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Toedtman v. Turnpoint Medical Devices, Inc.

Superior Court of Delaware

January 23, 2019

JOHN R. TOEDTMAN, Plaintiff,
v.
TURNPOINT MEDICAL DEVICES, INC., Defendant.

          Submitted: October 30, 2018

          On Plaintiff John R. Toedtman's Cross-Motion for Summary Judgment. GRANTED IN PART.

         On Defendant TurnPoint Medical Devices, Inc.'s Cross-Motion for Summary Judgment. DENIED.

          Theodore A. Kittila, Esquire, and James G. McMillan, III, Esquire, Halloran Farkas Kittila, LLP, Wilmington, Delaware, Attorneys for Plaintiff.

          Sharon Oras Morgan, Esquire, and Courtney A. Emerson, Esquire, Fox Rothschild LLP, Wilmington, Delaware, Attorneys for Defendant.

          MEMORANDUM OPINION

          Richard R. Cooch, R.J.

         I. INTRODUCTION

         Plaintiff John R. Toedtman ("Plaintiff) and Defendant TurnPoint Medical Devices, Inc. ("TurnPoint/Defendant") have filed cross-motions for summary judgment in the above captioned matter. Plaintiff asserts that he has a valid employment agreement with TurnPoint which TurnPoint allegedly breached when it failed to pay severance and other benefits totaling $250, 900 after Plaintiffs termination without cause. Contrarily, TurnPoint contends the employment agreement was voidable under 8 Del. C. § 144(a), was properly voided, and that Plaintiff is not entitled to recovery.

         The Court concludes, in the context of this case where both parties have filed cross-motions for summary judgment, that Plaintiffs employment agreement is valid, that TurnPoint breached the employment agreement, and that Plaintiff is entitled to recover severance and other fees totaling $250, 900 owed to him under the employment agreement. Furthermore, Plaintiff has established that he is entitled to recovery under the doctrine of promissory estoppel. However, Plaintiff has not demonstrated that he is entitled to recover attorneys' fees and costs based on alleged bad faith. Further, the Court lacks jurisdiction to determine Plaintiffs claim for indemnification under the company's bylaws. Therefore, Plaintiffs Motion for Summary Judgment is GRANTED IN PART. Defendant's Motion for Summary Judgment is DENIED.

         II. PROCEDURAL HISTORY AND FACTUAL BACKGROUND

         Since the parties each filed cross-motions for summary judgment as to all disputed claims, the Court asked the parties to submit a joint stipulation of the procedural history and the factual background to aid the Court in rendering its decision. The stipulation was submitted to the Court on October 30, 2018, The stipulated procedural history and facts are set forth below. It is somewhat lengthy, and the Court has later restated only those facts necessary to this decision.

1. On August 14, 2017, Toedtman filed the above-captioned civil action against the Company. The Complaint alleged four counts: (1) Breach of Contract; (2) Promissory Estoppel; (3) Quasi-Contract/Quantum Meruit; and (4) Unjust Enrichment.
2. On September 28, 2017, the Company filed a Motion for Summary Judgment. This motion was withdrawn without prejudice following a scheduling conference before Judge Cooch on October 23, 2017. The Court set a trial date of September 24 and 25, 2018.
3. The Company filed its Answer and Affirmative Defenses on November 14, 2017.
4. Thereafter, the Parties engaged in discovery. Documents were produced by both sides and depositions were taken of various persons. Experts were designated by both Parties and expert reports were exchanged.
5. On June 8, 2018, following the completion of discovery, both Parties filed Motions for Summary Judgment (the "Cross-Motions"). Both motions were fully briefed by August 8, 2018. Additionally, both Parties filed Motions in Limine seeking to exclude the testimony and expert reports of the experts. Both motions were fully briefed by the Parties.
6. On August 17, 2018, the Court heard oral argument on the Cross- Motions. The Court determined that the Cross-Motions would be treated as a stipulation for decision on the merits based on the record submitted with the motions pursuant to Superior Court Civil Rule 56(h), and that no trial would be necessary. The Court ordered that the Parties submit this stipulation to aid the Court in rendering its decision. With respect to the pending Motions in Limine, the Court determined that it would defer any such decision on that until a later time.[1]

