1. business and industrial

Case: 3:15-cv-00130-TMR Doc #: 1 Filed: 04/10/15 Page: 1 of 15 PAGEID #: 1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION (DAYTON)
DANIEL S. LIPSKY,
855 Lower Bellbrook Road
Xenia, Ohio 45385
NATIONWIDE BIWEEKLY
ADMINISTRATION, INC., an Ohio
corporation,
855 Lower Bellbrook Road
Xenia, Ohio 45385
Plaintiffs,
v.
STEVEN P. LIPSKY,
127 River Oak Court
Weatherford, Texas 76087
LIPSKY & ASSOCIATES, INC., a Texas
corporation,
1400 Santa Fe Drive, Suite 200
Weatherford, Texas 76086
Defendants.
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Case No: 3:15-cv-00130-TMR
Judge Thomas M. Rose
COMPLAINT
JURY TRIAL DEMANDED
Plaintiffs Daniel S. Lipsky (“Dan Lipsky” or “Dan” ), and his solely-owned company,
Nationwide Biweekly Administration, Inc. (“Nationwide”), bring this Complaint against
Defendants Steven P. Lipsky and Lipsky & Associates, Inc. as follows:
INTRODUCTION
1.
Dan Lipsky is the founding President and sole shareholder of Nationwide, which
is an Ohio corporation and a successful independent administrator of a biweekly interest savings
program. Dan Lipsky’s brother, Steven P. Lipsky (“Steve Lipsky” or “Steve”), currently owns
and operates a competing business, Lipsky & Associates, Inc. and its subsidiaries and affiliates
(“Lipsky & Associates”). This lawsuit is about the valuable information taken from Plaintiffs
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and used by Defendants for their own gain—all to the detriment of Plaintiffs. Because Plaintiffs
have been damaged, and continue to suffer damages as a result of Defendants’ actions, Plaintiffs
bring the following lawsuit.
PARTIES
2.
Plaintiff Daniel S. Lipsky is the founder, president and sole shareholder of
Nationwide.
3.
Plaintiff Nationwide Biweekly Administration, Inc. is an Ohio corporation with
its principal place of business located at 855 Lower Bellbrook Road, Xenia, Ohio 45385.
4.
Upon information and belief, Defendant Steven P. Lipsky is the principal owner
of Lipsky & Associates, Inc. and resides at 127 River Oak Court, Weatherford, Texas 76087.
5.
Upon information and belief, Defendant Lipsky & Associates, Inc. is a Texas
corporation with its principal place of business located at 1400 Santa Fe Drive, Suite 200,
Weatherford, Texas 76086.
JURISDICTION AND VENUE
6.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)
because this lawsuit is between citizens of different states and the amount in controversy exceeds
$75,000, exclusive of interest and costs.
7.
Venue is properly vested in this Court pursuant to 28 U.S.C. § 1391(b)(2) because
a substantial part of the events or omissions giving rise to Plaintiffs’ claims occurred in this
District.
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FACTUAL ALLEGATIONS
Dan Lipsky and the Business Model
8.
Dan Lipsky started a unique biweekly interest savings program in 1999, and
eventually founded Nationwide in 2002. Dan is Nationwide’s president and sole shareholder.
9.
Dan Lipsky has continually worked to innovate, improve and grow his successful
business model. Over the years—with expense and large commitment of resources—Nationwide
has progressively perfected a unique business plan (the “Business Model”), which includes
specific marketing and sales techniques, a pricing structure, and other company operations.
Other independent companies in the biweekly industry have tried to develop a direct mail
marketing program and failed where Nationwide found success. Nationwide’s Business Model
is unique and distinct from the business models of competitors in the biweekly program industry.
10.
In short, the Business Model is very valuable because it represents a competitive
business advantage to Dan Lipsky and his company.
The Business of Dan Lipsky’s Brother
11.
Dan Lipsky has felt a natural inclination toward helping his brother Steve achieve
success. After Dan started in the biweekly program industry, he achieved success through
innovative use of direct mail marketing where others failed. Dan started his brother off in the
same industry (also utilizing direct mail), by giving his brother a copyrighted direct mail
marketing letter, a script that had been developed with great effort, and other business materials
subject to certain conditions.
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Brother’s Business Start Was a Gift from Dan Lipsky
12.
