Glenwood Capital, LLC v. West Plains Company et al

Filing 65

MEMORANDUM AND ORDER denying 40 Motion for Summary Judgment; denying 46 Motion for Sanctions; denying 37 Motion for Summary Judgment. Signed by District Judge Richard D. Rogers on 7/8/14. (meh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
GLENWOOD CAPITAL, LLC,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
WEST PLAINS COMPANY,
WEST PLAINS LLC.
Defendants.

Case No. 13-2109-RDR

MEMORANDUM AND ORDER
Glenwood Capital, LLC (Glenwood) brings this action against
West Plains Company (WP Company) and West Plains, LLC (WP LLC).
The claims arise out of a purported agreement between Glenwood and
WP Company.

Glenwood asserts three causes of action against WP

Company: breach of an oral contract, quantum meruit and fraudulent
inducement.

Glenwood asserts two causes of action against WP LLC:

breach of an oral contract and quantum meruit.

This matter is

presently before the court upon the following motions: (1) WP
Company’s motion for summary judgment; (2) WP LLC’s motion for
summary judgment; and (3) Glenwood’s motion for sanctions against
WP LLC.

Having carefully reviewed the arguments of the parties,

the court is now prepared to rule.

I.
The
judgment.

court

shall

first

consider

the

motions

for

summary

This is a case based upon diversity of citizenship

jurisdiction. The claims in this case arise in Missouri and, thus,
Missouri law controls.

The defendants seek summary judgment on all of the claims
asserted by Glenwood against each of them.

WP Company contends in

its motion that Glenwood’s claims must fail because it has produced
insufficient evidence to support its claims for damages.

WP LLC

argues that it is entitled to summary judgment on the claims
brought

by

Glenwood

against

it

because

WP

Company

was

not

authorized to entered into the oral contract with Glenwood and WP
LLC was not a part of any agreement or request for services with
Glenwood.
II.
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 of
material fact and that the moving party is entitled to judgment as
a matter of law.”

Fed.R.Civ.P. 56(c).

The requirement of a

genuine issue of fact means that the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Essentially,

the

inquiry

is

whether

the

evidence

presents

a

sufficient disagreement to require submission to a jury or whether
it is so one-sided that one party must prevail as a matter of law.
Id. at 251-52.
The moving party bears the initial burden of demonstrating the
absence of a genuine issue of material fact. This burden may be met
by showing that there is a lack of evidence to support the
nonmoving party’s case.

See Celotex Corp. v. Catrett, 477 U.S.
2

317, 325 (1986).

Once the moving party has properly supported its

motion for summary judgment, the burden shifts to the nonmoving
party to show that there is a genuine issue of material fact left
for trial.

See Anderson, 477 U.S. at 256.

A party opposing a

properly supported motion for summary judgment may not rest on mere
allegations or denials of [its] pleading, but must set forth
specific facts showing that there is a genuine issue for trial.
Id.

Therefore, the mere existence of some alleged factual dispute

between the parties will not defeat an otherwise properly supported
motion for summary judgment.

See id.

When reviewing a motion for summary judgment, the court should
keep in mind three principles. First, the court’s role is not to
weigh the evidence, but to assess the threshold issue whether a
genuine issue exists as to material facts requiring a trial. See
Anderson, 477 U.S. at 249.

Second, the court must resolve all

reasonable inferences and doubts in favor of the non-moving party
and construe all evidence in the light most favorable to the
non-moving party.

See Hunt v. Cromartie, 526 U.S. 541, 550–55

(1999). Third, the court cannot decide any issues of credibility.
See Anderson, 477 U.S. at 255.
The court notes that summary judgment is not a “disfavored
procedural

shortcut;”

rather,

it

is

an

important

procedure

“designed to secure the just, speedy and inexpensive determination
of every action.”

Celotex, 477 U.S. at 327 (quoting Fed.R.Civ.P.

1).
III.
3

The uncontroverted facts are as follows:
as

a

grain

warehouse

and

merchant

WP Company operated

company.

WP

LLC

is

an

agricultural commodity trading business specializing in warehouse
operation.
Wells Fargo Bank, N.A., provided $34 million to WP Company for
operating capital.

Wells Fargo had a first priority security

interest in the assets of WP Company.

As part of the continuing

financing, Wells Fargo required WP Company to engage a “crisis
manager” from a list of firms provided by Wells Fargo.

