RONALD A. KRUPINSKI, Individually and Derivatively on Behalf of SCHARNHORST, INC., Plaintiff,
WILLIAM A. DEYESSO, SCHARNHORST, INC., and RICHARD P. MCCABE, Defendants.
Providence County Superior Court
For Plaintiff: Andrew J. Tine, Esq.
For Defendant: Christopher A. Murphy, Esq., Carl S. Levin, Esq.
Before the Court for decision is Defendant William A. Deyesso's (Defendant or Deyesso) Motion for Summary Judgment as to Count I of Plaintiff Ronald A. Krupinski's (Plaintiff or Krupinski) Third Amended Complaint and Jury Demand pursuant to Super. R. Civ. P. 56(c). Under Count I of the Complaint, Krupinski alleges Deyesso breached a series of agreements by (i) requiring Krupinski to pay a certain amount by way of a promissory note to receive his already granted shareholder interest in Defendant Scharnhorst, Inc. (Scharnhorst); (ii) by firing Krupinski from his position as a manager of an adult entertainment club in Providence, Rhode Island without cause; (iii) by failing to find Krupinski another position in the company; and (iv) by failing to provide Krupinski with an equity interest in certain additional clubs opened and operated in Massachusetts.
Facts and Travel
The Court in two previous written decisions has set forth the pertinent facts. See Krupinski v. Deyesso, No. PB 07-3484, 2012 WL 1360869 (R.I. Super. Apr. 12, 2012) (Silverstein, J.) (hereinafter Krupinski I); Krupinski v. Deyesso, No. PB 07-3484, 2013 WL 1562564 (R.I. Super. Apr. 10, 2013) (Silverstein, J.) (hereinafter Krupinski II). The Court will recount only those facts relevant to Plaintiff's instant claim of breach of contract. For purposes of the summary judgment record, those relevant facts are presented below.
In February 1995, Krupinski met with Frank Viola (Viola) and Deyesso to discuss investing in a potential "turnkey opportunity" for an adult entertainment club in Providence, Rhode Island. (Krupinski Aff. ¶¶ 2-3, Dec. 5, 2014; Krupinski Dep. 141:13-23, July 21, 2011). The club, to be named "Centerfolds, " would be operated at 521 Eddy Street in Providence, at a location owned by Krupinski's friend, Pasquale Cortellessa (Cortellessa). (Krupinski Aff. ¶ 2). At the meeting, Krupinski claims it was agreed that he was to receive a thirty-three percent ownership interest in Centerfolds. Id. at ¶ 3. Additionally, Krupinski claims the parties agreed that when the club opened he would work as a manager, earning a salary of $52, 000 annually plus bonuses. Id. Thereafter, in May 1995, Viola purchased Scharnhorst (which held a liquor license) as the operating entity for the club. Id. at ¶¶ 4-5. Viola, Deyesso, and others became officers and shareholders of Scharnhorst in December 1995 through appropriate corporate action. Id. at ¶ 7. Krupinski was not listed as an officer, director, or shareholder. Id.
Following the purchase, Krupinski began preparing the club for its opening, which officially occurred in February 1996. Id. at ¶ 9. Due to an issue with the adult entertainment license or permit, the club was forced to close only a day or two after opening, but eventually reopened in August 1996. Id. at ¶¶ 9-11. Centerfolds operated continuously thereafter until operations ceased in October 2001. Id. at ¶ 11. Deyesso stated in his deposition that he was told at the February 1995 meeting that the business in Providence already had a liquor license and an adult entertainment license. (Deyesso Dep. 36:17-22, Aug. 10, 2011). Deyesso did not investigate whether Scharnhorst actually had an adult entertainment license, id. at 45:16-21; specifically, Deyesso explained:
"The only person that told me that [the license] existed was Ron. Ron is the one that brought the deal, Ron is the one that guaranteed, you know, not in so many words, that it was ready to go as an adult club. It had a liquor license, and it had an adult license. All he had to do was a little cosmetic, and it was ready to go." Id. at 46:1-7.
As a result of the club's temporary forced closure, Krupinski agreed to reduce his ownership interest in the club to twenty-five percent. (Krupinski Aff. ¶ 12). According to his affidavit, Krupinski again served as a manager of the club when it reopened in August 1996. Id. at ¶ 13. Krupinski served in that capacity until July 1997 when he claims he was terminated without cause and without justification. Id. Krupinski did not have a written employment agreement during his tenure as manager. (Krupinski Dep. 167:6-10, Aug. 12, 2011).
Despite Krupinski's allegations to the contrary, Deyesso claims Krupinski was terminated due to his participation in a purported credit-card scam through the altering of customer receipts, improper conduct with the club's dancers, and excessive drinking. See Def.'s Supplemental Answers to Pl.'s Interrogs. 6. Notwithstanding his employment termination, Krupinski remained a twenty-five percent shareholder of Scharnhorst, but never received any distributions from the company in 1997, despite its profitability that year. See Krupinski Aff. ¶ 20. Krupinski did, however, receive distributions as a shareholder in Scharnhorst from 1998 to 2004. See Hr'g Tr. 204:5-14, 208:3-16, Jan. 18, 2012.
