Pipeline Productions, Inc. v. The Madison Companies, LLC, et al
Filing
850
MEMORANDUM AND ORDER overruling 822 Motion for Directed Verdict; overruling 825 Motion for Directed Verdict. See Order for further details. Signed by District Judge Kathryn H. Vratil on 3/17/2020. (smc)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
PIPELINE PRODUCTIONS, INC., et al.,
)
)
Plaintiffs,
)
)
v.
)
)
THE MADISON COMPANIES, LLC, et al.,
)
)
Defendants.
)
____________________________________________)
CIVIL ACTION
No. 15-4890-KHV
MEMORANDUM AND ORDER
On February 3, 2020, the Court began an eight-day trial in this matter.
On
February 10, 2020, after plaintiffs rested their case in chief, defendants orally moved for judgment
as a matter of law pursuant to Rule 50(a), Fed. R. Civ. P. Oral Motion (Doc. #825). The Court
took that motion under advisement. On February 13, 2020, after defendants had completed their
case in chief, defendants filed written authorities in support of their oral motion of February 10.
Defendants’ Memorandum In Support Of Motion For Judgment As A Matter Of Law (Doc. #822).
Later on February 13, the jury returned a verdict which found defendants liable on all claims except
plaintiffs’ claims for tortious interference with a business relationship or expectancy against
Madison Companies, LLC (“Madison”).1 Jury Verdict (Doc. #830). Specifically, the jury found
(1) Horsepower Entertainment, LLC (“Horsepower”) liable to Pipeline Productions, Inc.
(“Pipeline”) for breach of contract, breach of fiduciary duty and tortious interference,
1
Because the jury found that Madison is not liable to either Pipeline or Backwood
for tortious interference, defendants’ motion for judgment as a matter of law is moot. See Vehicle
Mkt. Research, Inc. v. Mitchell Int’l, Inc., No. 09-2518-JAR, 2015 WL 13642257, at *1 (D. Kan.
Sept. 11, 2015) (overruling as moot defendant’s motion for judgment as matter of law because jury
found in its favor).
(2) Horsepower liable to Backwood Enterprises, LLC (“Backwood”) for breach of contract, breach
of fiduciary duty and tortious interference and (3) Madison liable to Pipeline and Backwood for
breach of fiduciary duty. This matter is before the Court on defendants’ Oral Motion (Doc. #825)
filed February 10, 2020 and Defendants’ Memorandum In Support Of Motion For Judgment As A
Matter Of Law (Doc. #822) filed February 13, 2020. For the reasons below, the Court overrules
defendants’ motion.
Legal Standards
Under Rule 50(a)(1), Fed. R. Civ. P., the Court may grant judgment as a matter of law
when “a party has been fully heard on an issue during a jury trial and the [C]ourt finds that a
reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that
issue.” A moving party is entitled to judgment if the evidence “points but one way and is
susceptible to no reasonable inferences which may support the opposing party’s position.” Deters
v. Equifax Credit Info. Servs., Inc., 202 F.3d 1262, 1268 (10th Cir. 2000) (internal quotations and
citations omitted). The question “is not whether there is literally no evidence supporting the
nonmoving party but whether there is evidence upon which a jury could properly find for that
party.” Herrera v. Lufkin Indus., Inc., 474 F.3d 675, 685 (10th Cir. 2007).
In considering a motion for judgment as a matter of law, the Court reviews all of the
evidence in the record and construes it in the light most favorable to the nonmoving party. Tyler
v. RE/MAX Mountain States, Inc., 232 F.3d 808, 812 (10th Cir. 2000) (citations omitted). In
doing so, the Court must refrain from making credibility determinations and weighing the
evidence: the jury “has the exclusive function of appraising credibility, determining the weight to
be given to the testimony, drawing inferences from the facts established, resolving conflicts in the
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evidence, and reaching ultimate conclusions of fact.” United Int’l Holdings, Inc. v. Wharf
(Holdings) Ltd., 210 F.3d 1207, 1227 (10th Cir. 2000) (internal quotations and citation omitted).