Glenwood

and Wells Fargo had prior business relationships in which Glenwood
had been inserted as a “crisis manager” for Wells Fargo customers.
Glenwood entered into a written agreement in August 2011 to be a
“crisis manager” for WP Company.

The agreement provided the terms

under which Glenwood would provide services for WP Company, which
was in substantial financial distress. In late September 2011, the
agreement was amended to increase the amount to be paid to Glenwood
to $100,000 per month and to establish a retainer of $300,000.
Glenwood claims that in late September or early October 2011
it made an oral agreement with Bryce Wells, the former chief
executive officer of WP Company, for payment of a success fee in
exchange for successful completion of additional work beyond that
provided for in the written agreement between Glenwood and WP
Company.

The additional services Glenwood says it was to provide

to WP Company were “regarding the potential sale of WP Company.”
Glenwood claims that Wells required it and WP Company to not put
the agreement in writing.
4

On October 20, 2011, Wells Fargo entered into a written “Loan
Sale Agreement” to sell all of its rights under the loan agreement
with WP Company to QuartrA, LLC, a third-party unrelated to WP
Company. The loan sale agreement provided that (1) there was a $23
million shortfall in Wells Fargo’s collateral and (2) the agreement
was made for the exclusive benefit and protection of Wells Fargo
and QuartA, and that there were no direct or indirect beneficiaries
of the agreement.
WP Company gave written notice to Glenwood on October 21,
2011, that WP Company was terminating Glenwood’s engagement under
the written agreement with thirty days notice.
On November 21, 2011, WP Company demanded return of the
balance of the retainer held by Glenwood.

In a letter to WP

Company on December 8, 2011, Glenwood stated that the “additional
work” allegedly requested by Wells had been completed, and the
amount of the success fee was to be negotiated at the completion of
the work. On December 13, 2011, QuartA advised Glenwood that there
had never been any consent by QuartA or its companies to pay a
success fee to Glenwood.

Glenwood contends the success fee is 10%

of the value of WP Company.
On March 1, 2012, a written asset purchase agreement between
WP Company and WP LLC was closed.

The agreement stated that WP

Company had sold essentially all its assets to WP LLC for $100 and
an assumption of specified liabilities, and that the purchase and
sale was to be in lieu of and with the same force and effect as if
WP LLC had foreclosed on the liens and security interests of QuartA
5

under the credit agreement.

No agreement between WP Company and

Glenwood is specified as a liability assumed by WP LLC.
IV.
In its claims against WP Company, Glenwood’s only measure of
damages is an alleged “success fee” of 10% of the value of WP
Company promised by WP Company.

WP Company denies that it ever

promised Glenwood such a success fee.

But, WP Company contends

that it is entitled to summary judgment on WP Company’s claims,
even if such a success fee was promised, because Glenwood cannot
introduce evidence to support its claim for damages due to its
failure to identify an expert witness on the value of WP Company.
Without an expert witness on the value of WP Company, WP Company
contends that Glenwood cannot make a sufficient showing of its
damages.
This presents an interesting issue. Glenwood believes that it
has sufficient evidence, without an expert witness, to support its
claim for damages.

WP Company contends that Missouri law requires

an expert witness whenever the issue concerns the valuation of a
business for the purposes of damages.
The court begins with WP Company’s suggestion that Missouri
law requires an expert witness to testify on the value of a
business.

In support of this contention, they point to Housman v.

Fiddyment, 421 S.W.2d 284 (Mo. banc 1967).
Initially, the court notes that we are not persuaded that
Missouri law always requires the presentation of expert testimony
on the value of a business.

No such statement is contained in
6

Housman and WP Company has not pointed to any Missouri case where
such a statement is made. Rather, in Housman, the Missouri Supreme
Court indicates only that when jurors, for want of experience or
knowledge of the subject under inquiry, are incapable of reaching
intelligent opinion without outside aid, courts out of necessity
admit testimony of experts in the field.

421 S.W.2d at 289.

Thus, allowing experts to give opinions on the subject of inquiry,
instead

of

requiring

the

witness

to

give

only

facts,

is

an

exception to the general rule that witnesses must state facts. Id.
This is similar to the Federal Rules of Evidence.

See F.R.E.

