Solis v. The Taco Maker, Inc. et al
Filing
216
ORDER granting Shane Stogner's 154 Motion for Summary Judgment, and the Clerk is directed to enter judgment in favor of Shane Stogner and Busch, Slipakoff, & Schuh, LLP on all of The Taco Maker, Inc.'s third party claims. The Taco Maker& #039;s 191 Motion for Summary Judgment, and its 194 Motion for Sanctions, are DENIED. For good cause shown, The Taco Maker Inc.'s 212 Motion for Leave to File an Errata Sheet, is GRANTED, rendering The Taco Maker, Inc.'s 210 Motion to Strike, moot and, as such, DENIED. The Clerk is directed to close this action. Signed by Judge Richard W. Story on 8/27/2013. (cem)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
MARCELINO SOLIS,
Plaintiff,
v.
THE TACO MAKER, INC., et al.,
Defendants.
:
:
:
:
:
:
:
CIVIL ACTION NO.
1:09-CV-3293-RWS
ORDER
Background
This case started out as a securities/unjust enrichment lawsuit between
Marcelino Solis (Solis) and The Taco Maker, Inc. (TTM). TTM responded to Solis’
complaint by filing various counterclaims along with a third party complaint against
Solis’ lawyer, Shane Stogner and Mr. Stogner’s firm, Busch, Slipakoff, & Schuh, LLP
(collectively, Stogner).
The parties’ versions of the facts differ, but the divergence of those narratives
is not material to the issues that remain to be resolved. Everyone agrees that Solis
owns a company that manufactures tortillas and that Solis sought to supply TTM’s
restaurant chain with tortillas. The parties further agree that in 2008, certain of TTM’s
shareholders were in a dispute regarding control of the company. Solis agreed to help
TTM’s CEO gain control of the company by purchasing the shares of a major
shareholder named Lausell. After that share purchase was complete, TTM’s CEO and
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Solis would have sufficient shares to control the company, the CEO would be able to
run the company as he saw fit, and Solis would be able to direct orders for tortillas to
his company.
The parties began negotiating a share purchase agreement under which Solis
would obtain Lausell’s shares. During this time, Solis told TTM’s CEO and its lawyer
that Stogner was a good lawyer and that he should handle TTM’s corporate and
securities law work once the share purchase deal was consummated. TTM’s CEO
agreed that Stogner would perform legal services for TTM. After TTM’s CEO asked
Stogner to use his banking contacts to secure financing for TTM, Stogner sent TTM
an engagement letter. The letter was never signed and Stogner never contacted any
banks on TTM’s behalf. Sometime later, after the share purchase deal had fallen
through, TTM’s attorney asked Stogner for assistance regarding certain real estate
leases. Stogner sent another engagement letter that also was never signed, and Stogner
did not assist TTM regarding the leases.
According to TTM, Solis entered the share purchase agreement and made a
down payment of $125,000.00 to secure performance of the agreement that ultimately
would have required Solis to pay $750,000.00. TTM further contends that, after Solis
made this initial payment, his bank failed, and he was unable to secure credit to
complete the deal.
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There are several problems with TTM’s version of events, however.1 First it is
clear that the parties never completed or executed the share purchase agreement.
Second, the record – notably TTM’s CEO’s deposition testimony, [see Doc. 209 at 74]
– demonstrates that, before he sent the $125,000.00, Solis informed TTM’s CEO that
he could not raise the necessary money to purchase the Lausell shares. Finally, when
Solis sent the $125,000.00, that money went directly into TTM’s CEO’s personal bank
account and not to Lausell. While TTM contends that Lausell ended up with those
funds, TTM’s CEO testified that he used the funds to purchase the shares for himself
because TTM’s bank would permit only the TTM CEO to purchase the Lausell shares.
[See id.]. Clearly, whatever deal was done was not the one contemplated by the share
purchase agreement that the parties were negotiating.
According to Stogner, Solis had to back out of the share purchase deal because
his bankers would not agree to provide credit for the transaction. However, because
Solis still wanted to secure a contract to sell tortillas to TTM, he agreed to send the
$125,000.00. When he sent the money, Solis had no idea what he was getting in return
aside from a vague idea that he would either receive orders for tortillas or an ownership
interest in TTM.
