Capital Solutions, LLC v. Konica Minolta Business Solutions U.S.A., Inc.

Filing 90

MEMORANDUM AND ORDER denying 76 Motion to strike plaintiffs demand for a jury trial. Signed by District Judge John W. Lungstrum on 10/22/2008. (ses)

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF KANSAS ) C A P I T A L SOLUTIONS, LLC, ) ) P l a i n t i f f, ) ) v. ) ) K O N I C A MINOLTA BUSINESS ) S O L U T I O N S USA, INC. and BANK ) O F OKLAHOMA, N.A., ) ) D e f e n d a n t s. ) ) ) ) B A N K OF OKLAHOMA, N.A., ) ) C o u n te r c la im and ) C ro ss-cla i m Plaintiff, ) ) v. ) ) C A P I T A L SOLUTIONS, LLC, ) ) C o u n ter cl a i m Defendant, ) ) and ) ) K O N I C A MINOLTA BUSINESS ) S O L U T I O N S USA, INC. , ) ) C ro ss-cla i m Defendant. ) )

C a s e No. 08-2027-JWL

B A N K OF OKLAHOMA, N.A., P l a i n t i f f, v. C A P I T A L SOLUTIONS, LLC, MIKE B R E A K E Y , LARRY SEWARD, LEE U L L M A N , and MIKE EARL, D e f e n d a n t s.

) ) ) ) ) ) ) ) ) ) ) ) )

C a s e No. 08-2191-JWL

M E M O R A N D U M AND ORDER T h e s e consolidated cases arise from a dispute between Capital Solutions, LLC a n d Konica Minolta Business Solutions USA, Inc. over the administration of business e q u ip m e n t leases and service agreements, and Capital Solutions' subsequent alleged d ef au lt on loans from Bank of Oklahoma, N.A. This matter comes before the court o n the Bank's motion in Case No. 08-2027 to strike Capital Solutions' demand for a ju ry trial (Doc. 76). For the reasons discussed below, this motion is denied.

BACKGROUND T h i s lawsuit arises from a dispute over the administration of business e q u ip m e n t leases and service agreements. Konica Minolta is in the business of d is trib u tin g copiers for sale to businesses. Capital Solutions provided financing for 2

a n d leased certain copiers to customers serviced by Konica Minolta. Konica Minolta w a s to bill and collect lease payments and other fees due to Capital Solutions from th e s e customers. The complaint alleges that Konica Minolta failed to remit these p a ym e n ts collected on behalf of Capital Solutions in a timely manner, failed to make tim e ly and diligent efforts to collect the payments, and failed to accurately account f o r payments collected on behalf of Capital Solutions. As a result, Capital Solutions a lle g e s , its relationship with its financial institutions and customers has become s tra in e d and endangered, it has incurred interest costs and other expenses it would not o th e rw is e have incurred, it has lost a banking relationship, its business expectancies h a v e been destroyed, and it has lost value in the collateral. Based on these a lle g a tio n s , Capital Solutions asserts claims against Konica Minolta for accounting, b r e a c h of fiduciary duty, breach of contract, tortious interference with business re la tio n s , and fraud.1

Capital Solutions also originally asserted a negligence claim against Konica M in o lta , but the court dismissed that claim. Capitol Bus. Solutions, LLC v. Konica M in o lta Bus. Solutions USA, Inc., Case No. 08-2027-JWL, 2008 WL 2761307, at *5 (D. K a n . July 14, 2008). In the caption of that case, the court referred to plaintiff Capital S o lu tio n s, LLC as Capitol Business Solutions, LLC because that is how Capital S o l u tio n s captioned its own name in its amended complaint. In considering the parties' m e m o r a n d a , briefs, and other documents submitted in connection with the case, h o w e v e r, it appears that plaintiff's correct name (as was reflected in the original c o m p la in t) is Capital Solutions, LLC. See also Capital Solutions, LLC v. Konica M in o lta Bus. Solutions USA, Inc., Case No. 08-2027-JWL, 2008 WL 3538968, at *1 n.1 (D . Kan. Aug. 11, 2008). 3

