Published: December 18, 2019
DENVER, PENN. — On November 18, Dan Morphy and Dan Morphy Auctions, LLC filed a civil suit in the Delaware Court of Chancery against auctioneer Jim Julia and James D. Julia Inc, alleging a breach of contract stemming from Morphy’s December 14, 2017 purchase of James D. Julia Inc.
The complaint alleges that Julia broke his purchase agreement and restrictive covenant agreement with Morphy by steering firearm consignments to his sister Jeanine Poulin’s company, Poulin’s Antiques and Auctions Inc, in Fairfield, Maine, and also by enticing Morphy employees and consultants to enter into business relationships with that auction house.
The complaint documents portions of the 2017 purchase agreement and the restrictive covenant agreement agreed to by both parties. According to the complaint, the agreement prohibits Julia from competing against Morphy or referring customers to other auctioneering firms. It also says that Julia agreed to “on a timely basis, refer any and all parties and entities” who contacted him about auction services exclusively to Morphy. The restrictive covenant agreement specifically precluded Julia “from referring customers, buyers or consignors to Poulin Antiques & Auctions.”
The complaint says that despite agreeing to refer customers to Morphy, Julia has failed to make any referrals to Morphy in the two years since the purchase transaction closed. “Instead, when potential customers called Julia seeking auctioneering services, Julia has sent them to Poulin, his sister’s auctioneering firm. Specifically, in 2019, Julia received a call from a purported consignor seeking a referral for a firearms auction consignment and… advised them that ‘it sounds like Poulin would be the actual best,’ and recommended they use Poulin instead of Morphy,” the complaint reads.
In regards to poaching employees, the complaint reads “both the purchase agreement and the restrictive covenant agreement further prohibit… Julia from attempting to entice away from employment or affiliation or hire or affiliate with any person who is an employee or independent contractor of Morphy or its affiliates or subsidiaries.”
Morphy says that Julia asked a Morphy’s appraiser to leave Morphy and begin working for Poulin. The complaint says that since 2015, other employees have left Morphy in Pennsylvania and relocated to Maine to work for Poulin.
The complaint says that shortly after the sale of James D. Julia Inc, Julia set up an office in Poulin’s building in Maine.
In 2019, Poulin Antiques & Auction ran quarterly cataloged firearm auctions that, according to catalogs posted on Invaluable, processed 6,935 lots. Posted catalogs on that platform indicate the firm sold 4,628 lots over two sales in 2018 and 4,921 lots over two sales in 2017. Morphy’s firearms division also scheduled their sales quarterly in 2019 and ran 5,992 lots through those dedicated auctions, with 5,719 lots over four sales in 2018 and 4,263 lots over three sales in 2017. An additional number of firearm lots sold by Morphy in specialty sales were uncounted.
When Morphy Auctions acquired James D. Julia Inc, in 2017 for $7.25 million, Julia’s three divisions, consisting of Rare Firearms; Lamps, Glass & Fine Jewelry; and Fine Arts, Asian & Antiques, were producing annual sales of $43 million. All were folded into the Morphy umbrella, as well as all the goodwill and nearly all the assets of that business.
The complaint says “A significant portion of the consideration for the purchase price paid by Morphy was Julia’s…continued cooperation and assistance with their auction relationships and business. Morphy decided to enter into this agreement based on [James D Julia Inc’s] reputation and goodwill in the firearm auctioneering industry and based on Morphy’s desire to expand its firearm division through the acquisition of [James D Julia Inc’s] assets and the cooperation of Julia.”
According to their purchase agreement, Julia was retained as a consultant to Morphy for a period of six years at a rate of $112,000 per year. The agreement gives Morphy the right to withhold payments of this as well as other promissory notes as part of the initial purchase should Julia be found in violation of the agreements. Should Morphy be found to default on those promissory payments without cause, Julia is entitled to accelerate the schedule of promissory notes owed.
Morphy seeks damages, legal fees, injunctive relief to stop further breaches of contract, declaratory relief allowing Morphy to withhold consultancy payments and declaratory relief that will allow Morphy to deduct damages from amounts still owed to Julia.
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