Analysis
Defendants assert that they are entitled to judgment as a matter of law on all of plaintiffs’
claims. Specifically, defendants argue that a reasonable jury could not find for plaintiffs because
(1) plaintiffs’ evidence regarding actual damages is speculative and conjectural, (2) plaintiffs’
evidence does not satisfy the necessary elements of each claim and (3) plaintiffs cannot recover
punitive damages.
I.
Actual Damages
Defendants assert that plaintiffs did not present concrete, non-speculative evidence of
actual damages. Because actual damages are an essential element of plaintiffs’ claims for breach
of contract, breach of fiduciary duty and tortious interference, defendants argue that no reasonable
jury could find in favor of plaintiffs on these claims.
Under Kansas law, actual damages are an essential element of breach of contract, breach
of fiduciary duty and tortious interference claims. Gateway Fin. Grp., Inc. v. Mission Bank, No.
95-2428-GTV, 1997 WL 567791, at *5 (D. Kan. Aug. 15, 1997) (actual damages essential element
of breach of contract claim); Fergus v. Faith Home Healthcare, Inc., No. 18- 2330-JWL, 2019 WL
3817961, at *10 (D. Kan. Aug. 14, 2019) (actual damages essential element of breach of fiduciary
duty and tortious interference claims). To satisfy this element, plaintiffs must provide evidence of
actual damages that is “based on more than mere speculation, conjecture, or surmise.” Sibley v.
Sprint Nextel Corp., No. 08-2063-KHV, 2017 WL 8944042, at *4 (D. Kan. Apr. 21, 2017), report
and recommendation adopted, No. 08-2063-KHV, 2017 WL 2471304 (D. Kan. June 8, 2017)
(citations omitted). Plaintiffs’ evidence of actual damages can be adequately concrete even if they
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do not quantify or place a specific dollar amount on them. Fergus, 2019 WL 3817961, at *10
(evidence of actual damages from tortious interference and breach of fiduciary duty insufficient
where counterclaimant failed to show “any injury whatsoever” – not because he failed to quantify
or monetize actual damages); Sunlight Saunas, Inc. v. Sundance Sauna, Inc., 442 F. Supp. 2d 1160,
1170 (D. Kan. 2006) (actual damages do not require actual dollar value for injury). In other words,
where it is an essential element of a claim, Kansas law requires plaintiffs to prove the existence of
non-speculative, actual damages – but not necessarily the dollar amount of such damages.
Defendants’ argument focuses on plaintiffs’ claims for tortious interference and breach of
fiduciary duty.2 In that regard, defendants argue that plaintiffs failed to provide non-speculative
evidence of specifically-quantifiable damages, and plaintiffs therefore failed to establish the fact
of damage. As the Court explained above, however, Kansas law does not support this rigid test
for actual damages. Plaintiffs need only prove the existence of non-speculative, actual damage.
They have done so here. With respect to the tortious interference claims, Mosiman testified that
Horsepower stole several employees (Nate Prenger, Brian Pilsl, Brian Wingerd and Taylor
Gustafson) from Backwood and Pipeline, which cost Backwood and Pipeline their value and
forced them to hire and train new ones. Mosiman likewise testified that when Horsepower and
Madison breached their fiduciary duties to Backwood and Pipeline by trying to force them to
accept different deals, suing and threatening more litigation, sending defamatory letters and
2
Defendants also argue that plaintiffs did not adequately quantify damages for their
breach of contract claim. Specifically, they take issue with the damage claims for $750,000 and
$80,000 –amounts that Horsepower allegedly owed under the purported contract. In support,
defendants cite the Court’s Order (Doc. #815) filed February 7, 2020, which found that the Second
Amended Pretrial Order (Doc. #795) filed January 31, 2020 did not disclose plaintiffs’ damage
calculations in compliance with Fed. R. Civ. P. 26(a)(1)(A)(iii). This observation clearly did not
refer to the claims for $750,000 and $80,000, which were always part of plaintiffs’ breach of
contract damage claims and were not damage claims that needed computation.