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C a p ita l Solutions subsequently filed an amended complaint, adding the Bank o f Oklahoma as a defendant and asserting claims against the Bank for breach of f id u c ia ry duty and conversion.2 According to the amended complaint, the Bank w ith d r e w funds from Capital Solutions' account (without Capital Solutions' a u th o riz a tio n ) to pay an obligation of an entity by the name of Southwinds, LLC, " th e re b y converting these funds to its own benefit." Furthermore, according to the amended complaint, the Bank essentially took o v e r Capital Solutions' business in 2007 by instructing Capital Solutions not to take c e rta in commercially-reasonable actions in order to assure that Konica Minolta was in f a ct servicing the leases in question in a timely and proper manner. For example, C a p ita l Solutions asserts that the Bank instructed Capital Solutions to refrain from c o n ta c tin g the lessees, even though contact was necessary in order to prevent the le a se base from deteriorating. Once the Bank undertook to instruct Capital Solutions in conducting its business, Capital Solutions maintains that a special relationship a ro s e that created a duty to give timely and proper advice. The amended complaint a lleg e s that the Bank's instructions were imprudent and breached the fiduciary duty c re a ted by its intrusion and takeover of Capital Solutions' business. As a result,

Capital Solutions also asserted claims of negligence, breach of the duty of good f a ith , and a violation of 12 U.S.C. § 1972, but these claims were dismissed. Capital S o lu tio n s , 2008 WL 3538968, at *4-*6. 4

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C a p i ta l Solutions contends that it suffered unnecessary fees, interest, loss of business e x p e c tan c ies , loss of profits, and a loss of value in the collateral. B e f o re receiving notice that it was a defendant in Capital Solutions' amended c o m p la in t, the Bank filed a complaint against Capital Solutions, initiating Case No. 0 8 -2 1 9 1 . That case has been consolidated with Case No. 08-2027 for purposes of p re tria l proceedings, and in its answer to Capital Solutions' amended complaint, the B a n k raised as counterclaims many of the same claims included in its complaint in C a se No. 08-2191. Specifically, the Bank alleges that Capital Solutions and its g u a ra n to rs (four individuals named as defendants in Case No. 08-2191) entered into a lo a n agreement with the Bank for a revolving line of credit up to eight million dollars. In accordance with that agreement, the Bank made advances to Capital Solutions to talin g nearly six million dollars, secured by three promissory notes. According to th e Bank, Capital Solutions has failed to repay those three notes and has been o p e ra tin g while undercapitalized to avoid the Bank's demands on its assets. The B a n k , then, has identified eight claims against Capital Solutions based on the three p ro m iss o ry notes and various aspects of the loan agreement. A d d itio n a lly, the Bank filed a cross-claim against Konica Minolta alleging c o n v e r s io n . Specifically, the Bank asserts that Konica Minolta retained lease p a ym e n ts for its own benefit instead of remitting them directly to the Bank.

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C a p ital Solutions requested a jury trial on its claims against Konica Minolta a n d the Bank. The Bank, however, suggests that Capital Solutions waived its right to a jury trial on claims brought against the Bank.

D IS C U S S IO N The right to a jury trial is a fundamental right, integral to the judicial system. Christenson v. Diversified Builders Inc., 331 F.2d 992, 994 (10th Cir. 1964). It can, h o w e v e r, can be waived by agreement. Telum, Inc. v. E.F. Hutton Credit Corp., 859 F .2 d 835, 837 (10th Cir. 1988). The Bank argues that it and Capital Solutions agreed in the loan agreement d o c u m e n ts to waive a jury trial. The relevant paragraph of the agreement provides in p a rt that "lender and borrower waive the right to a trial by jury in any action or p ro c e ed in g based upon, or related to, the subject matter of this agreement." Based on th a t language, the Bank argues, this court should strike Capital Solutions' request for a jury trial. C a p ita l Solutions does not challenge the validity of the agreement or the w a iv e r provision. It argues, however, that its claims are not "based upon or related to th e subject matter of" the agreement, and so the waiver provision should not apply to its lawsuit against the Bank.

