BRAKE PLUS LLC et al v. KINETECH. LLC et al

Filing 88

ENTRY on Defendant's Motion for Partial Summary Judgment and Motion for leave to file additional Motion for Summary Judgment. For the foregoing reasons, Kinetech's Motion for Partial Summary Judgment 24 is DENIED, and its Motion for Lea ve to File Additional Motion for Summary Judgment 27 is GRANTED. Any additional dispositive motions may be filed no later than thirty (30) days from the date of this Order. (See Entry). Signed by Judge Tanya Walton Pratt on 6/19/2015. Copy to Jeff Hail via U.S. Mail. (MAC) Modified on 6/19/2015 (MAC).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
BRAKEPLUS LLC, KEVIN CANNON,
MICHELLE HANBY, JILL CATES,
RON CHRISTIAN, IT’S A DATE, LLC,
D MAC ENTERPRISES, PAT CROZIER
ENTERPRISES, INC., MAD
AFTERMARKET SERVICES, LLC, and
BRAKEPLUS NWA, INC.,
Plaintiffs,
v.
KINETECH, LLC,
Defendant.
______________________________________
KINETECH, LLC,
Third Party Plaintiff,
v.
JEFF HAIL and DUSTIN SHEPHERD,
Third Party Defendants.

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Case No. 1:14-cv-01415-TWP-MJD

ENTRY ON DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT
AND MOTION FOR LEAVE TO FILE ADDITIONAL
MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Defendant Kinetech, LLC’s (“Kinetech”) Motion for
Partial Summary Judgment (Filing No. 24) and Motion for Leave to File Additional Motion for
Summary Judgment (Filing No. 27).1 The parties in this lawsuit were parties in a separate lawsuit

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When these Motions were filed, Mark Olson, president of Kinetech, was a defendant in this case in his personal
capacity. However, Mark Olson signed the Settlement Agreement at issue in this case only on behalf of Kinetech in
his official capacity as the company’s president. The Court questioned Plaintiffs’ counsel regarding this fact during
the summary judgment hearing and then entered summary judgment in favor of Mark Olson individually. Thus, Mark
Olson no longer is a defendant in this action (Filing No. 49).

filed in July 2013. That litigation ended after mediation and the execution of a settlement
agreement in August 2013 (the “Settlement Agreement”). About four months later, this action
was initiated by BrakePlus LLC (“BrakePlus”). BrakePlus asserted claims for breach of the
Settlement Agreement, defamation, and fraud. Kinetech moved for summary judgment on
BrakePlus’ fraud claim on the bases that no misrepresentation was made and BrakePlus cannot
show reliance on Kinetech’s alleged misrepresentation. Kinetech also moved for leave to file an
additional dispositive motion because the Court’s Case Management Order limits the parties to
only one dispositive motion. The parties appeared for a hearing on the Motion for Partial Summary
Judgment on December 11, 2014, and presented oral argument to the Court. For the following
reasons, the Court DENIES Kinetech’s Motion for Partial Summary Judgment and GRANTS its
Motion for Leave to File Additional Motion for Summary Judgment.
I. BACKGROUND
Kinetech develops, manufactures, and distributes automotive safety products. In July
2013, Kinetech filed a lawsuit against BrakePlus, Ron Christian, Richard Battaglini, BrakeSafe
Rear-End Collision Avoidance System, LLC, Michelle Hanby, It’s a Date, LLC, BrakePlus NWA,
Inc., Jill Cates, D Mac Enterprises, MAD Aftermarket Services, LLC, Dustin Shepherd, Kevin
Cannon, Jeff Hail, and Pat Crozier Enterprises, Inc. (collectively “BrakePlus Defendants”). In that
lawsuit, Kinetech alleged that the BrakePlus Defendants committed various unlawful acts in an
effort to steal the business of Kinetech, including acts of conversion, fraud, tortious interference
and breach of non-compete and non-solicitation agreements.
Kinetech asserted that Ron Christian, the president of BrakePlus—in concert with two
former employees of Kinetech who had been terminated for their involvement in taking and selling
Kinetech’s product without Kinetech’s knowledge and then keeping the proceeds—created