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stealing their employees, Horsepower and Madison severely damaged their reputation and viability
as music festival business. As a result, Backwood and Pipeline have been unable to produce any
more music festivals. Because plaintiffs provided non-speculative evidence of actual damages,
the Court overrules defendants’ motion on this issue.
II.
Substantive Claims
A.
Breach Of Contract
Horsepower asserts that it is entitled to judgment as a matter of law on the breach of
contract claims because no reasonable jury could find that a contract existed between it and
Pipeline and/or Backwood. Specifically, Horsepower argues that any alleged agreement omitted
too many key provisions to be binding, which shows that the parties only intended to enter a future
contract.
Under Kansas law, parties form a binding contract – which can be written or oral – when
they reach a meeting of the minds on all essential elements of the agreement. See Ludwikoski &
Assocs., Inc. v. Yeti Coolers, LLC, No. 13-2649-EFM, 2014 WL 3767684, at *5 (D. Kan.
July 31, 2014); see also RLI Ins. Co. v. Russell, No. 14-2479-EFM, 2015 WL 9455569, at *5 (D.
Kan. Dec. 23, 2015). For the parties to reach a meeting of the minds, “there must be a fair
understanding between [them] which normally accompanies mutual consent and the evidence must
show with reasonable definiteness that the minds of the parties met upon the same manner and
agreed upon the terms of the contract.” Felling v. Hobby Lobby, Inc., No. 04-2374-GTV, 2005
WL 928641, at *3 (D. Kan. Apr. 19, 2005) (citations omitted). To determine whether the parties
did so, the Court applies an objective test that asks whether they manifested their intent to be bound
by the agreement. Sw. & Assocs., Inc. v. Steven Enterprises, LLC, 32 Kan. App. 2d 778, 781, 88
P.3d 1246, 1249 (2004). In other words, the relevant inquiry is the “manifestation of a party’s
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intention, rather than the actual or real intention.” Id. Accordingly, the Court looks to the parties’
“outward expression[s] of assent.” Pierce v. PrimeRevenue, Inc., No. 17-2233-JWB, 2018 WL
4749331, at *2 (D. Kan. Oct. 2, 2018). Parties can manifest an intent sufficient to form a binding
contract even if they “contemplate the subsequent execution of a formal instrument as evidence of
their agreement,” and even if they “know[ ] that there are other matters on which the have not
agreed and on which they expect further negotiation.” Phillips & Easton Supply Co. v. Eleanor
Int’l, Inc., 212 Kan. 730, 735, 512 P.2d 379, 384 (1973); Storts v. Martin K. Eby Const. Co., 217
Kan. 34, 40, 535 P.2d 908, 913 (1975).
Here, a reasonable jury could find that Backwood, Pipeline and Horsepower entered into
an agreement to partner in the production of Thunder on the Mountain. Specifically, a reasonable
jury could find that (1) Pipeline agreed to produce and operate Thunder, for which Horsepower
agreed to pay Pipeline $80,000 and (2) Backwood agreed to give Horsepower a 51% interest in
Thunder, for which Horsepower agreed to pay Backwood $750,000. The record contains evidence
that on November 4, 2014, Mosiman emailed Gordon a proposed framework for this deal, and
approximately two days later Gordon orally agreed to a slightly modified version of it. Soon after
they entered into the alleged agreement, Mosiman emailed Gordon to discuss booking a specific
artist for Thunder, to which Gordon responded, “Do it, please!” Moreover, Horsepower later
funded $272,000 in artist deposits and created four entities with variations of the name “Thunder
on the Mountain.” Finally, Horsepower – through Gordon – continued to exercise significant
control over various aspects of the operation, including deciding which bands to book. Based on
this evidence, a reasonable jury could find that Horsepower entered into an agreement with
Backwood and Pipeline to produce the Thunder on the Mountain music festival. The Court
therefore overrules Horsepower’s motion on this issue.
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B.
Breach Of Fiduciary Duty
Defendants assert that they are entitled to judgment as a matter of law on the breach of
fiduciary duty claims because the economic loss doctrine bars them.3 Specifically, defendants
argue that plaintiffs’ damages under the breach of fiduciary duty claims are the same as those under
the breach of contract claim.
