Hardy et al v. Bartmess

Filing 201

ORDER accepting in part and declining granting in part 178 Partial Report and Recommendations and granting in part and denying in part 94 Motion for Judgment on the Pleadings; denying 169 Motion for Leave to File and declining 190 Partial Report and Recommendations. Signed by Judge D. P. Marshall Jr. on 9/26/11. (kpr)

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

NORTHERN DIVISION

JAMES HARDY, JR.; HARDY RESOURCES
LLC; JOHN HARDY; EVERGREEN PROCESSING, LLC,
formerly B&H RESOURCES, LLC; MARY HARDY;
HARDY ENERGY SERVICES, INC.; ELITE
COIL TUBING SOLUTIONS LLC; and
NORTHSTAR FARMS LLC
PLAINTIFFS

v.

Case No.l:09-cv-4l-DPM

HELEN BARTMESS, Executrix of the
Estate of George Bartmess
DEFENDANT

ORDER
A failed venture to mine valuable sand for fracking has resulted in a
tangled lawsuit. On referral, the Honorable H. David Young has ably
handled a host of preliminary matters and disputes. Pending for decision are
two recommendations from Magistrate Judge Young: that the Court should
grant in part and deny in part Defendant's motion for judgment on the
pleadings, Document No. 178; and that the Court should grant Plaintiffs'
motion to file a second amended complaint, Document No. 190. Objections to

both recommendations have triggered this Court's de novo review. FED. R.

ClV.

P. 72(b)(3).
1. Some General Points. This case is two and a half years old. It seems

mired in unnecessary complexity, paper, and contentiousness. The docket,
for example, contains some 200 entries.

What this case needs most is

resolution. The Court continued the last trial date because it was scheduled
to try a criminal case. Trial is reset for 13 February 2012 in Batesville. That
date will stick absent extraordinary circumstances. An amended scheduling
order will issue soon.

The Court-with many thanks-withdraws the

reference to Magistrate Judge Young. The Court does so because it needs to
get deeper in this case before trying it.
The Court will hold a status conference with all counsel on 20 October
2011 at 1:00 P.M. in Room 155 of the Richard Sheppard Arnold United States
Courthouse in Little Rock. At that conference, the Court requests the Hardy
Interests to explain which facts support which of the remaining claims and to
consider abandoning duplicative claims to narrow the issues for trial. The
Court also requests both parties to come prepared to discuss whether
dispositive motions are planned and, if so, how they can be handled most

-2­

efficiently. If the parties anticipate evidentiary motions on key issues, the
Court would benefit from hearing about these items too.
2. Motion for Judgment on the Pleadings. The parties agree on the

applicable law about the pending Rule 12(c) motion: the Court takes the
pleaded facts as true and asks whether this is the unusual case where the
complaint demonstrates"some insuperable bar to relief." Frey v. City of

Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995) (omitting quotation and
discussing identical standard for 12(b)(6) motion); see also Clemons v. Crawford,
585 F.3d 1119, 1124 (8th Cir. 2009). The parties also agree that the Court may
consider matters which, though outside the amended complaint, are
necessarily embraced by it. Noble Systems Corp. v. Alarica Central, LLC, 543
F.3d 978, 982 (8th Cir. 2008). Judge Young concluded that three documents
and one set of documents are so embraced. Document 178, at 5. No one
objects to this conclusion; and the Court agrees with it.
These incorporated materials are the following:
•

B & H Resources, LLC Membership Interest Purchase Agreement;

•

Buy-Sell Agreement (600+ Acre Tract);

•

Assignment of Buy-Sell Agreement; and

-3­

•

E-mails, Draft Deeds, and Other Documents About lOS-acre Tract.