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BrakePlus to sell Kinetech’s products to Kinetech’s customers under a different brand name using
Kinetech’s ex-employees’ knowledge of Kinetech’s business model, suppliers, and customer lists.
Kinetech also alleged that BrakePlus approached Kinetech’s salespeople in 2013 and
convinced them to sell products on behalf of BrakePlus rather than Kinetech and to convert
Kinetech customer accounts to BrakePlus accounts. These actions were in violation of noncompete and non-solicitation agreements executed by Kinetech’s employees and contractors, of
which BrakePlus was aware.
The Kinetech and BrakePlus Defendants participated in a mediation session, which
resulted in resolution of the case and execution of the Settlement Agreement on August 27, 2013.
As part of the Settlement Agreement, BrakePlus Defendants agreed to not do business with any of
the entities on two lists that were attached as exhibits to the Settlement Agreement. Also, the
parties agreed that they would not make disparaging or derogatory comments about each other.
About two and a half months after the Settlement Agreement was executed, Ron Christian
(BrakePlus’ president) informed Mark Olson (Kinetech’s president) that one of BrakePlus’ key
distributors/investors had learned of the terms of the Settlement Agreement and was dissatisfied
with the terms. This key distributor/investor directly competed with Kinetech. Mr. Christian
informed Mr. Olson that the distributor/investor was threatening to withhold hundreds of
thousands of dollars from BrakePlus if Mr. Christian did not renegotiate the terms of the Settlement
Agreement with Kinetech.

After considering BrakePlus’ proposals for renegotiating the

Settlement Agreement, Kinetech rejected the proposals and insisted that the parties continue under
the terms of the Settlement Agreement that had been agreed upon during mediation and executed
by the parties.

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On December 18, 2013, BrakePlus filed this lawsuit against Kinetech and Mr. Olson in
Marion Superior Court, alleging breach of the Settlement Agreement, defamation based on
disparaging and derogatory comments made about BrakePlus, and fraud. For its fraud claim,
BrakePlus alleged that Kinetech represented in the Settlement Agreement that the entities listed in
the exhibits—with whom BrakePlus could not do business—were Kinetech’s customers when in
reality the entities were not Kinetech’s customers. The state court entered a protective order for
confidential documents, and on March 14, 2014, BrakePlus amended its complaint to include the
Settlement Agreement as an exhibit to the complaint (Filing No. 1-2 at 42).
On May 12, 2014, Kinetech filed its Motion for Partial Summary Judgment on BrakePlus’
fraud claim. Then on July 25, 2014, BrakePlus again amended its complaint to add a claim under
the Sherman Antitrust Act, alleging an illegal horizontal market division (Filing No. 1-6 at 36).
The following month, BrakePlus responded to Kinetech’s Motion for Partial Summary Judgment,
and Kinetech removed the case to federal court on August 27, 2014, based on the Sherman
Antitrust Act claim. On September 26, 2014, the parties were ordered to file their state court
dispositive motions papers in this Court (Filing No. 19), which they did on October 10, 2014. The
Court then heard oral argument from the parties on the Motion for Partial Summary Judgment on
December 11, 2014.
II. SUMMARY JUDGMENT STANDARD
Federal Rule of Civil Procedure 56 provides that 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 a judgment as a matter of law.” Hemsworth v. Quotesmith.com, Inc., 476 F.3d
487, 489–90 (7th Cir. 2007). In ruling on a motion for summary judgment, the court reviews “the