Kansas courts have adopted the economic loss doctrine, which “sets forth the
circumstances under which a tort action is prohibited if the only damages suffered are economic
losses.” Freedom Transportation, Inc. v. Navistar Int’l Corp., No. 18-02602-JAR, 2019 WL
4689604, at *23 (D. Kan. Sept. 26, 2019), motion to certify appeal denied, No. 18-02602-JAR,
2020 WL 108670 (D. Kan. Jan. 9, 2020). The doctrine prevents parties “from asserting a tort
remedy in circumstances governed by the law of contracts.” BHC Dev., L.C. v. Bally Gaming,
Inc., 985 F. Supp. 2d 1276, 1287 (D. Kan. 2013) (citations omitted). In effect, this means that
plaintiffs cannot recover under tort theories when their claims are actually based in contract. In
other words, if plaintiffs’ claims arise under the contract – “as opposed to an independent duty
arising by operation of law” – plaintiffs cannot assert tort claims to recover economic damages.
Rand Const. Co. v. Dearborn Mid-W. Conveyor Co., 944 F. Supp. 2d 1042, 1062 (D. Kan. 2013);
3
Defendants also argue that the breach of fiduciary duty claims fail as a matter of
law because plaintiffs did not provide evidence that quantified their damages. The Court rejected
this argument above.
Finally, defendants argue that some of their actions do not constitute breaches.
Specifically, they assert that (1) filing the Delaware lawsuits was privileged and (2) the letters that
they sent to talent agents were not defamatory and did not harm plaintiffs. Defendants do not cite
any authority or record evidence to support their assertions. Even if both propositions are true,
however, plaintiffs asserted four different actions by which defendants violated their fiduciary
duties. Specifically, in addition to filing lawsuits and sending letters, plaintiffs claimed that
defendants breached their fiduciary duties by stealing their employees and trying to force plaintiffs
to accept different deals. The evidence supports these theories and defendants are not entitled to
judgment as a matter of law on the breach of fiduciary duty claims.
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see Andrewjeski v. Bimbo Foods Bakeries Distribution, LLC, No. 18-2425-KHV, 2019 WL
2250068, at *13 (D. Kan. May 24, 2019).
As the Court has recently explained, the economic loss doctrine is still developing under
Kanas law, and Kansas courts have largely limited its application to the commercial product
liability sphere. Andrewjeski, 2019 WL 2250068, at *12. According to the Kansas Supreme
Court, determining when the doctrine should apply outside of this limited context “has proven
difficult, and there is some sense the doctrine’s application has expanded too far.” Rinehart v.
Morton Bldgs., Inc., 297 Kan. 926, 934, 305 P.3d 622, 628 (2013). Indeed, no Kansas court has
found that the doctrine applies to claims for breach of fiduciary duty.
Against this backdrop, the Court declines to expand the economic loss doctrine to the
breach of fiduciary duty claims in this case. The fiduciary duties at issue arose by virtue of an
alleged joint venture agreement. See Underground Vaults & Storage, Inc. v. Cintas Corp., 632 F.
App’x 917, 922 (10th Cir. 2015) (parties to joint venture owe each other fiduciary duties). Under
defendants’ argument, joint venturers could never enforce those fiduciary duties: if their agreement
explicitly imposed fiduciary duties, the economic loss doctrine would bar their breach of fiduciary
duty claims because they arose under the contract. If their agreement did not explicitly impose
fiduciary duties (as in this case), the economic loss doctrine would still bar their breach of fiduciary
duty claims because the duties nonetheless arose under the joint venture agreement. In other
words, because the fiduciary duties would always arise under the joint venture – which is
established by the agreement of the parties – the economic loss doctrine would always bar recovery
for breaches of those duties.
Accordingly, defendants’ proposal would effectively abolish
remedies for the well-established law that joint venturers owe each other fiduciary duties. The
Court declines to do so.
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C.