1
This is not the only example of TTM misconstruing (at best) or
misrepresenting (at worst) the facts of this case.
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After some time passed and Solis did not receive any orders for tortillas, he –
through Stogner – inquired what he had purchased with his $125,000.00. The record
demonstrates that TTM’s representatives responded to that question with a variety of
different answers. At one point, TTM told Solis that he had purchased a one percent
ownership interest which later turned out not to be true. Stogner wanted TTM to either
provide a stock certificate to show what Solis had purchased or sign a promissory note
to pay Solis back. TTM’s CEO indicated that he would pay the money back, and the
parties began to negotiate a promissory note, but TTM representatives never signed a
note.
Solis then brought this action against TTM, another company and TTM’s CEO
to recover his $125,000.00. Solis’ complaint was filed by Stogner and asserted claims
of common law fraud, sale of unregistered securities, unjust enrichment, securities
fraud, conversion, and attorneys fees. In response, TTM filed various counterclaims
and a third party complaint against Stogner, asserting claims of breach of fiduciary
duty, an entitlement to declaratory relief, legal malpractice, and for attorney fees. The
original dispute between Solis and TTM, including all counterclaims, has been settled
by the parties, and it appears that Solis is now selling tortillas to TTM. The only matter
left for this Court to adjudicate is TTM’s third party suit against Stogner.
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TTM filed a motion to disqualify Stogner, [Doc. 9], and this Court, after a
hearing, denied the motion based on the finding that there was no conflict of interest
and that TTM had not disclosed confidential information to Stogner, [Doc. 25].
Stogner then filed a motion to dismiss the third party complaint, [Docs. 23, 29], which
this Court denied, [Doc. 43], except with respect to TTM’s claim for injunctive relief.
Both parties have now filed motions for summary judgment. [Docs. 154, 191].
In addition, TTM has pending before this Court a motion for sanctions, [Doc. 194], a
motion to strike, [Doc. 210], and a motion for leave to file an errata sheet, [Doc. 212].
Allegations in the Third Party Complaint
In its third party complaint, TTM asserts that Stogner did the following: While
Solis was in the process of attempting to secure an ownership interest in TTM, Stogner
was designated by Solis to negotiate on Solis’ behalf. Stogner gave one of TTM’s
major shareholders an offer to purchase twenty percent of TTM for two million dollars.
Stogner then refused to provide audited financial statements of Solis’ company as well
as a letter of recommendation from Solis’ bank for presentation to TTM’s bank.
Stogner next obtained copies of TTM’s corporate formation documents. While
Stogner was representing Solis in negotiating a stock purchase agreement on Solis’
behalf, Solis requested that Stogner be allowed to represent TTM’s interests in the
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United States. Stogner sent TTM an unsigned form of engagement letter. Stogner
wired $125,000.00 to TTM on Solis’ behalf. After wiring the money, Stogner filed a
lawsuit on Solis’ behalf which contained material misrepresentations.
In the surviving counts of the third party complaint, TTM claims in Count I that,
based on the foregoing facts, Stogner was TTM’s legal representative and breached a
fiduciary duty to TTM by filing Solis’ lawsuit. In Count III, TTM claims that
Stogner’s malpractice and/or negligence “in implementing contract formalities and
[his] dual representation” have caused a dispute to arise between Solis and TTM,
forcing TTM to defend the action brought by Solis. Count IV asserts a claim for
attorneys fees, which, of course, relies on TTM establishing Stogner’s liability in either
Counts I or III.
Discussion
Summary Judgment
Under the Federal Rules, summary judgment is appropriate “if the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
“The moving party bears ‘the initial responsibility of informing the . . . court of the
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basis for its motion.” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259 (11th
Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal
quotations omitted)). Where the moving party makes such a showing, the burden shifts
to the non-movant, who must go beyond the pleadings and present affirmative evidence
to show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 257 (1986).
In resolving a motion for summary judgment, the court must view all evidence
and draw all reasonable inferences in the light most favorable to the non-moving party.
Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296 (11th Cir. 2002). However, this
Court is bound only to draw those inferences which are reasonable. “Where the record
taken as a whole could not lead a rational trier of fact to find for the non-moving party,
there is no genuine issue for trial.” Allen v. Tyson Foods, Inc., 121 F.3d 642, 646
(11th Cir. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986)). “If the evidence is merely colorable, or is not significantly
probative, summary judgment may be granted.” Anderson, 477 U.S. at 249–50
(internal citations omitted); see also Matsushita, 475 U.S. at 586 (once the moving
party has met its burden under Rule 56(a), the nonmoving party “must do more than
simply show there is some metaphysical doubt as to the material facts”).
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Discussion of The Parties’ Arguments
At the outset, this Court notes that TTM’s claims generally lack substance.
Reading TTM’s rather exagerated allegations in its motion for summary judgment
might indicate, at most, that Stogner may have exercised poor judgment. However, a
review of the record indicates that Stogner has done nothing wrong. Notably, the
evidence to establish an attorney/client relationship or a fiduciary relationship between
Stogner and TTM is entirely unconvincing. The record demonstrates that all parties
agreed that Stogner would provide legal services to TTM only after Solis had
completed the purchase of the Lausell shares. That transaction never took place. This
Court also found earlier that TTM did not supply confidential information to Stogner
and TTM has done nothing to convince this Court otherwise.
Further, there is no evidence, outside of vague statements by TTM
representatives, that Stogner did any legal work for TTM at all. TTM’s CEO testified
in his deposition that he was not involved in the details of what Stogner and the TTM
attorney were doing but that: “I was under the understanding that [Stogner] was
working for us, making sure that we can – because [Solis] asked for it – that we can –
that we can put together what we were – we wanted, the both of us.” [Doc. 209 at 64].
The context of that statement, however, was that Stogner was working in furtherance
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of Solis’ purchase of the the Lausell shares.2 While that transaction would have
benefitted the TTM CEO, it cannot be reasonably believed that Stogner was working
as TTM’s lawyer in negotiating the share purchase agreement on Solis’ behalf,
especially considering the fact that Stogner was negotiating against TTM’s lawyer.3
This Court concedes that there was some discussion regarding whether Stogner
would help with TTM’s recapitialization and would clean up TTM’s corporate records.
However, all of those plans were conditional on Solis’ purchase of shares, and nothing
about those statements creates an attorney/client relationship until the lawyer actually
begins his representation.
2
The TTM lawyer similarly testified when asked about how TTM was relying
on Stogner as an attorney: “Once an offer was made from [a TTM shareholder] –
that’s written in there – [TTM’s CEO] told [Stogner] ‘Well, [Stogner], make sure –
take care that this happens.’ And that was the – assigned by so much as him as well
as the shareholder to be.” [Doc. 156 at 42]. The “shareholder to be” in that statement
is Solis. In other words, the testimony is that the CEO was simply telling Stogner to
get Solis’ share purchase deal done.
3
Although a third party beneficiary claim does not appear in its third party
complaint, TTM mentions (with little specificity) in its summary judgment motion that
TTM was a third party beneficiary of Stogner’s work. However, as noted, the Lausell
share purchase deal fell through because Solis did not have the funds to complete it,
and there is nothing in the record that indicates that Stogner could be held responsible
for Solis’ decision to send $125,000.00 to TTM’s CEO. As such, there is no basis
upon which to conclude that Stogner did anything to give rise to third party beneficiary
liability.
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Most telling, however, is TTM’s lawyer’s testimony in response to the question,
“Does Taco Maker contend that Mr. Stogner did anything for Taco Maker in the
summer of 2008?” The following colloquoy ensued:
A. The part that was added for him to evaluate, in addition for him to
prepare and secure the documents that he would evaluate in the proper
manner of the proper procedures to be able to accomplish these
documents in his expertise.
Q. I don’t understand that at all. Can you tell me what Mr. Stogner did for
Taco Maker in 2008?
A. Protecting the documents – production of the documents, in other
words, providing that the transactions would be done in the proper
manner so that it would not suffer the transactions that were done with
[Lausell]. That is why – that’s why all the drafts in the stock purchase
agreement were coming from him.