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record in the light most favorable to the non-moving party and draw[s] all reasonable inferences
in that party’s favor.” Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009) (citation omitted).
However, “[a] party who bears the burden of proof on a particular issue may not rest on its
pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a
genuine issue of material fact that requires trial.” Hemsworth, 476 F.3d at 490 (citation omitted).
“In much the same way that a court is not required to scour the record in search of evidence
to defeat a motion for summary judgment, nor is it permitted to conduct a paper trial on the merits
of [the] claim.” Ritchie v. Glidden Co., 242 F.3d 713, 723 (7th Cir. 2001) (internal citations and
quotation marks omitted). “[N]either the mere existence of some alleged factual dispute between
the parties nor the existence of some metaphysical doubt as to the material facts is sufficient to
defeat a motion for summary judgment.” Chiaramonte v. Fashion Bed Grp., Inc., 129 F.3d 391,
395 (7th Cir. 1997) (internal citations and quotation marks omitted).
III. DISCUSSION
Kinetech moves for partial summary judgment on BrakePlus’ fraud claim, asserting that
Kinetech never made a false representation regarding “customers” during the mediation and in the
Settlement Agreement and that BrakePlus could not have detrimentally relied on Kinetech’s
alleged misrepresentation. Additionally, Kinetech moves for leave to file an additional dispositive
motion. The Court will address each Motion in turn.
A.

Kinetech’s Motion for Partial Summary Judgment on BrakePlus’ Fraud Claim
To succeed on its claim for fraud, BrakePlus must show: (1) a material misrepresentation

of past or existing facts; (2) made with knowledge or reckless ignorance of falsity; (3) which
caused the plaintiff to rely on the misrepresentation to the plaintiff’s detriment. Rice v. Strunk,
670 N.E.2d 1280, 1289 (Ind. 1996); Tobin v. Ruman, 819 N.E.2d 78, 86 (Ind. Ct. App. 2004);

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Jackson v. Blanchard, 601 N.E.2d 411, 418 (Ind. Ct. App. 1992). In order to prevail at the
summary judgment stage, Kinetech need only defeat one element of the claim for fraud. See In re
Inlow Accident Litig., 2001 U.S. Dist. LEXIS 2747, at *62 (S.D. Ind. Feb. 7, 2001). Kinetech
asserts that summary judgment is appropriate based on the first and third elements of fraud: a
material misrepresentation and detrimental reliance.
1.

Material Misrepresentation

BrakePlus’ fraud claim is based on Kinetech’s alleged misrepresentation that the entities
listed on the Settlement Agreement exhibits were Kinetech’s customers. Kinetech had a broad
non-compete, non-solicitation agreement that covered all car dealerships in the country. BrakePlus
approached some of Kinetech’s salespeople in 2013 and convinced them to sell product on behalf
of BrakePlus rather than Kinetech and to convert Kinetech customer accounts to BrakePlus
accounts. These actions were in violation of the non-compete, non-solicitation agreements
executed by Kinetech’s employees and contractors, of which BrakePlus was aware. As part of the
negotiations during mediation, Kinetech agreed to narrow its non-compete, non-solicitation
agreement from a nationwide restriction to specific, identified entities. Kinetech furnished lists of
entities to BrakePlus during the mediation session. After additional discussion and negotiation,
the lists were narrowed, finalized, and attached as exhibits to the Settlement Agreement.
BrakePlus could not do business with these listed entities for a set period of time.
BrakePlus now alleges that the entities on the lists were identified throughout mediation,
on the exhibits, and in the Settlement Agreement as Kinetech’s “customers,” and that it later
learned that the entities were not actually Kinetech’s customers. BrakePlus asserts that it would
not have agreed to the Settlement Agreement if it had known the entities were not actual customers
of Kinetech. As part of its designated evidence, BrakePlus designated the Settlement Agreement

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and its exhibits, which make reference to “customers.” But the use of the term “customers” in the
Settlement Agreement and the exhibits is not defined or put in the context of being Kinetech’s
customers. BrakePlus also designated many affidavits that state Kinetech represented during
mediation that the listed entities were “customers.”
Conversely, Kinetech asserts that it never referred to the entities as its “customers,” but
rather as “restricted dealers” or the “protected list.” Kinetech’s only designated evidence is an
affidavit from its president, Mr. Olson. That designated evidence explains that, during the
mediation session, Kinetech made no direct representations to BrakePlus because all
communication occurred through the mediator. Kinetech’s evidence also explains that Kinetech
never represented that the entities listed on the exhibits to the Settlement Agreement were
Kinetech’s customers. Instead, Kinetech created the initial list of entities in an Excel spreadsheet
entitled “Restricted Dealers” and emailed the list with the subject line “Protected List” to the
mediator.