Tortious Interference
Horsepower asserts that it is entitled to judgment as a matter of law on the tortious
interference claims by Pipeline and Backwood.4 To succeed on a claim for tortious interference
with a prospective business advantage under Kansas law, plaintiffs must show (1) a business
relationship or expectancy with probable future economic benefit to plaintiffs, (2) defendants’
knowledge of the relationship or expectancy, (3) that but for defendants’ conduct, plaintiffs were
reasonably certain to have continued the relationship or realized the expectancy, (4) that
defendants engaged in intentional misconduct and (5) plaintiffs sustained direct and proximate
damages. Pipeline Prods., Inc. v. Horsepower Entm’t, No. 15-4890-KHV, 2017 WL 4536420, at
*5 (D. Kan. Oct. 11, 2017) (citations omitted).
Here, Horsepower asserts that plaintiffs’ tortious interference claims must fail because
plaintiffs have not satisfied various elements with respect to each employee at issue (Nate Prenger,
Brian Pilsl, Brian Wingerd and Taylor Gustafson).5
1.
Prenger
Nate Prenger was a minority partner in several of Mosiman’s companies, and he operated
Pipeline and Backwood. Plaintiffs ultimately fired Prenger for embezzlement, and he immediately
4
As the Court explained above, the jury found that Madison was not liable for
tortious interference. Accordingly, defendants’ motion on this issue is moot with respect to
Madison.
5
Without citing any authority or record evidence, Horsepower also argues that
plaintiffs have not satisfied the intentional misconduct element with respect to the employees at
issue. To satisfy the intentional misconduct element of a claim for tortious interference with a
prospective business advantage, plaintiffs must show that defendants acted with “intent to do a
harmful act without reasonable justification.” Pipeline Prods., Inc. v. Horsepower Entm’t, No. 154890-KHV, 2017 WL 4536420, at *3 (D. Kan. Oct. 11, 2017) (citations omitted). Based on the
evidence in the record, a reasonable jury could find that Horsepower intended to harm plaintiffs
when it stole plaintiffs’ employees.
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went to work for Horsepower. Horsepower asserts that as a matter of law, it did not tortiously
interfere with plaintiffs’ business relationship or expectancy with Prenger. Specifically, it argues
that plaintiffs fired Prenger before Horsepower hired him, and that even absent its alleged tortious
interference, plaintiffs were not reasonably certain to have continued their relationship with
Prenger.
The Court disagrees. The record contains evidence that even before Prenger’s relationship
with plaintiffs fell apart, Horsepower was soliciting Prenger to leave plaintiffs and come work for
it. Plaintiffs presented evidence that as early as April of 2015, Horsepower and Prenger were
exchanging draft consulting agreements. This caused the relationship between Prenger and
Mosiman to sour and on July 1, 2015, Mosiman terminated Prenger’s employment. Prenger began
working for Horsepower the next day. Although Prenger’s embezzlement was the final straw
leading to his termination, Mosiman also cited Prenger’s continued collusion with Horsepower
and the resulting deterioration of their relationship. A reasonable jury could find that absent this
interference from Horsepower, plaintiffs were reasonably certain to have continued their
relationship with Prenger.
2.
Gustafson
Taylor Gustafson was the ticketing manager and box office manager for Pipeline and
Backwood. She was responsible for the box office, credentials and the guest lists for the festivals.
In July of 2015, she began working for Horsepower. Horsepower asserts that as a matter of law,
it did not tortiously interfere with plaintiffs’ business relationship or expectancy with Gustafson.
Specifically, Horsepower argues that Mosiman was unhappy with her performance, and that even
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absent its alleged tortious interference, plaintiffs were not reasonably certain to have continued
their relationship with her.6
The Court disagrees. Even if it were true that plaintiffs were unhappy with Gustafson’s
performance – a proposition for which defendants cite no record evidence – this does not prove as
a matter of law that plaintiffs were not reasonably certain to have continued their relationship with
her absent Horsepower’s interference.
Horsepower seems to implicitly argue that given
Gustafson’s purported performance, plaintiffs were ultimately going to fire her at some point even
if Horsepower did not steal her away. Horsepower does not cite any record evidence for this
theory. A reasonable jury could find that absent Horsepower’s interference, plaintiffs were
reasonably certain to have continued their relationship with Gustafson.