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In a previous order, this court noted that "Capital Solutions' claims and a lle g a tio n s against the bank do not rest on the terms and conditions set forth in the[] lo a n documents." Capital Solutions, 2008 WL 3538968, at *3. This comment came w ith in the discussion of which documents the court could properly consider in e v a lu a tin g the Bank's motion to dismiss. Id. The Bank had attached to its motion the lo a n agreement documents in support of its arguments for dismissal. Id. The court n o te d that a defendant may properly attach to a motion to dismiss documents referred to in the complaint and central to the plaintiff's claim. Id. Here, however, the court re f u se d to consider the loan documents, including the choice of law provision c o n ta in e d therein, because "plaintiff's claims against the bank are based on other le g a l theories, not the loan documents." Id. at *3 n.5. R e c o g n iz in g that this previous determination was made within the context of a m o tio n to dismiss, the court will consider anew the question of whether, for the p u rp o s e s of enforcing the jury waiver provision, Capital Solutions' claims against the B a n k are "based upon or related to the subject matter" of the agreement. In doing so, th e court relies on federal, rather than state, law. Telum, 859 F.2d at 837 ("The right to a jury trial in federal courts is governed by federal law.") G iv e n that the right to a trial by jury is a "vital and cherished right," courts s h o u ld "indulge every reasonable presumption against waiver." Christenson, 331 F .2 d at 994. Thus, federal courts "generally construe jury waivers narrowly."

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P a r a c o r Finance, Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1166 n.21(9th Cir. 1 9 9 6 ). T h e Tenth Circuit has little case law interpreting jury waivers. Instead, this c o u rt will turn to Tenth Circuit decisions interpreting similarly-worded clauses in a rb itra tio n agreements (requiring arbitration, for example, of claims arising out of or related to a particular contractual arrangement). Although arbitration agreements are o f te n broadly construed, Brown v. Coleman Co., 220 F.3d 1180, 1184 (10th Cir. 2 0 0 0 ), cases interpreting those provisions can provide guidance on how to evaluate th e similar wording of the jury waiver provision at issue here. In deciding whether certain claims relate to a particular document, courts look b e yo n d the label attached to the claim. P&P Indus., Inc. v. Sutter Corp., 179 F.3d 8 6 1 , 871 (10th Cir. 1999). Thus, tort claims can still relate to or arise out of a c o n tra c t. Id. The key is whether the factual allegations underlying the claims arise f ro m the parties' agreement. Id. (citing Gregory v. Electro-Mechanical Corp., 83 F .3 d 382, 384 (11th Cir. 1996)). In P&P, for example, parties to a marketing agreement disagreed about w h e th e r one party's tortious interference with contract claim arose out of or related to th e marketing agreement and thus was subject to arbitration. Id. at 870-71. The T e n th Circuit held that the tort-based claim did arise out of or relate to the agreement b ec au s e the purported tortious interference was based solely on the other party's

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a c tio n s as it terminated the agreement. Id. at 871-72. Thus, the tort claims depended o n the same factual allegations as the breach of contract claim. Id. In AWF Hedged, Ltd. v. Kidder, Peabody, & Co., the Tenth Circuit concluded that the plaintiff's tort claims, including claims of conversion and breach of fiduciary d u ty, did not fall within the scope of an arbitration agreement because "[n]one of th e [ ] claims . . . hinge[d] on the existence and or breach of a contract" between the p arties. 1994 WL 446782, at *1 (10th Cir. Aug. 18, 1994) (unpublished).3 D is tin g u is h in g a Seventh Circuit case in which the tort claims required proof of b re a ch of contract, the Tenth Circuit found that "no proof of the existence of a c o n tra c tu a l agreement between [the parties] is required" to prove the tort claims. Id. a t *2 (distinguishing Rao v. Rao, 718 F.2d 219 (7th Cir. 1983)). Thus, the tort claims d id not arise under the parties' agreement and were not subject to the mandatory a rb itr a tio n provision. Id. A s recounted above, Capital Solutions' remaining claims against the Bank are f o r breach of fiduciary duty and conversion. As to the fiduciary duty claim, Capital S o lu tio n s alleges that the Bank took over its business and instructed it not to take c e rta in actions, all for the Bank's own benefit in obtaining increased interest and late c h a rg e s . See also Capital Solutions, 2008 WL 3538968, at *4. The conversion claim

Pursuant to Tenth Circuit Rule 32.1(A), the court cites this unpublished opinion f o r its persuasive value. 9

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is based on Capital Solutions' allegations that the Bank took its money to pay an o b lig a tio n of another entity. Id. at *5. Neither of these claims depends on the loan a g re e m e n t documents. Neither requires proof of the existence of or breach of the lo a n agreement. Thus, neither claim is based on or relates to the loan documents so a s to fall within the jury waiver provision.

IT IS THEREFORE ORDERED BY THE COURT that defendant's motion to strike plaintiff's demand for a jury trial (Doc. 76) is denied.

I T IS SO ORDERED this 22nd day of October, 2008.

s / John W. Lungstrum John W. Lungstrum U n ite d States District Judge

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