Kinetech explains that BrakePlus’ attorney insisted on drafting the Settlement

Agreement, and he added the undefined, unspecified term “customer” to the Settlement Agreement
and its exhibits. While the “Restricted Dealers” Excel spreadsheet and “Protected List” email to
the mediator would have been helpful to the Court in considering this Motion for Partial Summary
Judgment, Kinetech did not designate either of those documents as evidence.
Because the Court must view the evidence in the light most favorable to the non-moving
party and must draw all reasonable inferences in that party’s favor, after reviewing the parties’
competing affidavits, it appears that summary judgment is inappropriate on this element of
BrakePlus’ fraud claim. Kinetech claims that it never referred to the entities that ended up on the
exhibit lists as its customers. Conversely, BrakePlus asserts that the lists provided by Kinetech
during mediation referred to the entities as customers. The parties designated evidence to support

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their positions. The affidavits present a factual dispute regarding the representations made by
Kinetech, and the Court cannot weigh evidence or make credibility determinations on summary
judgment because those tasks are left to the trier of fact. O’Leary v. Accretive Health, Inc., 657
F.3d 625, 630 (7th Cir. 2011). Therefore, the Court cannot enter summary judgment on this
element of fraud.
2.

Detrimental Reliance

Reasonable reliance is a necessary element of any recovery for a claim of fraud, and
generally, the reasonableness of the plaintiff’s reliance is a question for the trier of fact. Allen v.
Great Am. Reserve Ins. Co., 766 N.E.2d 1157, 1164 (Ind. 2002). Further, a party who claims fraud
must not only demonstrate that they relied on the alleged misrepresentation but that they had the
right to rely upon the misrepresentation. Pugh’s IGA, Inc. v. Super Food Services, Inc., 531 N.E.2d
1194, 1198–99 (Ind. Ct. App. 1988). A party does not have the right to rely on an alleged
misrepresentation regarding “facts equally open to the observation of both parties, and concerning
which the party complaining, had he exercised ordinary prudence, could have attained correct
knowledge.” Id. at 1199 (quoting Frenzel v. Miller, 37 Ind. 1, 17 (1871)). “[I]f a party blindly
trusts, where he should not, and closes his eyes, where ordinary diligence requires him to see, he
is willingly deceived, and the maxim applies volenti non fit injuria [He who consents cannot
receive an injury].” Id.
During mediation, Kinetech agreed to narrow its broad, nationwide non-compete, nonsolicitation agreement to a list of identified car dealerships chosen by Kinetech. Kinetech asserts
that it created the proposed list in an Excel spreadsheet entitled “Restricted Dealers,” and emailed
the list in an email entitled “Protected List” to the mediator, who then shared the list with
BrakePlus. Kinetech explains that it did not agree or represent that the list represented a list of its