Q. You refer to documents. What documents are you referring to?
A. The stock, there was – there was some documents, in other words, the
certificates of corporations, the bylaws of the corporations. And all that
is established in a specific form and manner and with respect to how
stocks can be sold to third parties and/or in between the existing
stockholders and/or the corporation. Thus, being – not being an expert in
corporations, even though I can read and I know what the document says,
some transaction documents needed to be formed. And in one manner
[Solis] put a deposit in his confidence of [Stogner] so that would not
happen to him what occurred in the previous transaction. And he
demanded that [TTM’s CEO] – he would designate him to be the person
that was going to do that transaction. And I was going to be reviewing all
these documents next to him, all these documents. That part up to the
point of July, that was paid by [Solis]. But when the second phase starts,
of the refinancing, that’s when [Solis] says, “Because I understand that
you need to be contracted directly by [TTM] because I’m not going to be
continuing to pay for this big buffet of the offer for – with regards to the
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refinancing, because the one that’s going to receive all the benefits is
going to be [TTM] and not [Solis].
[Doc. 156 at 51-53].
Reading interpretively – and giving the TTM lawyer the benefit of the doubt –
he merely states that, leading up to the share purchase deal, Stogner was interpreting
TTM’s corporate formation documents to see if the deal could be done, and, after the
deal was completed, Stogner would help TTM refinance its debt. This clearly indicates
that Stogner did, in fact, nothing in the way of legal services for TTM. Interpreting the
TTM corporate documents was part of his duties to Solis. Further, as repeatedly stated,
the share purchase deal was never consummated. In other words, the condition
precedent to Stogner providing legal services to TTM was never met.
TTM considers the engagement letter that Stogner sent to be a significant factor
in its favor. However, this Court finds the opposite to be true. The record reveals that
TTM’s CEO asked Stogner to contact banks on TTM’s behalf. Stogner responded by
sending an engagement letter. The letter was never signed and Stogner did not contact
any banks. Then TTM’s lawyer asked Stogner about a lease issue, and Stogner sent
another engagement letter. That letter was never signed, and Stogner did no work on
the lease issue. The obvious interpretation of these facts is that Stogner was willing
to do some work for TTM, but only after he received a signature on an engagement
letter, which never happened.
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In summary, this Court concludes that there was no attorney/client relationship
between Stogner and TTM. This Court further concludes that, in the absence of an
attorney/client relationship, Stogner had no fiduciary duty to TTM. Indeed, it is
unreasonable for TTM to have believed that a fiduciary relationship existed. Given the
facts that Stogner entered the scene as Solis’ attorney, that Stogner was Solis’ son-inlaw (which TTM’s CEO well knew), and that Stogner was negotiating the share
purchase agreement in opposition to TTM’s lawyer, any reasonable person would have
concluded that Stogner’s duties rested with Solis alone. As such, Stogner is entitled
to judgment in his favor.
TTM’s Motion for Sanctions
TTM’s motion for sanctions, [Doc. 194], is based upon the unsupportable
proposition that merely filing a lawsuit is a sanctionable act if you cannot prove every
allegation in your complaint. In this case, Solis sent $125,000.00 to TTM and got
nothing much in return. He attempted to negotiate a deal whereby TTM would either
issue stock certificates in Solis’ name or TTM would sign a promissory note for
$125,000.00. When TTM refused, Stogner filed suit on Solis’ behalf, which was a
perfectly reasonable reaction. While some of the lawsuit’s theories of relief might be
somewhat farfetched, this Court has carefully reviewed the record in this matter and
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has concluded that Stogner has not committed a sanctionable act. As such, TTM’s
motion will be denied.
Conclusion
For the reasons stated,
IT IS HEREBY ORDERED that Stogner’s motion for summary judgment,
[Docs. 154], is GRANTED and the Clerk is directed to enter judgment in favor of
Stogner and Busch, Slipakoff, & Schuh, LLP on all of TTM’s third party claims.
TTM’s motion for summary judgment, [Doc. 191], and its motion for sanctions, [Doc.
194], are DENIED. For good cause shown, TTM’s motion for leave to file an errata
sheet, [Doc. 212], is GRANTED, rendering TTM’s motions to strike, [Doc. 210], moot
and, as such, DENIED.
The Clerk is directed to close this action.
IT IS SO ORDERED, this 27th day of August, 2013.
________________________________
RICHARD W. STORY
United States District Judge
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