Using this information, Dan Lipsky’s brother Steve began mailing this initial
letter. From this beginning, Steve grew his company Lipsky & Associates, which continues
today as a Texas corporation doing business under the names “Equity Plus,” “Home Mortgage
Services” and “BiSaver”.
13.
Dan Lipsky expected that his brother would run his independent business in Texas
and, going forward, that he would develop his own versions of a direct mail marketing program,
scripts, and his own business model. Likewise, Dan continued developing his own business in
Ohio and developed his own updated direct mail marketing program, scripts and his own
business model.
Dan Lipsky’s Brother Goes Behind Dan’s Back
14.
Steve did not adhere to the conditions put in place when Dan shared the original
copyrighted direct mail marketing letter and other business materials developed with great effort.
15.
After Dan shared the initial materials with Steve, Nationwide began to develop a
new direct mail marketing letter that was even more successful than the original direct mail
marketing letter. Steve became aware that Nationwide had developed a new more successful
letter, and Steve then secretly obtained copies of the letter from potential customers.
16.
Then, without permission from Dan or Nationwide, Steve copied from this new
letter and used it to create a new direct mail letter for himself. Nationwide also learned that
Steve had deceptively asked an employee to enroll in Nationwide’s program so that Steve’s
company could obtain all the documentation related to Nationwide’s program.
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17.
To stop this plagiarism and violation of copyright law, Nationwide filed a lawsuit
styled Nationwide Bi-Weekly Administration Inc., et al. v. Home Mortgage Services, Inc., et al.
Case No. 3:04CV242 (S.D. Ohio) before the Honorable Judge Walter H. Rice.
18.
The lawsuit obviously caused strain on Dan and his family. So after two and a
half years (in 2008), when Dan felt that Steve would never betray him again, Dan decided to
attempt to bring the family back together by dismissing the case without compensation. Dan felt
that each brother would reap his own benefits in the future from their own independent business
decisions.
19.
Since 2008, Dan’s company has grown considerably based on developing new
marketing materials, new business models and innovative marketing strategies including the
Business Model. During this time, Dan’s company has experienced exponential growth through
tremendous hard work and innovation.
20.
After the case was dismissed, however, Dan decided not to share his private
business information with Steve because he had been betrayed by his brother’s past actions and
did not want it ever to happen again.
21.
On a personal basis, Dan wanted to move beyond Steve’s betrayal and attempted
to rebuild a personal relationship with his brother after 2008, hoping that the entire family could
be brought back together. But these attempts had only limited success and Dan and Steve were
estranged except for some limited interactions.
Dan Lipsky’s Brother Say he wants to Restore Their Relationship
22.
Then, late one evening in March 2013, Dan received a phone call from Steve who
stated that he missed Dan and wanted to be brothers again. Dan’s brother stated that he was
remorseful for his prior actions, wanted to have a good brotherly relationship, and hoped they
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might work together again. Steve also told Dan that he had not been focused on growing his
company and had given up on his own company three years ago because he was focused on
fracking near his Texas home and the substantial personal injuries it was causing to his family
and damage to his new home. As a result, Steve said, his company was stagnant and not growing
even though it was still profitable and provided Steve with a good income.
23.
Steve asked to merge Dan’s company with his company to bring “his brother
back” by the two of them working together. Dan declined to merge and thought it was better to
keep the two companies separate. Still, Steve responded that he wanted Dan to be involved in
his company and, consequently, Dan offered to buy one-half of Steve’s company.
24.
At first Steve agreed to this, but after Dan explained to Steve that distributions of
profits would have to be divided equally based upon ownership, Steve backed-away, concerned
that his income would drop due to lower distributions (even though he would have received a
lump sum payment for half of the company). To solve this problem, Steve stated that he would
give Dan one-half of the company conditioned upon Steve continuing to receive the same
income he had been receiving in the form of a guaranteed salary. Dan agreed to Steve’s
proposal.
25.
Steve acted pleased with this idea because this business agreement would allow
him to receive the same income, grow his company, and, importantly, Steve stated he wanted to
do this to make up for the wrong he had done in the past to Dan and to their relationship.
26.
Dan believed his brother because he was optimistic, Steve sounded truly
remorseful and very sincere. Dan further believed that business concerns would not be an issue
because Steve would be guaranteed his prior income as the company grew.
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27.