In 1997, Viola conveyed his interest in Scharnhorst to Deyesso. Defendant Richard P. McCabe (McCabe) also became a shareholder of Scharnhorst. (Krupinski Aff. ¶¶ 16-17). Before Krupinski was terminated, Krupinski alleges that Deyesso had identified a club in Worcester, Massachusetts, named "Pudgy's, " and intended to acquire that club and to convert it into a new Centerfolds location. The club was ultimately purchased only in McCabe's name in August 1997. Following the purchase of Pudgy's, several other clubs in Massachusetts were purchased by Deyesso and McCabe. Neither Krupinski nor Scharnhorst participated in the ownership or management of these locations.
Krupinski also claims that when he met with Deyesso about his termination, Deyesso orally represented to him that Deyesso would find him another opportunity in the business. Id. at ¶ 21. In August 1997, Krupinski claims that he signed a promissory note for $54, 000 under duress, payable to Deyesso, that would vest his interest in Scharnhorst. Id. at ¶ 22. According to Deyesso, the purpose of the promissory note was to essentially reimburse Deyesso for some of the costs incurred from the Providence club's failed opening in February 1996. See Deyesso Dep. 64:4-65:22. Specifically, Deyesso described the purpose of the note at his deposition:
"I told [Krupinski] that the costs were getting a little bit high now that we were not open, and that I felt that [Krupinski] had put a little bit of skin in the game for the fact that he brought the deal to us, and from a good-faith standpoint, he should pick up a little bit of that loss." Id. at 65:1-6.
The site where Providence Centerfolds operated was taken by eminent domain in 2001. As indicated above, once Centerfolds closed and McCabe and Deyesso failed to timely locate a new building, Deyesso and McCabe proceeded to open other clubs in Massachusetts under the name Centerfolds, using some of the tangible property from the Providence club. Krupinski alleges that Deyesso breached the original agreement with him by excluding him from participating in those new, additional clubs. See Compl. ¶ 33.
On October 7, 2005, Scharnhorst's corporate charter was revoked by the Rhode Island Secretary of State due to its failure to file its Annual Report for the year 2005. See Def.'s Mot. Summ. J., Ex. E. Krupinski's original Complaint was filed on July 10, 2007, and the current, operative Complaint was filed on February 8, 2012. On April 12, 2012, the Court issued a Decision dismissing Counts II through VIII of the Complaint, including the dismissal of two additional claims that were first raised therein. The Court subsequently denied Krupinski's motion to reconsider that Decision. See Krupinski II, 2013 WL 1562564. Accordingly, the only remaining cause of action in this matter-which is now the subject of Defendant's summary judgment motion-is Count I setting forth a claim for breach of contract brought individually against Deyesso.
Standard of Review
The Rhode Island Supreme Court has consistently stated "[t]he purpose of the summary judgment procedure is issue finding, not issue determination." Indus. Nat'l Bank v. Peloso, 121 R.I. 305, 307, 397 A.2d 1312, 1313 (1979); see also Saltzman v. Atl. Realty Co., 434 A.2d 1343, 1345 (R.I. 1981). It is important for a trial justice ruling on a motion seeking summary judgment to be mindful that it is a drastic remedy that should only be granted when a review of the pleadings, affidavits, and other discovery materials indicate that no genuine issues of material fact exist in the matter. Superior Boiler Works, Inc. v. R.J. Sanders, Inc., 711 A.2d 628, 631 (R.I. 1998). "[I]f no issues of material fact appear and the moving party is entitled to judgment as a matter of law, the trial justice may enter an order for summary judgment." Steinberg v. State, 427 A.2d 338, 340 (R.I. 1981); see also Holliston Mills, Inc. v. Citizens Trust Co., 604 A.2d 331, 334 (R.I. 1992) (finding "[s]ummary judgment is proper when there is no ambiguity as a matter of law"). A party opposing a summary judgment motion "'carries the burden of proving by competent evidence the existence of a disputed material issue of fact and cannot rest on allegations or denials in the pleadings or on conclusions or legal opinions.'" Gliottone v. Ethier, 870 A.2d 1022, 1027 (R.I. 2005) (quoting Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1225 (R.I. 1996)). Indeed, Rule 56 of the Superior Court Rules of Civil Procedure "'requires that the nonmoving party adduce sufficient controverted evidence of material fact(s)-irrespective of its credibility or weight-to require a trial.'" Id. at 1027 (quoting Mitchell v. Mitchell, 756 A.2d 179, 185 (R.I. 2000)).
Deyesso's motion seeking summary judgment with respect to Count I requires the Court to examine four separate agreements allegedly made by Deyesso. The analysis for the most part centers on the applicability of the Statute of Frauds and the formation of a valid contract. The Court will begin its discussion with an analysis of Krupinski's claims relative to the promissory note.
Krupinski's Promissory Note