Superior Court of Massachusetts, Suffolk, Business Litigation Session
Ralph SEVINOR et al.
v.
Surinda SAHNI et al.[1]
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTSâ
MOTION FOR SUMMARY JUDGMENT
Janet
L. Sanders, Justice of the Superior Court
Defendants Surinda "Sam" Sahni and his son Arbreed
"Sunny" Sahni, through various corporate entities
that they control, own cell phone stores throughout the
United States operating as franchisees of "National
Cricket Wireless." One of those stores was located in
Lynn, Massachusetts in a building owned by the plaintiff
Ralph Sevinor. In the fall of 2014, the Sahnis and Sevinor
discussed the prospect of going into business together for
the purpose of opening additional stores in the New England
area. This case stems from disputes that arose among them as
a result of that failed venture.
The
First Amended Complaint contains thirteen counts, among them
fraud and misrepresentation (Count III), breach of contract
(Count IV), breach of fiduciary duty (Count VIII) and a
violation of Chapter 93A (Count VII). Some Counts are
remedies rather than separate claims: Counts I and II seek
declaratory judgment, Count XI alleges "Piercing of the
Corporate Veil," Count XII seeks injunctive relief, and
Count XIII seeks a trustee process attachment. Named as
defendants are not only the Sahnis but also the corporate
entities through which they have operated cell phone stores
both here in Massachusetts and elsewhere. Now before the
Court is defendantsâ Motion for Summary Judgment. The motion
is aimed at those claims asserted against those entities
operating stores outside of Massachusetts (the "Outside
Entities").[2] This Court concluded that these
Outside Entities must be dismissed from the case.
BACKGROUND
Ralph
Sevinor (Ralph) together with his son Jared Sevinor (Jared),
own and manage commercial real estate in Massachusetts and
Rhode Island. Sometime in 2014, Sunny Sahni approached Ralph
about renting space in a building that Ralph owned in Lynn at
395 Lynnway. A lease was signed between 395 Lynnway, LLC (an
entity controlled by the Sevinors) and the defendant ICell
New England, Inc. (ICNE), the corporate entity through which
the Sahnis planned to operate the cell phone store. The
Sahnis are based in New York and at that point had no cell
phone stores in the New England area. The Sahnis told the
Sevinors that they had an "exclusive deal" with
Cricket Wireless and were looking to expand. Discussions
ensued between the Sevinors and the Sahnis about how they
might work together to open additional stores in
Massachusetts.
Jared
(who has a Masters degree in Business from Wharton College),
visited the Sahnisâ office in Hempstead, New York to review
certain financial information. On his return, he drafted a
letter dated January 14, 2015 (the January 14 Letter)
addressed to Sam and Sunny as well as ICNE at the Sahnisâ New
York office. The January 14 Letter purports to set forth the
"key terms in which we understand to enter into a
venture with you to develop the Cricket Wireless business in
New England." The Letter goes on to state as follows:
Transaction Overview: Ralph and Jared Sevinor (RJS) agree to
loan $ 200, 000 into ICell New England, Inc. (Company). Sam
and Sunny (SS) agree to fund all costs for the first five (5)
stores, including inventory, so that the relationship
commences with a turnkey operation and no debt or
encumbrances. These five stores will be Methuen, Revere,
Lynn, Worcester and likely Chelsea.
RJS will be given 40% profit sharing in the Company for
operating the market on behalf of Company and (SS) will
retain 50%% Total 60% of Profits.
RJS and SS agree to reinvest store profits to fund additional
expansion for the near term. However, the first $ 200, 000 in
profits that are distributed will be paid to SS. Thereafter,
distributions will be according to the respective profit
sharing as agreed to above.
The
January 14 Letter continues by stating the "Business
Goals" of this "venture" and the "key
responsibilities" of the respective parties.
Specifically, Ralph would focus on finding appropriate sites
for the stores and overseeing district managers, with
"constant contact with employees at the store
level." Sunny would focus on "relationship
management with Cricket/ATT" and "store performance
oversight." The Letter is signed by Ralph Sevinor and by
one of the Sahnis (the signature is illegible). On January
15, 2015, Jared Sevinor wired $ 200, 000 to a bank account in
the name of ICNE.
What
happened after that is in dispute. Two more stores— in
Methuen and Revere— were opened, but (according to Sam
Sahni), "from day one, we started losing money."
The Sahnis claim that the Sevinors failed to live up to their
promise to take responsibility for the day to day operation
of the stores. Ralph Sevinor recommended a relative to be
district manager but, once hired, he was rarely seen at any
store location. As Sam Sahni described it in his deposition,
the "cell phone business requires very close
supervision. Without that, you are bound to lose money. That
is what happened here." Ralph Sevinor tells a different
story, describing the Sahnis as "con men" and
"criminals." "We got zero, zilch. The minute
they got the 200 grand, they disappeared."
What
is undisputed is that all three stores closed within two
years. Profit and Loss Statements filed by ICNE for the
period January through December 2015 show a net loss of $
163, 879.77; for the period January through December 2016,
Profit and Loss Statements show a net loss of $ 139, 042.63.
The Sevinors received no money back in return for their $
200, 000 investment, and instituted this lawsuit in December
2016.
The
original Complaint named only the Sahnis and ICNE as
defendants. On August 17, 2017, the Sevinors filed an Amended
Complaint, adding as defendants the Outside Entities, which
are as follows: ICell, Inc., ICell of Bawa, Inc., ICell of
Fordham, Inc., ICell of Port Jefferson, Inc., ICell of
Wyandanch, Inc., and ICell Holdings, Inc. The Affidavit of
Sam Sahni dated September 7, 2017, describes what each of
these entities is. See Exhibit 7 of Joint Appendix.
Plaintiffs have offered no evidence to dispute this
description of the corporate structure. Briefly summarized,
that affidavit states that ICell, Inc. is the entity which is
the party to the franchise agreement with Cricket Wireless.
Each of the other entities was organized to operate and
manage separate store locations. For example, ICell Bawa,
Inc. operates a store in Baltimore. ICell Holdings operates
stores in New York. None of these entities have any
connection to any store in the New England area, much less in
Massachusetts. Each entity maintains its own bank account and
files a separate tax return under its own tax identification
number.
In
support of their position that these Outside Entities should
remain as defendants, plaintiffs cite to the following
evidence in the summary judgment record.[3] The Outside Entities
are all owned and/or controlled by the Sahnis. ICell, Inc. is
used to make up for shortfalls at store locations, including
those run by ICNE. ICNE at one point transferred $ 50, 000
money to ICell Bawa. Spreadsheets produced by defendants that
include check numbers, dates and amounts show that between
October 2014 and July 2017, ICell, Inc. transferred a total
of $ 422, ...