Shortly after these initial discussions, Steve told Dan that he had refined his
proposal such that Dan would become a non-controlling owner of 49% of Steve’s company. Dan
agreed to this change because Dan wanted to hold to what he believed the original reason was for
Steve reaching out to him—restoring the relationship between Dan and Steve.
28.
As discussions continued, Steve requested that Dan provide his assistance,
knowledge, and information to improve and further develop Steve’s business, agreeing that Dan
would receive 49% of the growth that Dan would be creating over and above the profitability of
Steve’s company at the time Steve first called Dan (which was approximately equivalent to
Steve’s guaranteed salary).
29.
Dan and Steve agreed to this arrangement and counsel for both parties began
formalizing the details of the transaction starting approximately in the spring of 2013.
30.
Over the coming months, Dan believed—and Steve led him to believe—that the
brothers were renewing their relationship. In fact, Dan hosted Steve for a visit at his Ohio home
in mid-November 2013. During this visit, which was his first visit since the late 1990s, Steve
again represented that he would give Dan 49% ownership in Steve’s company in exchange for
Dan’s assistance, knowledge, and information about the Business Model.
31.
During this visit, on November 15, 2013, Dan and Steve drafted a document
showing the basic terms of their agreement:

“Steve will receive $1,000,000 guaranteed salary until company annual net
revenues reach $3,000,000 at which time salary will stop.”

“For 10 years, Steve will be guaranteed that he will receive a minimum of
$1,000,000 annual income (either from salary or entirely from distributions).”
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
“After company annual revenue reaches $2,000,000—49% of stock goes to Dan
(can not [sic] be revoked).”
32.
Following this November 15, 2013 term sheet, Dan and Steve instructed their
respective attorneys to prepare the contractual documents in accordance with the agreed terms.
Dan relied upon his brother’s representation that he would go forward with this deal forward.
Before the Deal Closes, Dan Lipsky’s Brother Repeatedly Asks for Information to Get Started
33.
Beginning about six months after the initial phone call, during the fall of 2013,
Steve repeatedly asked Dan to begin to divulge the details of the Business Model. Although Dan
had grown to trust his brother again, he initially declined to share these details until the
transaction was formalized.
34.
However, in the late fall of 2013, Steve repeatedly reassured Dan that the deal
was going to happen. Dan believed his brother Steve, and trusted his pretenses, so he began to
share some details about the Business Model.
35.
By December 4-5, 2013, the transaction was getting close to being finished and
would have an effective date of January 1, 2014. Management and counsel for both companies
had worked through many issues such as reclassifying Steve’s company from a corporation to a
limited liability company to guarantee Steve’s salary and notifying licensing agencies of this
change.
Dan offered to provide assistance to Steve’s company in completing these few
remaining tasks.
36.
On December 5, 2013, trusting his brother Steve’s repeated representations that
the deal would get done, Dan relented to Steve’s requests to begin helping his company in
earnest. Specifically, Dan directed his company management to divulge a significant amount of
details of the Business Model to Steve and to Steve’s company management during a December
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5, 2013 conference call. The details shared during this call included information about Plaintiffs’
specific marketing and sales techniques, pricing structure, and other company operations.
Dan Lipsky’s Brother Cuts Off Communication and the Deal
37.
Following the December 5, 2013 teleconference, and continuing into the year
2014, Steve (and his counsel) became generally unresponsive to communications from Dan (or
counsel).
38.
Indeed, through the winter and spring of 2014, Dan tried repeatedly to contact
Steve to finish the deal. After many attempts, Dan finally reached Steve by telephone and asked
why Steve was not returning Dan’s messages. Steve stated that he had been busy. Dan asked
Steve to work with him to finish the deal and at that time Steve told Dan: I can do this myself; I
no longer need you. Steve stated he could do this because he had gained all the information he
needed to succeed and could now implement the Business Model by himself. When Dan heard
this statement, he asked: What happened to the original vision of us being brothers and working
together? Steve again stated that he did not need Dan and could do everything by himself.
39.
At this time, Dan for the first time understood that Steve had used the transaction
and the auspices of renewing his relationship with Dan as a ruse to defraud Dan and his company
out of Nationwide’s successful Business Model.
40.
In other words, Steve pretended to have an interest in restoring his relationship
with Dan, and strung him along until the information about the Business Model was obtained.
