Sevinor v. Sahni

          MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’ 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 defendants’ 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 Sahnis’ 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 Sahnis’ 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, ...