Reference no: EM131233946

John Stanton and Harv Straus owned Global Recycling Solutions, LLC, which was acquired through an asset purchase agreement by Greenstar New Jersey, LLC, in July 2008. The acquisition included the Monmouth County Reclamation Center (“MCRC”). By the terms of the asset purchase agreement, Stanton and Straus entered into Employment Agreements with the predecessor company to Greenstar Recycled Holdings, LLC (“GRH”), which were ultimately assigned to GRH, a subsidiary of Greenstar New Jersey. The employment agreements included provisions for the payment of various special bonuses to Stanton and Straus upon the achievement of specified performance milestones. There were two-year milestones and five-year milestones. The two-year milestones indicated that Stanton and Straus would receive: (1) a $25,000 bonus for the installation of “single stream” recycling at MCRC; (2) a $25,000 bonus for achieving a Total Recordable Incidence Rate below five at MCRC; and (3) a $75,000 bonus for reaching a volume of 500 tons per month of net new business since January 1, 2008. Through the five-year milestones, they would receive: (1) a $75,000 bonus if Plaintiffs achieved a volume of 1,500 tons per month of net new business since January 1, 2008; and (2) a $50,000 bonus if Plaintiffs successfully obtained a new five-year contract with Monmouth County. Stanton's employment was terminated without cause in June 2009. Straus's employment was terminated without cause in June 2010. Nonetheless, Stanton and Straus claimed that GRH breached the employment agreements by refusing to pay each of the two-year and five-year bonuses. As to the single-stream recycling bonus, they claimed that Greenstar intentionally and in bad faith frustrated the intent of the employment agreements by diverting to another facility a single-stream screen that it had originally purchased for MCRC and that was necessary to institute single-stream recycling there. With respect to the five-year tonnage bonus, Stanton and Straus claimed that the milestone was met in 2010 and that they are entitled to payment within 60 days of the five-year milestone date. Finally, they claimed that GRH had negotiated a contract with Monmouth County, but then rejected it in bad faith in order to frustrate the employment agreement and avoid paying the renewal bonus. Stanton and Straus filed a lawsuit against GRH and Greenstar for breach of contract, alleging the above. The defendants moved the court to dismiss the complaint for failure to state a claim upon which relief could be granted. Mary L. Cooper, District Judge In addressing a motion to dismiss a complaint under Rule 12(b)(6) [for failure to state a claim upon which relief can be granted], the Court must accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine, whether under any reasonable reading of the complaint, the plaintiff may be entitled to relief…. The Court, in evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, may consider the complaint, exhibits attached thereto, matters of public record, and undisputedly authentic documents if the plaintiff's claims are based upon those documents. The Employment Agreements … provide the basis for Plaintiffs' claims, and will be considered by the Court in deciding the motion. A. Count 1 - Two-Year “Single Stream” Bonus Count 1 of the [complaint] alleges … that “Plaintiffs are entitled to the $25,000 Single Stream two-year bonus because Defendants … [made] it impossible for Stanton and Strauss to achieve this bonus by … not installing the Single Stream screen.” They further state that “Defendants unforeseeably failed to install the screen even after purchasing it for the MCRC.” To state such a claim, Plaintiffs must plead (1) a contract, (2) a breach of the contract, (3) damages resulting from the breach, and (4) that the party alleging the breach performed its own contractual duties. [Citation omitted.] Defendants contend that as a matter of contract law, Plaintiffs have failed to state a claim with respect to the single stream bonus because they admit that they did not satisfy the condition precedent contained in the Employment Agreements of installment of the single stream technology at MCRC. They further argue that nothing in the Employment Agreements required GRH to install such a screen regardless of whether one had been obtained. Plaintiffs respond that they have alleged a viable claim because the fact that the screen was not installed at MCRC was due to the bad faith of Defendants. A covenant of good faith and fair dealing is implied in every contract in New Jersey, and implied covenants are as effective components of an agreement as those that are express… Where a contract vests one party with discretion, that party “must exercise discretion reasonably and with proper motive,” not arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectation of the parties. [Citation omitted.] Page 503 The Court finds that Plaintiffs' allegations regarding the reason for their inability to satisfy the condition precedent allow this claim to survive the motion to dismiss…. Defendants analogize to the contract renewal bonus in arguing that the single stream bonus reserved discretion to GRH with respect to installation of the single stream screen, by the Employment Agreements' specification that such screen must be installed “to the company's satisfaction.” However, the Court finds that a reading of the Employment Agreements indicates that the parties all expressly contemplated that the single stream screen would be installed at MCRC, notwithstanding the “to the company's satisfaction” language, and Plaintiffs have alleged that Defendants “intentionally frustrated the intent of the Employment Agreements by making it impossible for [Plaintiffs] to achieve this bonus by … not