Dan for the first time came to understand that either from the very beginning, or at some other
point prior to the December 5, 2013 teleconference, his brother did not intend to fulfill his
promise to give Dan Lipsky 49% ownership in Lipsky & Associates.
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41.
Upon information and belief, Steve ordered his company to implement and utilize
the Business Model to improve the performance of Steve’s company, including direct mail
marketing and the pricing structure.
42.
Upon information and belief, the implementation of the valuable information
obtained from Dan and his company has resulted in Steve’s company increasing revenue and
profits.
43.
Further, the implementation of the information has resulted in damages, including
lost profits, for Plaintiffs.
FIRST CAUSE OF ACTION
(Promissory Fraud)
44.
Plaintiffs incorporate by reference all preceding paragraphs as if fully repeated
45.
Steve Lipsky repeatedly and falsely represented to Plaintiffs that he would give
here.
Dan Lipsky 49% ownership of Lipsky & Associates in exchange for Plaintiffs’ assistance and the
disclosure of the Business Model.
46.
These representations were material to Plaintiffs’ decision to divulge the Business
Model to Defendants. If Steve Lipsky had not falsely represented that he would give Dan Lipsky
49% ownership in Lipsky & Associates, Plaintiffs would not have shared information about the
Business Model with Defendants.
47.
Steve Lipsky deliberately made promises to Dan Lipsky with no present intent to
perform the promises, but rather with the intent of misleading Dan Lipsky into relying on the
statements, all in an effort to fraudulently gain access to the Business Model.
48.
Dan Lipsky justifiably relied on Steve Lipsky’s false representations, and
concealments of facts, as he did eventually disclose the Business Model to his brother.
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49.
As a proximate result of the reliance on this promise, Plaintiffs have been injured.
As a result of these injuries, Plaintiffs have incurred damages, including, but not limited to,
compensatory damages (including the value of the Business Model, which Defendants valued at
an amount more than equal to 49% of the ownership in Lipsky & Associates), and consequential
damages (including lost profits), all in an amount to be proved at trial but exceeding $75,000.00.
50.
Further, because Steve Lipsky’s conduct and second betrayal of this brother was
committed with actual malice, the Court should award punitive damages to Plaintiffs.
SECOND CAUSE OF ACTION
(Fraud)
51.
Plaintiffs incorporate by reference all preceding paragraphs as if fully repeated
52.
On numerous occasions, as described above, Steve Lipsky represented to Dan
here.
Lipsky that he would give Dan Lipsky 49% ownership of Lipsky & Associates in exchange for
Plaintiffs’ assistance and the divulgement of the Business Model.
53.
These representations were material to Plaintiffs’ decision to divulge the Business
Model to Defendants. If Steve Lipsky had not represented that he would give Dan Lipsky 49%
ownership in Lipsky & Associates, Plaintiffs would have never shared information about the
Business Model with Defendants.
54.
These representations were false in that Steve Lipsky did not intend to give Dan
Lipsky 49% ownership in Lipsky & Associates, but rather intended to cause Plaintiffs to divulge
the Business Model to Defendants, as indicated by among other things, Steve Lipsky failing to
return messages from Dan Lipsky after the December 5, 2013 teleconference.
55.
Dan Lipsky justifiably relied on Steve Lipsky’s representations because he
genuinely believed that Steve Lipsky was remorseful and desired to restore their relationship.
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56.
As a result of Defendants’ actions, and their subsequent implementation of the
fraudulently obtained Business Model, Plaintiffs have incurred damages, including, but not
limited to, compensatory damages (including the value of the Business Model, which Defendants
valued at an amount more than equal to 49% of the ownership in Lipsky & Associates), and
consequential damages (including lost profits), all in an amount to be proved at trial but
exceeding $75,000.00.
57.
Further, because Steve Lipsky’s conduct and second betrayal of his brother was
committed with actual malice, the Court should award punitive damages to Plaintiffs.
THIRD CAUSE OF ACTION
(Constructive Trust)
58.
Plaintiffs incorporate by reference all preceding paragraphs as if fully repeated
59.
Defendants fraudulently obtained valuable information relating to the Business
here.
Model from Plaintiffs, which was the property of Plaintiffs.
60.
Further, Defendants abused Plaintiffs’ trust and unjustly enriched themselves by
obtaining the information relating to the Business Model through deception, representing that
they would give Dan Lipsky 49% ownership in Lipsky & Associates in exchange for the
information about the Business Model, but then failing to do so after Defendants obtained the
information.
