to United Talent Agency (“UTA”), representing that the funds were for a legitimate G&R Live business expense-a cancellation fee for a performance by the rapper, “Flo Rida, ” related to a customer project (the “Cancellation Fee”). (Id. ¶ 20.) Based upon Janese's representation that the payment was for a legitimate business-related purpose, G&R Live made a wire transfer payment from its Michigan offices to UTA in the amount of $149, 000 (G&R Live had previously paid UTA a deposit of $13, 500). (Id. ¶ 21.) Upon request by G&R Live, UTA provided supporting documentation for the engagement of Flo Rida which revealed that the Cancellation Fee was only $135, 000.00, and not the $162, 500.00 represented by Janese. (Id. ¶ 22.) G&R Live discovered in February 2019 that the additional $27, 500 had been misappropriated by Janese for his purely personal expenses, specifically payment for Flo Rida's performance at the 50th birthday party for Janese's wife (“the Party”). (Id. ¶ 23.)

         Upon confirmation of Janese's misappropriation of company funds in February 2019, G&R Live immediately commenced an investigation into further breaches of fiduciary duty, fraud, theft, embezzlement and intentional misappropriation of company funds by Janese. (Id. ¶ 24.) On April 9, 2019, G&R Live suspended Janese with pay while continuing its investigation, and Janese thereafter failed to completely cooperate with the investigation, despite requests that he do so. (Id. ¶¶ 25-26.)

         In the course of its investigation, G&R Live discovered additional incidents of Janese's breaches of fiduciary duty, fraud and intentional misappropriation of company funds, in addition to the $27, 500 misappropriated by Janese related to the Flo Rida performance at the Party, including but not limited to:

a. In January, February and March 2019, Janese improperly directed G&R Live employees based in Michigan to devote over 100 hours of work and time, paid for by G&R Live, relative to the preparations for, and attendance at, the Party, at a total cost to G&R Live in excess of $5, 694;
b. In March 2019, Janese improperly directed charges of $7, 500 to an unrelated customer project to pay for the contractor providing sound and lighting services for the Party;
c. In March 2019, Janese improperly directed charges of $1, 200 to an unrelated customer project to pay for the contractor providing temporary labor services for the Party;
d. In February and March, 2019, Janese improperly directed charges of $1, 962.93 to various unrelated customer projects to pay for air travel and car rentals associated with the work of Michigan-based and other G&R Live employees for the Party;
e. On January 24, 2019, Janese improperly directed charges of $1, 500 to an unrelated customer project for a mentalist to perform at the Party;
f. On January 27, 2019, Janese improperly directed charges of $6, 641.41 to an unrelated customer contract to pay for a private jet ...

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