702(“A witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of an
opinion or otherwise if:

(a) the expert's scientific, technical,

or other specialized knowledge will help the trier of fact to
understand the evidence or to determine a fact in issue; (b) the
testimony is based on sufficient facts or data; (c) the testimony
is the product of reliable principles and methods; and (d) the
expert has reliably applied the principles and methods to the facts
of the case.”).

The court notes that it has discovered several

Missouri cases where damages were decided based upon the valuation
of a business without expert testimony.
Wood,

262

S.W.3d

267,

275

(Mo.App.

See In re Marriage of
2008);

Summerville

v.

Summerville, 869 S.W.2d 79, 82 (Mo.App. 1993), overruled in part on
other grounds, Schriner v. Edwards, 69 S.W.3d 89, 93 (Mo.App.
2002).

Thus, the court is not convinced that expert testimony is

7

necessary under Missouri law in determining the valuation of a
business.
In the absence of any requirement by Missouri law that expert
testimony must be produced on the valuation of a business, the
court believes that the issue of what qualifies as expert testimony
and whether qualified expert testimony is required is controlled by
F.R.E. 702.

See Burke v. Air Serv. Intern., Inc., 685 F.3d 1102,

1108-09 (D.C.Cir. 2012).

This brings us to the issue of whether

Glenwood has produced sufficient evidence to allow a jury to
consider the value of WP Company.

At the present time, the court

is unable to determine this issue.

The record is clear that

Glenwood has not designated any expert witnesses in this case. The
law is also clear that generally the valuation of a business
requires

expert

testimony.

However,

there

are

exceptions.

Glenwood has suggested that its witnesses can offer evidence about
the value of WP Company.

The court believes that there is not

enough evidence before the court to evaluate this issue.
decision on it must await trial.

A

This will require the court to

consider the evidence possessed by these witnesses and the nature
of the testimony they will offer.

WP Company has not demonstrated

in its motion for summary judgment that these witnesses cannot
offer any evidence in support of the issue of the value of WP
Company.

As a result, the court must deny summary judgment to WP

Company on this matter.
V.

8

In its motion, WP LLC raises four arguments concerning the
alleged oral contract between Glenwood and WP Company.

First, WP

LLC contends that the written agreement entered into between
Glenwood and WP Company did not allow the subsequent oral agreement
alleged by Glenwood.

Second, WP LLC argues that the credit

agreement that WP Company entered into with Wells Fargo did not
allow WP Company to enter into the oral contract with Glenwood.
Third, WP LLC contends that Glenwood cannot assert a breach of
contract claim against it because it was not a party to the oral
contract.

Finally, WP LLC contends that Glenwood, as an agent of

WP Company, cannot rely upon the oral contract because it was aware
that Wells did not have the authority to make the oral contract on
behalf of WP Company.
WP LLC also contends that Glenwood’s quantum meruit claim must
fail because it was not a party to the oral contract between WP
Company and Glenwood and, thus, never requested Glenwood to provide
any “additional services.”
Glenwood has responded that (1) the written agreement between
WP Company and Glenwood did not preclude the oral contract between
WP Company through Wells and it; (2) any provisions in the credit
agreement between Wells Fargo and WP Company cannot bar its claim
against WP Company; and (3) WP LLC has not established that
Glenwood was an agent of WP Company.

Finally, Glenwood contends

that WP LLC is liable for the contract between Glenwood and WP
Company and for quantum meruit because WP LLC is a successor in
interest to WP Company.
9

The court fails to find that the arguments offered by WP LLC
require the entry of summary judgment in its favor. Initially, the
court

notes

that

the

written

agreement

entered

into

between

Glenwood and WP Company does not preclude the parties from amending
the document.

As noted by WP LLC, the written agreement does

provide a list of Glenwood’s duties and responsibilities. However,
the agreement provides that these duties and responsibilities shall
be “without limitation.”

WP LLC omitted this phrase when it

discussed the duties and responsibilities owed by Glenwood under
the agreement.

The term “without limitation” indicates that the

parties’ intent was not to limit Glenwood’s services under the
agreement. Accordingly, this contention does not entitle WP LLC to
summary judgment on Glenwood’s oral contract claim.
Next, the court must examine the credit agreement entered into
by WP Company with Wells Fargo.

This agreement did place certain

limitations on what WP Company could do.