installing the Single Stream screen…. [and] divert[ing] it to another facility.” Furthermore, as noted above, it is incumbent on a party vested with discretion to exercise such discretion in a reasonable manner, and Plaintiffs have alleged that Defendants failed to do so. [Citation omitted.] The Court will therefore deny the motion insofar as it seeks to dismiss with prejudice the part of Count 1 pertaining to the $25,000 single stream bonus. The claims for the other two-year bonuses set forth in the Employment Agreements also remain pending in Count 1. B. Count 2 - Five-Year Bonuses Count 2 of the Second Amended Complaint asserts a breach of the Employment Agreements' promise to pay two separate five-year bonuses conditioned on certain milestones being met. Defendants contend that Count 2 insofar as it pertains to the $50,000 county contract renewal bonus must be dismissed because it is undisputed that the Plaintiffs did not achieve that milestone; Plaintiffs concede that the contract was never renewed. Defendants further argue that Count 2 insofar as it concerns the $75,000 tonnage bonus must be dismissed because the Employment Agreements clearly and unambiguously state that whether the tonnage condition precedent has been satisfied “is to be determined on July 2, 2013.” Plaintiffs respond that they have pleaded that they achieved the tonnage bonus as of sometime in 2010, and that the Employment Agreements expressly contemplate that the five-year bonuses are payable if achieved “prior to” the “Five-Year Milestone Date.” They further argue that the renewal bonus was not met because the Defendants, in bad faith, refused to execute the renewal contract, and furthermore that the Employment Agreements only require that Plaintiffs “obtain” such renewal contract, not that GRH actually execute it. 1. Tonnage Bonus The Court finds that the interest in judicial efficiency counsels against dismissal without prejudice of the part of Count 2 asserting a breach of the Employment Contracts insofar as Defendants refuse to pay the tonnage bonus. The plain language of the Employment Agreements indicates that the five-year bonuses are not payable until “within 60 days after the fifth anniversary of” the date of execution of the Employment Agreements, or July 2, 2013. However, such bonuses are ultimately payable at such time if either milestone was “achieved on or prior to” that date, and Plaintiffs have alleged facts supporting their claim that they achieved the condition precedent to being paid the tonnage bonus sometime in 2010. There is no indication in the record that Defendants have any intention of paying Plaintiffs the tonnage bonus, insofar as they deny that Plaintiffs satisfied the threshold that would entitle them to the tonnage bonus. Plaintiffs will be permitted to supplement their pleading after such time as the tonnage bonus becomes due to reflect whether nonpayment of the tonnage bonus occurs. 2. Renewal Bonus The contract language covering the renewal bonus reserves discretion to GRH to accept or reject any proposed renewal contract insofar as the putative contract's “[t]erms … must be acceptable to the Company,” and the Employment Agreements themselves do not require GRH to accept a contract negotiated on its behalf by Plaintiffs. Plaintiffs' pleadings concede that the contract renewal milestone was not achieved. Thus, Defendants contend that Plaintiffs cannot state a claim for breach of contract for Defendants' failure to pay that bonus, insofar as Plaintiffs failed to meet the condition precedent. Plaintiffs respond that (1) they have pleaded that Defendants “arbitrarily, capriciously and unreasonably refused to execute the new five-year agreement” despite numerous efforts by the Plaintiffs to negotiate a renewal contract with terms acceptable to Defendants as contemplated by the Employment Agreements, and (2) the term “‘obtaining a new contract with the County of Monmouth’ which is ‘acceptable to the Company’” is ambiguous, insofar as Plaintiffs contend that term can be reasonably understood to encompass their negotiations with the County, but Defendants contend must be understood to require that a contract actually has been “executed.” Whether a contractual provision is ambiguous is a question of law for the Court, requiring the Court to consider, based on the plain language in the contract, whether it is subject to reasonable alternative interpretations. [Citation omitted.] Furthermore, “if the relevant terms in a contract are ambiguous, the issue must go to a jury.” Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159, 163 (3d Cir. 2001). The Court finds that to the extent Plaintiffs allege a breach of the express terms of the renewal bonus, ambiguity of the contract language augurs against dismissal. Specifically, we find that the term “[t]he obtaining of a new contract” in the renewal bonus language is ambiguous, insofar as it is not clear whether it requires that a putative contract be actually executed by Defendants, or simply negotiated and presented to Defendants for their approval. It is therefore plausible that the contract renewal negotiations detailed in Plaintiffs' pleading, paired with the allegations pertaining to Defendants' allegedly unreasonable rejection of the contract terms negotiated by Plaintiffs, state a claim for breach of contract with respect to the renewal bonus…. The Court further notes that it will not dismiss the breach of contract claim pertaining to the renewal contract bonus for lack of ripeness, for the same concerns of judicial efficiency discussed above with respect to the tonnage bonus claim. The Court will therefore deny the motion to dismiss insofar as it seeks dismissal of the part of Count 2 pertaining to the renewal bonus.

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