Judge Young's summary of the complaint's detailed allegations and the
parties' complicated agreements is helpful and well done. Without repeating
it, the Court adopts that summary in general with the exceptions noted.
Believing the parties agreed that the Membership Interest Purchase
Agreement, the Buy-Sell Agreement, and the Assignment were fully
integrated, Judge Young read these documents together and proposed
winnowing the Hardy Interests' claims based on various provisions of the
three agreements. But the Hardy Interests' objections belatedly clarify,
Document No. 179-1, at 19-22, that they do not agree about integration or

merger, and they challenge Judge Young's reading of various provisions.
With one exception, the Court respectfully disagrees with Judge
Young's recommendation on complete integration. Here is the exception: the
LLC Membership Interest Purchase Agreement unequivocally"supercedes,
cancels and revises all prior agreements between the parties including those
contained in Exhibits 'C' and 'D.'" This provision torpedoes any contract
claim by the Hardy Interests based on any prior agreement, oral or written.
The active complaint alleges that the Membership Interest Purchase

-4­

Agreement (including the clear merger clause), though signed by John Hardy

and B&H rather than all plaintiffs, was part of a multi-part deal approved by
the parties, including all the Hardy Interests. Document No. 3D, at ,-r163. The
Court thus adopts Judge Young's recommendation on this particular point:
the parties' long series of agreements leading toward the LLC and during the
LLC's operation were integrated into the Membership Purchase Agreement.
The parties made, in the Restatement's term, a partially integrated agreement.
Their agreement was only partially integrated because some of the parties
also made related but separate agreements for consideration-namely the
Buy-Sell and the Assignment. RESTATEMENT (SECOND) OF CONTRACTS §§ 210,
216 (1981).
The Buy-Sell Agreement and the Assignment are related to the
Membership Purchase Agreement. So the parties' various agreements must
be read together. Integon Life Insurance Co. v. Vandegrift, 11 Ark. App. 270,
276-77,669 S.W.2d 492,495 (1984). The Court agrees with the Hardy Interests,
however, that the record shows a multi-part deal without the full integration
of all three agreements. First, each recites that it is the entire agreement on the
subject matter - which is correct in a narrow sense and incorrect in a broader

-5­

sense, because all these agreements were part of the effort to push Bartmess

to the margin of the development project. Second, it also now appears
undisputed that George Bartmess balked at signing the Membership Interest
Purchase Agreement in December 2008 and did not sign until the February
2009 closing. Finally, the Membership Interest Purchase Agreement and the
Buy-Sell lack any internal reference to each other, though they mention lots
of other documents and agreements; instead, each document recites that no
unmentioned agreement exists between the parties that affects each
agreement.

The sum of all this, the Court concludes, is no complete

integration.
Whatever the correct answer on integration, neither the no-breach-exists
language in the Buy-Sell nor the waiver in the Assignment cuts as deeply as
Judge Young concluded. This means that the Hardy Interests' tort claims
about George Bartmess's alleged misdeeds survive the motion for judgment
on the pleadings.

In the precedent's words, the agreements create no

"insuperable bar" to the tort claims. Frey, 44 F.3d at 671.
The Buy-Sell agreement about the 600+ acres of land was made between
James Hardy (the buyer) and George and Helen Bartmess (the seller). Put to

-6­

one side that the buyer was not B&H Resources, LLC or John Hardy (the other
member/manager of that entity with George Bartmess). James and his
companies were part of the Hardy Interests involved in this venture, and were
acting (the Court reasonably infers) for the group. The Buy-Sell says the
following in paragraph 5[d]:
Buyer [James Hardy] and Seller [Mr. and Mrs. Bartmess] agree
that Buyer and Seller entered into a de facto partnership, with
other partners, for the purpose of exploring and developing a
sand mining operation, which resulted, in part, in the creation of
B&H Resources, LLC. Buyer and Seller agree that Buyer and
Seller have entered into this transaction in good faith and fair
dealing with one another and neither are in breach of any duties
owed to the de facto partnership or each other, as a result of this
transaction.
What was "this transaction"? The introductory phrase of paragraph 5
leaves no doubt: it was the sale of the 600+ acres, not the venture as a whole
or the de facto partnership.

