19910313a Federal Express Original Complaint

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GILMORE F. DIEKMANN PATRICIA H. CULLISON BRONSON, BRONSON & McKINNON 505 Montgomery street San Francisco, California 94111-2514 Telephone: (415) 986-4200 Attorneys for Plaintiff FEDERAL EXPRESS CORPORATION

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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FEDERAL EXPRESS CORPORATION, Plaintiff, COMPLAINT FOR INJUNCTIVE AND FOR DAMAGES FOR BREACH OF CONTRACT, FOR BREACH OF FIDUCIARY DUTY, AND FOR BREACH OF THE AGENCY RELATIONSHIP

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RELIEF

HAMILTON TAFT & COMPANY, Defendant.

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DEMAND FOR JURy TRIAL

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Plaintiff, FEDERAL EXPRESS CORPORATION, hereby alleges as follows:

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PARTIES

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Plaintiff FEDERAL EXPRESS CORPORATION ("Federal

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Express ll )

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virtue of the laws of the state of Delaware, and maintains its

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principal place of business in Memphis, Tennessee.

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2.

is a corporation organized and existing 'under and by

Plaintiff is informed and believes and thereon alleges

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that Defendant HAMILTON TAFT & COMPANY (IIHamilton Taft tl )

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corporation organized and existing under and by virtue of the

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laws of the State of California and maintains its principal place COMPLAINT FOR INJUNCTIVE RELIEF

is a

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of business in Texas.

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This is an action for breach of contract, breach of

fiduciary duty, and breach of agency relationship arising, inter alia, under the California Civil Code section 2322 et seg.

The

amount in controversy exceeds the sum or value of Fifty Thousand Dollars ($50,000) exclusive of interest and costs.

The

jurisdiction of this Court is invoked pursuant to 28 U.S.C. section 1332 . 4.

Venue

u.s.c. section

properly laid in this Court pursuant to

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1391(a), in that the claims involved arose in this

district.

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III.

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JURISDICTION AND VENUE

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GENERAL ALLEGATIONS

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Count One

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(Breach of Contract) 5.

Plaintiff realleges and incorporates by reference as

though fully set forth herein each and every allegation contained in paragraphs 1 through 4 of this Complaint. 6.

In December of 1989 Federal Express entered into a

payroll tax service contract with Hamilton Taft.

Pursuant to

this agreement, Federal Express would wire transfer its employee payroll taxes to Hamilton Taft.

Under the contract Hamilton Taft

was then obligated to make disbursements to the appropriate COMPLAINT FOR INJUNCTIVE RELIEF 2

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IRS, and state and local taxing agencies.

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performing this service, Hamilton Taft had the use of Federal

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Express' money from the time of its receipt until the time of its

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disbursement to the appropriate taxing authority.

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under the contract by promptly delivering to Hamilton Taft all

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Plaintiff has fully performed all contractual obligations except where prevented by breach of defendant. 8.

Plaintiff is informed and

belie~es

and thereon alleges

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that defendant has breached its contractual obligations by,

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rather than paying plaintiff's payroll taxes with the money

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transferred for that purpose, the money would be held for an

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additional 30 to 90 days.

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thereon alleges that in some cases defendant then used a

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different client's incoming funds to pay Federal Express taxes

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and any federal or state taxing agency penalties for late

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payments.

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Federal Express has performed all of its obligations

appropriate payroll tax summary reports and payroll tax funds.

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As consideration for

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taxing authorities on behalf of Federal Express including the

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9.

Plaintiff is informed and believes and

Plaintiff is informed and believes that in other cases,

Federal Express taxes simply were not paid, and penalties may be accruing. 10.

Defendant has further breached the contract by not

providing original tax receipts evidencing the tax payments as requested by plaintiff. 11.

As a result of defendant's breach of contract plaintiff

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has been damaged in excess of

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true extent of its damages plaintiff is in need of information

$50,000~

COMPLAINT FOR INJUNCTIVE RELIEF 3

In order to discovery the

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from the defendant regarding payroll taxes paid and money currently owed to the appropriate taxing

authorities~

Such

information is within the exclusive control of the defendant and has not been made available to the plaintiff as requested.

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count Two

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Plaintiff realleges and incorporates by reference as

though fully set forth herein each and every allegation contained in paragraphs 1 through 11 of this Complaint. 13.

Plaintiff is the trustee of the tax funds withheld from

the wages of its employee.