61.
Defendants have implemented the Business Model at Lipsky & Associates, and
the implementation of this information has resulted in Lipsky & Associates growing its revenues
and profits in an amount that is specifically traceable to the Business Model.
62.
It would be inequitable for Defendants to retain the revenues and profits they have
earned as a result of the unjustly and fraudulently obtained information relating to the Business
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Model. The Court should therefore impose a constructive trust on the resulting revenues and
profits earned by Defendants.
FOURTH CAUSE OF ACTION
(Unjust Enrichment)
63.
Plaintiffs incorporate by reference all preceding paragraphs as if fully repeated
64.
As described above, Plaintiffs conferred a benefit upon Defendants, namely the
here.
details of the Business Model.
65.
As described above, Defendants had knowledge of the benefit and value of the
Business Model, which they valued in an amount more than the value of 49% ownership in
Lipsky & Associates.
66.
Upon information and belief, Defendants’ use of the information obtained about
the Business Model has increased the revenue and profits of Lipsky & Associates.
67.
As described above, the retention of the benefit and value of the Business Model
by Defendants without payment would be unjust due to the deceptive way in which Defendants
obtained the information relating to the Business Model. Plaintiffs have therefore been damaged
in the amount of the value of the Business Model, to be proved at trial, but in excess of
$75,000.00.
FIFTH CAUSE OF ACTION
(Promissory Estoppel)
68.
Plaintiffs incorporate by reference all preceding paragraphs as if fully repeated
here.
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69.
As described above, Steve Lipsky repeatedly and unambiguously promised
Plaintiffs that Dan Lipsky would receive 49% ownership in Lipsky & Associates in exchange for
assistance and information relating to the Business Model.
70.
It was reasonable and foreseeable for Plaintiffs to rely on this promise because
Dan Lipsky genuinely believed that Steve Lipsky was remorseful and desired to restore their
relationship.
71.
Plaintiffs would not have provided Defendants with information relating to the
Business Model but for Steve Lipsky’s promise to give 49% ownership in Lipsky & Associates
to Dan Lipsky. In reliance on this promise, Plaintiffs provided Defendants with information
about the Business Model.
72.
The information relating to the Business Model that Defendants obtained from
Plaintiffs is valuable, and Defendants have utilized and implemented this information to the
detriment of Plaintiffs. Plaintiffs have therefore been injured in an amount to be proved at trial,
but in excess of $75,000.00.
DEMAND FOR RELIEF
WHEREFORE, Plaintiffs request judgment in their favor and pray:
1.
That this Court enter judgment against Defendants for Plaintiffs’ fraud claim, and
award compensatory, consequential and punitive damages in an amount in excess of $75,000.00.
2.
That this Court enter judgment against Defendants on Plaintiffs’ claim for
constructive trust and impose a constructive trust against Defendants, and in favor of Plaintiffs,
on the revenues and profits earned by Defendants as a result of, and traceable to, the Business
Model.
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3.
That this Court enter judgment against Defendants for Plaintiffs’ unjust
enrichment claim, and award damages in an amount in excess of $75,000.00.
4.
That this Court enter judgment against Defendants for Plaintiffs’ promissory
estoppel claim, and award damages in excess of $75,000.00.
5.
That this Court award Plaintiffs all interest, costs, and fees incurred in bringing
and prosecuting this action, including an award of reasonable attorneys’ fees; and
6.
That this Court award such other relief, both in law and equity, as is just and
appropriate in the premises.
Dated: April 10, 2015
Respectfully submitted,
/s/ Nathan L. Colvin
Glenn V. Whitaker (0018169)
Trial Attorney
Nathan L. Colvin (0087093)
VORYS, SATER, SEYMOUR AND PEASE LLP
301 East Fourth Street
Suite 3500, Great American Tower
Cincinnati, OH 45202
Telephone: (513) 723-4000
Fax: (513) 852-8450
Email: [email protected]
[email protected]
Attorneys for Plaintiffs Nationwide Biweekly
Administration, Inc. and Daniel S. Lipsky
JURY DEMAND
Plaintiffs demand a trial by jury on all issues contained herein.
/s/ Nathan L. Colvin
Nathan L. Colvin
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