         The parties stipulated to the following facts:

7. The Company was incorporated in Delaware on or about August 23, 2013, under the name "Point Medical, Inc.," and later changed its name to "TurnPoint Medical Devices, Inc."
8. Toedtman was the initial Chairman and President of the Company under its Bylaws and Mr. Joerg Klaube was the initial Secretary and Chief Financial Officer. Toedtman and George Boyajian were the initial directors.
9. On or about January 3, 2014, the Company entered into a Personal Services Agreement with Toedtman, agreeing to pay him $4, 000.00 per month on a consulting basis to serve as interim CEO, which would increase to $150, 000 annually if Boyajian did not become CEO by May 31, 2015.
10.On or about December 10, 2014, the Company's directors, John Toedtman and George Boyajian, executed a Unanimous Written Consent which contains a resolution as follows: "RESOLVED, that the management of the Company negotiate, and enter into, employment agreements with John Toedtman, George Boyajian and Jerry Ruddle to serve as officers of the Company" (the "Dec. 10 Consent"). Additionally, the Dec. 10 Consent adopted the following resolution: "RESOLVED, that the proper officers of the Corporation are hereby authorized to take all necessary and proper actions to effectuate the foregoing resolutions adopted by this Board of Directors ...."
11. In December 2014, the Company entered into an employment agreement with Mr. Jerry Ruddle to become the President and COO. At his deposition, Mr. Ruddle testified as follows:
Q [By Plaintiffs Counsel]. Do you remember ever getting a contract with TurnPoint?
A [By Mr. Ruddle]. Yes, December of 2014.
Q. How did that employment contract come about?
A. So how did it come about? It was time to step up the relationship between myself and the company and so I provided the boilerplate of the employment agreement to John Toedtman and we negotiated final terms.
Q. Where did you get that boilerplate from?
A. As I recall, I got it from Jeff Nicholas at Fox Rothschild.
Q. Had you reached out to Jeff yourself to get that?
A. Yes.
Ruddle Dep. 12:20-13:13.

         12. On November 10, 2015, the Board signed a Unanimous Written Consent of Directors (the "Nov. 10 Consent") which provided: "RESOLVED, that the base salary of John Toedtman, Chairman and Chief Executive Officer of the Company, be increased to $240, 000 per year, effective October 1, 2015, payable in accordance with applicable company policy."

         13.The Nov. 10 Consent further provided, "RESOLVED, that the proper officers of the Corporation are hereby authorized to take all necessary and proper actions to effectuate the foregoing resolutions adopted by this Board of Directors." The Nov. 10 Written Consent was signed by both directors of the Company, Toedtman and Mr. Christopher York.

         14. Toedtman and Klaube prepared an employment agreement (the "Employment Agreement" or the "Agreement") between Toedtman and the Company which provided that Toedtman was Chairman and CEO of the Company. One version of the Employment Agreement was signed by Toedtman for himself and by Klaube on behalf of the Company; the version on file with the SEC indicates that was signed by Toedtman both for the Company and for himself. The Employment Agreement is "dated as of November 10, 2015."

         15.Toedtman testified at his deposition as follows:

Q [By Defendant's Counsel]. And on the last page Bates numbered
Toedtman 2810 there is a signature of Joerg Klaube, correct?
A [By Mr. Toedtman]. Correct.
Q. And did you ask Joerg to sign this document?
A. I reviewed the changes with Joerg in his capacity as a company officer. He was aware that the salary change had been approved by the board as reflected in the minutes of a recent board meeting and he signed the agreement.
Q. Did you ask him to sign the agreement?
A. Yes.
Toedtman Dep. 27:8-22.

         16.Toedtman testified at his deposition as follows:

Q [By Defendant's Counsel]. So after you completed or after you made the changes to the employment agreement, did you show it to anybody prior to signing it other than Joerg?
A [By Mr. Toedtman]. I don't recall.
Q. Did you provide copies of it to any of the board members?
A. The copies of it provided to the board members were in the S-1 registration statement.
Q. Other than the S-1 registration statement, did you provide a copy of it to any of the board members either prior to it being signed or after it being signed?
A. I don't believe so.
Toedtman Dep. 30:11-31:1.

