A Pennsylvania auction company that bought the James D. Julia Inc. auction business, of Fairfield, in 2017 for $7.2 million has filed a lawsuit against Julia, claiming he referred business to his sister’s business in violation of sale agreements.
Further, Dan Morphy Auctions LLC, of Denver, Pennsylvania, and Dan Morphy, who filed the complaint Nov. 18, 2019, in the Delaware Court of Chancery, alleges Julia and the Julia LLC breached the contract in other ways, including by enticing Morphy employees away from Pennsylvania to work at Julia’s sister’s business, Poulin Antiques and Auctions Inc., on Skowhegan Road in Fairfield.
Contacted on Wednesday for comment, both Julia and his lawyer, Eric J. Wycoff of Pierce Atwood LLP, of Portland, issued a statement Thursday saying Morphy’s claims are “baseless” and Morphy is seeking to avoid paying significant amounts of money owed to Julia and his company.
James D. Julia explains the intricate metal work on a repeating flintlock rifle once owned by King Louis XV, at James D. Julia Auctioneers Inc. in Fairfield, on Jan. 11, 2018. The Pennsylvania company that has bought’s Julia’s auction business is suing him, alleging breach of contract.
“The complaint alleges that Mr. Julia and his company breached their agreements with Morphy, by failing to refer customers exclusively to Morphy and his company and, instead, have directed customers to Poulin Antiques and Auctions, Inc.,” the statement reads.
“The complaint also alleges that Mr. Julia and his company have tried to entice Morphy’s employees to terminate their employment with Morphy and to, instead, work for other companies.”
According to the statement, Julia and his company “categorically deny these allegations.”
“Not only did Mr. Julia and his company not breach the agreements with Morphy and his company, but before Morphy sued, Mr. Julia invited Morphy, on multiple occasions, to come and review all his records and satisfy himself that neither Mr. Julia nor his company breached the agreements,” the statement reads.
“However, Morphy declined to review any records. The lawsuit appears to be nothing more than a transparent effort by Morphy and his company to avoid paying the significant amounts of money which are owed to Mr. Julia and his company.”
Julia sold his longtime family business on Skowhegan Road in Fairfield to Morphy on Dec. 14, 2017, for $7.2 million, according to the lawsuit. As part of the sale, Morphy bought all the Julia assets and agreed Julia would be a consultant and refer all auction business to Morphy, which sought to expand its firearm division through the sale and cooperation of Julia. As a consultant, Julia was to receive $112,000 a year for six years.
The restrictive covenant agreement specifically precludes Julia from referring customers, buyers or consignors to Poulin, but Morphy alleges Julia set up office in a Poulin building and over the two years since the sale, Julia has referred no business to Morphy.
“Instead, when potential customers call Julia seeking auctioneering services, Julia has sent them to Poulin, his sister’s auctioneering firm,” the lawsuit alleges. “Specifically, in 2019, Julia received a call from a purported consignor seeking a referral for a firearms auction consignment and in direct violation of his contractural obligations advised them that ‘it sounds like Poulin would be the actual best,’ and recommended that they use Poulin instead of Morphy.”
The lawsuit goes on to allege that it is believed Julia, based on that incident, referred many other potential consignors to Poulin, whose owners include Julia’s sister, Jeanine Poulin.
“Furthermore, Julia made attempts to entice Morphy employees and consultants to enter into business relationships with a competing auction house in further violation of the Restrictive Convenant Agreement,” according to the lawsuit.
The lawsuit alleges Julia asked one of Morphy’s appraisers to leave Morphy and work for Poulin, which would pay him more than Morphy.
The lawsuit also claims Morphy delivered two promissory notes as part of the purchase agreement — the first for $335,000 and the second for $1.19 million — and that those notes and personal guaranty include provisions that allowed Julia to accelerate amounts owed without notice after an event of default.
The notes also provide that, if Julia is in violation of the purchase agreement, Morphy may cease payments owed under the note while violation is ongoing and may require reimbursing the company for actual damages, including reasonable legal fees and other costs.
Morphy, through its lawyers at Heyman Enerio Gattuso & Hirsel LLP, of Wilmington, Delaware, demanded in writing on Aug. 20, 2019, that Julia and James D. Julia Inc. immediately cease ongoing breaches and advised Julia he was not entitled to his $112,000 consulting payment for 2019, according to the complaint.
Morphy claims that because of Julia’s breach, Morphy has suffered loss of revenue and business goodwill, and is entitled to withhold all further payments to Julia.
Morphy seeks damages, including loss of business goodwill and revenue, legal fees, court costs and other related expenses. Morphy has also asked the court to allow Morphy to withhold future consultant payments from Julia.
James D. Julia holds a Winchester Model 66 that sold for $598,000 at James D. Julia Auctioneers Inc. on Skowhegan Road in Fairfield, on March 23, 2018. The Pennsylvania company that has bought’s Julia’s auction business is suing him, alleging breach of contract.
Julia filed an answer to Morphy’s allegations Dec. 23 through lawyers at Connolly Gallagher LLP, of Newark, Delaware, denying Morphy’s claims, denying all relief requested in the complaint and dismissing the complaint with prejudice.
The answer also requests Julia be awarded reasonable legal fees and costs, as well as other relief as the court deems just and proper, and Julia reserves the right to add additional affirmative defenses, if discovery reveals the defenses may be available.
Messages left for Melissa N. Donimirski of Heyman Enerio Gattuso & Hirsel, who signed the court document, and for Dan Morphy were not returned.
Also contacted Thursday, Matthew M. Hennesy of Barley Snyder LLP, of Lancaster, Pennsylvania, who is listed on the Morphy complaint as “of counsel,” said he had no comment.
In an interview with the Morning Sentinel in 2018, Julia said his company in 2017 grossed about $45 million, Morphy grossed about $34 million and the combination of the two companies put them in a position to generate perhaps as much as $80 million a year.
“If they do, they will become the fourth- or fifth-largest antique auction house in the world,” Julia said at the time.
Julia’s, which had a satellite office in the Boston area, was one of the top 10 antique auction houses in North America. Items auctioned at Julia’s included high-end collectibles, firearms and decorative arts, lamps, glass, fine jewelry and fine art.
“We’ve handled some of the greatest gun collections sold in this country in the last 20 years,” Julia said during the 2018 interview.
The lawsuit says Julia “developed an excellent and national reputation in the firearm auctioneering industry.”
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