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customers. BrakePlus reviewed the list as proposed by Kinetech and then countered Kinetech’s
proposal by requesting that several of the listed dealerships be removed from the list. After further
negotiation, a final list of restricted dealerships was agreed to by the parties. BrakePlus’ attorney
drafted the Settlement Agreement, and he included the list of restricted dealerships as exhibits to
the Settlement Agreement, referring to the restricted dealerships as “customers.”
Kinetech asserts that it gave no thought to the use of the term “customers,” and that it had
no reason to believe that BrakePlus was not aware of who were Kinetech’s customers because it
had produced in discovery its customer and sales lists to BrakePlus and many of BrakePlus’ current
employees were former employees, contractors, and a co-owner of Kinetech, so those individuals
knew Kinetech’s customers and business dealings.
Kinetech explains that because BrakePlus had Kinetech’s customer and sales lists,
BrakePlus could not have reasonably, detrimentally relied on any alleged misrepresentations
during mediation and in the Settlement Agreement and its exhibits. Kinetech further explains that
BrakePlus could not have reasonably relied on any alleged misrepresentations because of the
knowledge of BrakePlus’ current employees who were former employees, contractors, and a coowner of Kinetech.
BrakePlus responds that it did not have the opportunity to review Kinetech’s customer and
sales lists during mediation to cross-check the entities listed on the Settlement Agreement exhibits
and determine whether they were actual customers of Kinetech. BrakePlus further asserts that
some of the signatories to the Settlement Agreement never worked for Kinetech, so those
signatories did not have personal knowledge of Kinetech’s customers, and the former employees
of Kinetech had not worked at Kinetech for a number of months, implying that they would not
have remembered who were customers of Kinetech. Because of this lack of opportunity to review

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Kinetech’s customer and sales lists and because of the lack of knowledge, BrakePlus claims to
have relied on Kinetech’s representations during the mediation. BrakePlus asserts that it would
not have signed the Settlement Agreement if it had known the exhibits listed entities that were not
actual customers of Kinetech.
Again, because the Court must view the evidence in the light most favorable to the nonmoving party and must draw all reasonable inferences in that party’s favor, and because the Court
cannot weigh evidence or make credibility determinations on summary judgment, after reviewing
the parties’ competing designated evidence, it appears that there is an issue of fact whether
BrakePlus reasonably relied on Kinetech’s alleged misrepresentation to its detriment. Therefore,
the Court cannot enter summary judgment on this third element of BrakePlus’ fraud claim.
3.

Kinetech’s Motion for Leave to File Additional Motion for Summary
Judgment

When Kinetech filed its Motion for Partial Summary Judgment, it also filed a Motion for
Leave to File Additional Motion for Summary Judgment (Filing No. 27). Kinetech filed this
Motion at the recommendation of the Magistrate Judge because the Case Management Order
directed that the parties may file only one dispositive motion unless leave of court is granted.
Before this case was removed to this Court, Kinetech filed its Motion for Partial Summary
Judgment in the state court. BrakePlus filed a response brief, and the state court set a hearing for
the Motion. Then BrakePlus amended the complaint, and the case was removed to this Court
before the hearing on Kinetech’s Motion for Partial Summary Judgment was held.
Kinetech requested a hearing on its pending Motion for Partial Summary Judgment, and
the Court ordered the parties to refile their state court summary judgment papers in this Court.
Pursuant to the Court’s Order, the parties refiled their summary judgment papers, and Kinetech
now seeks leave to file an additional dispositive motion because it was not previously limited to
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filing only one dispositive motion when it filed its first partial summary judgment motion in state
court. Because the parties were not limited to only one dispositive motion at the time Kinetech
initially filed its Motion for Partial Summary Judgment, the Court finds that good cause exists to
allow the filing of an additional dispositive motion. Therefore, the Court grants Kinetech’s Motion
for Leave to File Additional Motion for Summary Judgment.
IV. CONCLUSION
For the foregoing reasons, Kinetech’s Motion for Partial Summary Judgment (Filing No.
24) is DENIED, and its Motion for Leave to File Additional Motion for Summary Judgment
(Filing No. 27) is GRANTED. Any additional dispositive motions may be filed no later than
thirty (30) days from the date of this Order.
SO ORDERED.
Date: 6/19/2015
DISTRIBUTION:
Fred Anthony Paganelli
[e-mail]
Jacob R. Cox
COX LAW OFFICE
[e-mail]
Nicole Keller
COX LAW OFFICE
[e-mail]
Jeff Hail
7141 North 78th Street
Scottsdale, Arizona 85258

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