         17.Mr. Klaube testified that he had an employment agreement with TurnPoint. Mr. Klaube testified that the "Ruddle agreement served as a template" for his employment agreement and the Toedtman Employment Agreement. Klaube Dep. 46:23-47:1.

         18. On August 11, 2016, a version of the Employment Agreement signed by Toedtman both for himself and on behalf of the Company was filed with the SEC as Exhibit 10.9 to its Form S-1/A Registration Statement (the "S-1/A") with the SEC. Mr. Klaube testified that he prepared this version as part of the filing of the S-1/A:

Q [By Plaintiffs Counsel]. Do you know why there's a difference between these two [versions of the employment agreements]?
A [By Mr. Klaube]. Yes.
Q. What happened?
A. Okay. The signature.
Q. I'm looking at the signature, yes, so that is a difference.
A. Okay. Initially there was a back-and-forth with counsel at that time. Initially he [counsel] received the PDF files of the signed employment agreement and he said he can't use this; it needs to be a Word document.
So I remember running this through a translation from PDF to Word.
Q. Yes.
A. And I stripped out the unreadable signatures because they're gobbledygook. I don't know that he had ever converted a document to Word.
Q. Yes, I have done that before.
A. And so I sent the Word document to counsel and he said it has to be signed.
Q. Okay.
A. Electronically signed. So he sent it back to me and I put in Toedtman's signature. And at that moment I did not connect that the original was signed by me. I put Toedtman's name in the and sent it back and that's the way it was filed. Obviously it was a mistake when I translated the document.
Q. So you're the one that put Toedtman's signature in there twice?
A. Yes.
Klaube Dep. 38:10-39:20.

         19. Toedtman testified as follows:

Q [By Defendant's Counsel]. Turn back to the S-1 's for a moment. How involved were you in the drafting of the actual S-1 statement?
A [By Mr. Toedtman]. Very.
Q. Would you say that you were the chief drafter?
A. That's fair to say.
Toedtman Dep. 66:13-20.

         20.The S-1 /A, which Toedtman participated in drafting, stated:

The Company has employment agreements with its chief executive officer and other key executives. Even though we have an employment agreement with our Chief Executive Officer and our Chief Financial Officer, we could not prevent these executives from terminating employment with us. The Company currently has "key man" life insurance on our Chief Executive Officer and on the principal member of Leveraged Developments LLC

S-1/A at p. 12. The S-1/A, which Toedtman participated in drafting, further stated with respect to Mr. Toedtman:

Mr. Toedtman has served as a director and as the CEO of the company since August 2013. Prior to that and beginning in May 2011, he was managing partner of Strategy Advisors, LLC. With over 40 years of business experience, Mr. Toedtman has held senior management positions as Group VP of the Metallurgical Group at Engelhard Industries, a Fortune 100 company, and as President and CEO of a number of early stage companies in the diagnostic and medical device fields. He has been on the board of 7 public companies including Vital Signs, Inc. and a number of private companies, and brings substantial experience in M&A, technology transfer and corporate strategy. He was a Managing Director at Bluestone Capital and is presently a Senior Advisor at Griffin Securities. Mr. Toedtman earned a BA in Economics and an MA in International Economics from Georgetown University.

Id. at p. 50. The S-1/A "Signatures" page appears as follows: [Image redacted] Id. at pp. 61-62.

         21.Regarding signatures on the S-1 documents, Mr. York testified as follows:

Q [By Plaintiffs Counsel]. You weren't involved at all in that?
A [By Mr. York]. I was not specifically involved in any of the information or the posting of information for the S-1.
York Dep. 44:9-13. Additionally, Mr. York testified:
Q [By Plaintiffs Counsel]. You don't recall signing this document?
A [By Mr. York]. No.
Q. So you never signed this document?
A. I don't recall ever signing any of the S-1 documents.
Q. At any point in time did you actually tell any of your directors hey, I didn't sign this?
A. No.
Q. At any point in time did you object to an S-1 being publicly filed that has ...

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