However, as suggested by

Glenwood, these provisions cannot bar Glenwood from seeking relief
on its oral contract claim when there is no evidence that it was
aware of the provisions in the credit agreement.
a party to that agreement.
WP

Company

under

the

Glenwood was not

Wells Fargo may have an action against

credit

agreement,

but,

based

upon

the

information before the court, that credit agreement cannot preclude
Glenwood’s oral contract against WP LLC.
WP LLC also contends that Glenwood cannot assert a breach of
contract claim against it because it was not a party to the oral
agreement between Glenwood and WP Company.
10

WP LLC also contends

that Glenwood’s quantum meruit claim must fail because it was not
a party to the oral contract between WP Company and Glenwood and,
thus,

never

services.”

requested

Glenwood

to

provide

any

“additional

Glenwood points out that it is seeking to establish

liability by WP LLC based upon the fact that WP LLC is a successor
in interest to WP Company.

WP Company suggests that Glenwood has

not presented continuation liability as a theory of recovery in the
pretrial order.

WP Company further argues that it cannot be

responsible for any liability to Glenwood because it did not assume
any liability to Glenwood in the sale agreement with QuartA.
The court begins with the issue of whether Glenwood has
properly asserted a claim of successor liability in the pretrial
order.

There is little question that such a claim is asserted in

the pretrial order. Glenwood has plainly indicated in the pretrial
order that its claims against WP LLC are based upon a “successor in
interest” theory.

The court does note that Glenwood omitted this

term in setting forth the essential elements of its quantum meruit
claim against WP LLC.

The court, however, believes that Glenwood

has sufficiently pleaded that it is alleging that WP LLC is a
successor in interest to WP Company.

Accordingly, the court must

reject this argument.
Moreover, the law in Missouri is settled that a successor in
interest can be held liable on a claim for quantum meruit.

Want v.

Leve, 574 S.W.2d 700, 715 (Mo.App. 1978). As noted by Glenwood, WP
LLC has made no argument that the uncontroverted facts show that it
is not a successor in interest to WP Company.
11

WP LLC has suggested

that it has no liability to Glenwood because it purchased the
corporate assets of WP Company.

However, WP LLC has failed to

address the various exceptions to the general rule of nonliability
when one corporation sells or transfers all its assets to another
corporation.

See

Edwards

v.

Black

Twig

Marketing

Communications LLC, 418 S.W.3d 512, 520 (Mo.App. 2013).

and
As a

result, this issue must await the presentation of evidence at
trial.

For the reasons above, the court shall deny WP LLC’s

motion for summary judgment.
VI.
Finally,

the

court

sanctions against WP LLC.

shall

consider

Glenwood’s

motion

for

Glenwood seeks sanctions against WP LLC

under Fed.R.Civ.P. 37(c) because it failed to adequately respond to
its discvoery requests.

Glenwood suggests that WP LLC failed to

properly respond to its discovery request when it sent 137 e-mail
accounts, which Glenwood characterized as “a hard drive filled with
thousands of irrelevant and jumbled documents.”

Glenwood contends

that default judgment against WP LLC would be an appropriate
sanction.
WP LLC contends that it produced the e-mail accounts of
individuals from WP Company “just as they were kept in West Plains
Co.’s e-mail system.”
Fed.R.Civ.P.

WP LLC suggests that it complied with

34(b)(2)(E)(I)

because

that

rule

requires

it

to

produce the e-mails as “they are kept in the usual course of
business.”

12

The court agrees with WP LLC.

The e-mails for each employee

were produced and the e-mails are organized by date.

The court

believes that WP LLC properly produced the e-mails sought by
Glenwood.

The court is not persuaded that the actions of Glenwood

violated Magistrate Sebelius’ order or the Federal Rules of Civil
Procedure.

Accordingly, Glenwood’s motion for sanctions shall be

denied.
IT IS THEREFORE ORDERED that West Plains Company’s motion for
summary judgment (Doc. # 37) be hereby denied.
IT IS FURTHER ORDERED that West Plains, LLC’s motion for
summary judgment (Doc. # 40) be hereby denied.
IT IS FURTHER ORDERED that Glenwood Capital, LLC’s motion for
sanctions (Doc. # 46) be hereby denied.
IT IS SO ORDERED.
Dated this 8th day of July, 2014, at Topeka, Kansas.

S/Richard D. Rogers
Richard D. Rogers
United States District Judge

13