Christopher G. Rein
ESS Group, Inc., et al.
Providence County Superior Court, PC 15-4645 Associate
Justice Richard A. Licht
Plaintiff: Gina A. DiCenso, Esq. V. Edward Formisano, Esq.
Michael D. Pushee, Esq.
Defendants: William R. Grimm, Esq. Ryan M. Gainor, Esq.
Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and
A. SUTTELL CHIEF JUSTICE.
plaintiff, Christopher G. Rein (Rein or plaintiff), appeals
from a Superior Court order granting a motion to dismiss
brought by the defendants, ESS Group, Inc. (ESS), Charles J.
Natale, Jr. (Natale), and the Charles J. Natale, Jr. 2003
Trust u/d/t January 23, 2003, as amended (the Natale trust)
(collectively defendants). This case came before the Supreme
Court pursuant to an order directing the parties to appear
and show cause why the issues raised in this appeal should
not be summarily decided. After considering the parties'
written and oral submissions and reviewing the record, we
conclude that cause has not been shown and that this case may
be decided without further briefing or argument. For the
reasons set forth in this opinion, we affirm in part and
reverse in part the order of the Superior Court.
began working at ESS in 2007 as a senior consultant and
senior project manager. Previously, he had worked at
ESS's predecessor, Environmental Science Services, Inc.,
for approximately thirteen years. On December 20, 2007, Rein,
ESS, and Natale, the president and chief executive officer of
ESS, entered into a stockholder agreement that resulted in
Rein owning 5, 000 shares of ESS stock and the Natale trust
owning 80, 300 shares of ESS stock.
complaint, Rein alleged that in 2013 he became concerned
about Natale's use of ESS's assets and funds. In
December 2013, Natale informed Rein that ESS would not be
giving employees payments pursuant to its incentive
compensation plan because ESS had not met its annual revenue
goal. Natale allegedly told Rein that certain employees would
nevertheless receive an annual bonus outside of the incentive
compensation plan. Rein asked to review the list of employees
who would be receiving an annual bonus and the amount of said
bonuses, but Natale refused to provide Rein with that
information. In February 2014, Natale and Rein met and
discussed the incentive compensation plan and bonuses. Rein
alleged that, at this meeting, Natale accused Rein of not
trusting him and told Rein that he could not review ESS's
financial documents because he was a minority shareholder.
Subsequently, in mid-2014, Rein received a negative
performance review from Natale, which Rein claimed was the
first negative performance review of his career.
December 11, 2014, Natale and Rein met to discuss matters
related to ESS's year-end. Thereafter, Natale gave Rein
the minutes of the December 11, 2014 meeting, which Natale
characterized as an ESS shareholder meeting. Rein alleged,
however, that his December 11, 2014 meeting with Natale was
not a shareholder meeting because it was not conducted
pursuant to ESS's corporate bylaws or the provision of
the Rhode Island Business Corporation Act (BCA) pertaining to
shareholder meetings, G.L. 1956 § 7-1.2-701. Rein
further claimed that the minutes falsely represented that
certain topics were discussed and voted on at the purported
end of December 2014, Rein sent a letter to ESS's counsel
requesting certain financial information pertaining to ESS,
but counsel informed him that he could not legally provide
Rein with the requested information because his request did
not comply with state law. Rein alleged that he also asked
defendants for permission to review ESS's books and
records, but was refused access to do so. Rein obtained
counsel and filed a formal request to review ESS's books
and records, but he was again informed by ESS's counsel
that his request did not comply with the law.
27, 2015, Rein was terminated from his position as senior
vice president. Rein alleged, in his lawsuit, that he was
terminated due to his complaints to his supervisors,
including Natale, that defendants had violated state and
municipal laws, and due to his refusal to violate the law or
assist defendants in doing so. After his termination, Rein
initiated a shareholder derivative action against defendants
in Delaware, where ESS is incorporated; however, the action
was dismissed on July 27, 2015.
October 23, 2015, Rein filed a two-count complaint in
Superior Court in Rhode Island, wherein he alleged that:
defendants had violated the Rhode Island Whistleblowers'
Protection Act, G.L. 1956 chapter 50 of title 28 (WPA), by
discriminating against Rein "because he refused to
violate or assist in violating state or local law and/or
because [Rein] reported to his supervisors a violation of
state or local law" (the WPA count or claim); and
defendants violated the BCA by refusing to allow Rein to
examine ESS's books and records of accounts, minutes,
and/or records of shareholders of ESS (the BCA count or
claim). In response, defendants moved to dismiss the action
pursuant to Rule 12(b)(6) of the Superior Court Rules of
Civil Procedure. In support of their motion, defendants
maintained that the WPA count should be dismissed because
Rein did not identify a law that defendants had allegedly
violated, as is necessary under the WPA. The defendants also
argued for dismissal of the BCA count because ESS is
incorporated in Delaware and, therefore, its internal affairs
are governed by Delaware law, not Rhode Island law.
objected to defendants' motion to dismiss. He rejected
defendants' argument that he failed to set forth a law
that defendants allegedly violated; Rein maintained that the
complaint alleged that defendants' conduct violated the
BCA. Rein argued that, even if ESS was not subject to the BCA
because the company is incorporated in Delaware, the WPA
claim is nevertheless viable because the complaint also
alleged that defendants made false representations in the
minutes of the December 11, 2014 meeting, which Rein
maintained amounted to a violation of the common law. With
respect to the BCA count, Rein asserted that ESS is subject
to the BCA because, pursuant to § 7-1.2-1402, a foreign
corporation "is subject to the same duties,
restrictions, penalties, and liabilities now or subsequently
imposed upon a domestic corporation of like character."
hearing was held on April 5, 2016, before a justice of the
Superior Court. After hearing the parties' arguments, the
hearing justice rendered his decision. He first discussed the
BCA count and referenced § 7-1.2-1401, which provides,
in part, that:
"A foreign corporation may not be denied a certificate
of authority because the laws of the state or country under
which the corporation is organized governing its organization
and internal affairs differ from the laws of this state, and
nothing contained in this chapter authorizes this state
to regulate the organization or the internal ...