After reciting dollar consideration, legal

descriptions, and the like in paragraphs 1-4, the parties said that" [a]s part of
the consideration for this transaction, the parties have made certain other
commitments and agreements, as recited [in the subparts to section 5]." In
5[d], the Hardy Interests (through James) and Mr. and Mrs. Bartmess agreed
on three things: the de facto partnership existed; the deal on the 600+ acres

-7­

was done in good faith; and their deal on this real property did not put them
in breach of any duty to each other or their de facto partners. Contrary to the
recommendation, there was no agreement here that George Bartmess was not
in breach of any duty to the de facto partnership or the LLC. This reading gives
inadequate weight to the clear last phrase of the parties' agreement on this
issue: they said"as a result of this transaction." That phrase limits the reach
of the parties' agreement in the Buy-Sell about no existing breach of duties.
The point is similar on the Assignment. James Hardy assigned the BuySell about the 600+ acres to B&H Resources, LLC. James, Mr. and Mrs.
Bartmess, and B&H agreed to the assignment. And the assignment contained
a waiver. The Court declines to adopt Judge Young's conclusion that this
waiver covered whatever non-contract duties George Bartmess had to the
Hardy Interests before the Buy-Sell Agreement.
The Assignment said this about waiver:
For good and valuable consideration and cause, it is hereby understood,
agreed and resolved that JAMES P. HARDY, JR., has agreed to waive
any and all claims against GEORGE BARTMESS and HELEN
BARTMESS, related to the Buy-Sell Agreement entered into between
James P. Hardy, Jr., and George Bartmess, dated December 10, 2008,
with initialed amendments thereto, as an incident to this Agreement.
In an echoing sentence, the Bartmesses agreed to a similar waiver. James was
-8­

acting for all the Hardy Interests. B&H Resources also agreed to the waiver
by consenting to this assignment," which contained the waiver.
/I

The parties were waiving claims and potential claims about the Buy-Sell
covering the 600+ acres, not all claims and potential claims about their entire
tangled relationship. The Bartmesses' contrary reading puts more weight on
this provision than it can bear. The Assignment did not extinguish pre­
existing tort claims or fiduciary duties unrelated to the Buy-Sell transaction.
The Hardy Interests' claims about breach of fiduciary duty, untoward
competition, and fraud therefore survive.
Now to the lOS-acre tract claims. Here the Court adopts Judge Young's
reasoning and conclusion as its own. The statute of frauds bars the Hardy
Interests' claim that an enforceable contract existed covering the lOS-acre
tract. George Bartmess's handling of the option and his profiting from his
friend's purchase of the land are relevant evidence on the alleged breach of
fiduciary duty and like tort claims; but Bartmess is entitled to judgment on the
pleadings on any contract claim about the 105 acres.
Last, Bartmess now says she is not pursuing any contract claim on the
Buy-Sell, much less a claim about foot-dragging on the legal description. The

-9­

Court, in any event, agrees with Judge Young that Bartmess has no claim

about that agreement on the pleadings.
3. Motion to Amend Complaint. Guided by Rule 15, and after
considering all the material circumstances, the Court denies the motion. First,
the Hardy Interests could have sued Bruce Bartmess long ago about
interfering with the development. They did sue him in the related Louisiana
litigation. The Court sees prejudice to the Defendant in having to deal so late
in this case with this new wrinkle.

At the minimum, the proposed

amendment would create a web of disputed legal issues, not least about
whether defenses available to the Bartmess Estate cloak Bruce too. More
briefing is the last thing this case needs. Second, the Hardy Interests can
pursue the new arson claim in another case. Third, while perhaps not futile,
the new claim seems thin. Fourth, it is time to get this old case tried. More
discovery and motions on a new claim will only delay that needed resolution.
Of course there would be some benefit in resolving the new claim now, but
the cost is too high. This is a close call, but the Court declines to follow
Magistrate Judge Young's suggestion on this issue.
***

-10­

The motion for judgment on the pleadings, Document No. 94, is granted
in part and denied in part. The Court accepts in part and declines in part the
related Findings and Recommendation, Document No. 178. The motion to
amend, Document No. 169, is denied.

And the related Findings and

Recommendation, Document No. 190, are declined.
So Ordered.

D.P. Marshall Jr.
United States District Judge

9/26/2011

-11­