3.
Pilsl And Wingerd
Brian Pilsl and Brian Wingerd owned Sprocket Marketing, an entity that provided various
festival-related services to Backwood and Pipeline. As early as June of 2015, Horsepower began
to solicit Pilsl and Wingerd to provide Sprocket’s services to it and to end their relationships with
plaintiffs. On October 1, 2015, Pilsl and Wingerd officially began working for Horsepower.
Horsepower asserts that as a matter of law, it did not tortiously interfere with plaintiffs’
business relationships or expectancies with Pilsl and Wingerd. Specifically, Horsepower argues
that Pilsl and Wingerd provided services to plaintiffs under an independent contracting
arrangement. As best the Court can ascertain, Horsepower is arguing that plaintiffs have not
6
In less than a sentence, defendants assert that plaintiffs have not established a
business relationship or expectancy with Gustafson because plaintiffs did not employ her.
Defendants do not identify Gustafson’s alleged employer, and they do not cite record evidence.
On this record, the Court cannot conclude as a matter of law that for purposes of their tortious
interference claims, Pipeline and/or Backwood lacked a business relationship or expectancy with
Gustafson.
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established a business relationship or expectancy with either Pilsl or Wingerd because plaintiffs
did not employ them.
Beyond vaguely referencing “the testimony,” Horsepower does not cite any record
evidence that Pilsl and Wingerd provided services to plaintiffs under independent contracting
agreements. Moreover, even if the evidence did show this, Horsepower does not cite any authority
for the proposition (or any authority at all) that this type of service arrangement cannot satisfy the
business relationship or expectancy prong of a tortious interference claim. In other words,
Horsepower has not shown that as a matter of law, plaintiffs could not have had a business
relationship or expectancy with probable future economic benefit simply because Pilsl and
Wingerd provided their services via independent contractor agreements. The Court therefore
overrules Horsepower’s motion on this issue.
III.
Punitive Damages
Defendants assert that as a matter of law, plaintiffs cannot recover punitive damages
because they have not shown that defendants acted in a “wanton and willful” manner.7
Punitive damages “punish the wrongdoer for his malicious, vindictive or willful and
wanton invasion of another’s rights, with the ultimate purpose being to restrain and deter others
from the commission of similar wrongs.” Brand v. Mazda Motor Corp., 978 F. Supp. 1382, 1393
(D. Kan. 1997). Defendants display wantonness when they realize that their acts place others in
imminent danger or risk of injury, but fail to prevent such injury because of indifference to whether
the injury occurs. Id.
7
Citing Fergus, defendants also assert that if the jury returns a verdict finding only
nominal damages, punitive damages are not available under Kansas law. 2019 WL 3817961, at
*9. As defendants seem to acknowledge, this is an issue more properly suited for a post-trial
motion.
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For purposes of the tortious interference and breach of fiduciary duty claims,8 the evidence
is sufficient to support punitive damages. A reasonable jury could find that Horsepower and
Madison intended to harm Backwood and Pipeline when, among other actions, they stole their
employees, tried to get them to accept a different deal, sued them and threatened further litigation
and sent defamatory letters to artist agencies. The Court therefore overrules defendants’ motion
on this issue.
IT IS THEREFORE ORDERED that defendants’ Oral Motion (Doc. #825) filed
February 10, 2020 is OVERRULED.
IT IS FURTHER ORDERED that Defendants’ Memorandum In Support Of Motion For
Judgment As A Matter Of Law (Doc. #822) filed February 13, 2020 is OVERRULED.
Dated this 17th day of March, 2020 at Kansas City, Kansas.
s/ Kathryn H. Vratil
KATHRYN H. VRATIL
United States District Judge
8
Under Kansas law, punitive damages are not available for the breach of contract
claims against Horsepower. See Penncro Assocs., Inc. v. Sprint Corp., No. 04-2549-JWL, 2006
WL 416227, at *9 (D. Kan. Feb. 22, 2006).
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