Plaintiff, as trustee of these funds,

is a fiduciary of the withheld funds for the purpose of paying the required amounts to the united states, and state and local agencies. 14.

As custodian of these funds, defendant owed a fiduciary

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(Breach of Fiduciary Duty)

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duty to the plaintiff to transmit these funds to the appropriate taxing agency promptly and in the full amount.

Defendant also

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had a fiduciary duty to invest these funds as a reasonably prudent investor investing his own money would have done so as not to jeopardize the principle.

On information and belief

plaintiff alleges that by investing in high risk non-liquid loans, defendant has breached this fiduciary duty.

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Count Three

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(Breach of Agency Relationship) 15.

Plaintiff hereby realleges and incorporates by

reference as though fully set forth herein paragraphs 1 through COMPLAINT FOR INJUNCTIVE RELIEF 4

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Pursuant to the written payroll tax service contract

entered into between the defendant and plaintiff, defendant became the agent of plaintiff. 17.

Defendant consented to the creation of this

relationship by agreeing to accept payroll tax money from the plaintiff and deposit such money on behalf of the plaintiff in the appropriate amounts and manner on or before the statutory

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deadlines as herein alleged.

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11 of this Complaint.

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In consideration of

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entering into an agency

relationship with the plaintiff, defendant had the use of

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plaintiff's employee payroll tax funds from the time received by

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defendant until the time of disbursement to the appropriate

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taxing authorities.

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Pursuant to its agency relationship with the plaintiff,

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defendant owed a duty of loyalty to the plaintiff.

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loyalty required defendant to pay the payroll tax funds owed by

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This duty of

the plaintiff to the appropriate taxing authorities in a timely

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manner, and to refrain from administering the payroll tax funds

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in a manner harmful to the interest of the plaintiff, includIng

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imprudent investments, or investments which might expose the plaintiff to taxing authority liability. 20.

Also pursuant to its agency relationship with the

plaintiff, defendant owed a duty to disclose promptly upon demand by the plaintiff all documents, including tax receipts, relating to the defendant's administration of the plaintiff's payroll account. 21.

Defendant has breached its agency relationship by

COMPLAINT FOR INJUNCTIVE RELIEF 5

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failing and refusing to render to Federal Express, upon its

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demand, an accounting of its fund.

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Defendant·s breach of its agency relationship has

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caused plaintiff damages in an amount to be specifically

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ascertained at trial but which is presently alleged to be in

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excess of $50,000.

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Count Four

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(Injunctive Relief)

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reference as though fully set forth herein paragraphs 1 through

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Unless defendant is restrained by appropriate

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injunctive relief herein from destroying or otherwise disposing

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of tax receipts and other information in its control documenting

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the use and transfer of plaintiff's employee tax funds,

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unless defendant is restrained by appropriate injunctive relief

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from continuing to operate the "ponzi scheme", and unless

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defendant is ordered to immediately produce tax receipts and/or

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other information regarding the transfer and use of funds,

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plaintiff will suffer immediate and irreparable injury for which

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there is no adequate remedy at law herein.

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Plaintiff hereby realleges and incorporates by

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and

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WHEREFORE, plaintiff prays for judgment against defendant as follows:

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For preliminary injunctive relief restraining or

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otherwise preventing defendant from destroying tax receipts

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and/or other information regarding the transfer of payment of

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plaintiff's payroll taxes as alleged, pending trial; COMPLAINT FOR INJUNCTIVE RELIEF 6

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For preliminary injunctive relief ordering defendant to

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cease using plaintiff's payroll tax funds as part of a "ponzi

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scheme", pending trial; For a temporary restraining order enjoining defendant

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from destroying tax receipts and/or other information regarding

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plaintiff's payroll taxes; and

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For an order mandating the production of tax receipts

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and/or other information in control of the defendant regarding

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the payment and transfer of plaintiff's payroll tax funds; and

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For damages for the acts herein alleged in accordance

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with proof ..

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JURy DEMAND

Plaintiff Federal Express Corporation hereby makes demand for jury.

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Dated:

March 13, 1991

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BRONSON, BRONSON & McKINNON

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BY:Qz(~~

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PATRICIA H. CULLISON Attorneys for Plaintiff

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\PHC\29296 \ 9999\COMPL T• eMP 44S9~J.Allen

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COMPLAINT FOR INJUNCTIVE RELIEF 7