Vincent et al v. Anand
Filing
40
MEMORANDUM OPINION & ORDER: 1. Plaintiff's 31 MOTION for Summary Judgment is GRANTED IN PART, insofatr as it pertains to Defendant being liable for breach of Guaranty Agreement (Count 1), and DENIED IN PART, insofar as it pertains to the amount of damages to be awarded for breach of the Guaranty Agreement; 2. Plaintiff's 31 Motion for Summary Judgment is GRANTED IN PART, insofar as it pertains to Defendant being liable for attorneys' fees with amount of the award to be deferred for later proceedings and after such submission of proofs. Signed by Judge Joseph M. Hood on 9/22/2021.(KM)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
JOHN VINCENT and JOHN CHI
)
)
)
)
)
)
)
)
)
Plaintiffs,
v.
ASHWINI ANAND
Defendant.
5:18-CV-419-JMH
MEMORANDUM OPINION
AND ORDER
***
Plaintiffs, John Vincent and John Chi, filed suit against
Defendant, Ashwini Anand, for breach of a guaranty agreement. This
matter is before the Court pursuant to Plaintiffs’ Motion for
Summary Judgement [DE 31].
For the reasons set forth below,
Plaintiffs’ motion will be granted in part and denied in part.
I. BACKGROUND
Plaintiffs
are
the
former
principals
of
Pacer
Health
Corporation (“PHC”). [DE 31-1, at 2]. PHC owned all the stock in
Pacer Holdings of Kentucky, INC. (“PHKI”). [Id.]. PHKI owned or
had a majority interest in Pacer Health Management Corporation of
Kentucky (“Pacer”). In December of 2006, Pacer entered into a
Hospital Operating lease with Knox County in Kentucky and the Knox
Hospital Corporation, which operated the Knox County Hospital (the
“Hospital”).
[Id.].
By
the
terms
of
the
Lease,
Pacer
took
managerial and operational control of the hospital. Pacer also
assumed
certain
tax
responsibility
including
remitting
the
Hospital’s “trust fund taxes.” [Id. at 3]. However, Pacer was
ultimately unable to pay the full amount owed for the first and
second quarters of 2009. [Id. at 4]. In November of 2009, PHC
entered into a Stock Purchase Agreement (“SPA”) with CumberlandPacer, LLC (“Cumberland”), of which Defendant Anand was a member.
[Id. at 5]. PHC sold its stock in PHKI to Cumberland, giving
Cumberland a majority interest. Section 5.7 of the SPA required
Cumberland to pay the outstanding trust fund taxes.1 [DE 1-1, ID
#30]. In addition to the SPA, Anand executed a separate Guaranty
and
Indemnification
Agreement
(the
“Guaranty”)
personally
guaranteeing payments of the trust fund taxes owed by Pacer.2 [DE
34-1, ID #209].
When no further payments were made on the trust fund exposing
Plaintiffs to liability on the delinquent taxes, PHC filed an
action in this Court in 2010 to settle respective obligations under
the Guaranty and SPA. [DE 34 at 7]. Despite the IRS determining
that Plaintiffs were the “responsible persons” for tax purposes in
February of 2011, the parties settled in January of 2012 (the “2012
Settlement
Agreement”)
and
Anand
reaffirmed
and
modified
his
obligations in the Guaranty.3 [DE 1-3, ID #54]. When the trust fund
1
“Buyer shall...pay all outstanding federal and state withhold taxes of the
Business arising out of…any period prior to the Closing.”
2 “Guarantor has agreed to...guarantee Cumberland’s obligation to pay the
trust fund portion of the delinquent federal and state withholding taxes owed
by Pacer Health.”
3 “Notwithstanding the release of their specific obligations to guarantee the
payment of one-third of the Medicare Receivables and at least $25,000.000 per
2
taxes remained unpaid, PHC sued again in 2013. In August of 2013,
the
parties
entered
another
settlement
(the
“2013
Settlement
Agreement”) whereby Anand reaffirmed his obligations in the 2012
Settlement Agreement.4 [DE 1-4, ID #73]. Plaintiffs brought the
current suit because “Defendant Anand has failed and refused to
pay the delinquent taxes as required under the Guaranty and
Indemnification Agreement, the 2012 Settlement Agreement and the
2013 Settlement Agreement.” [DE 1 at 5, ¶ 15].
Plaintiffs have filed the Motion before the Court [DE 31]
seeking (1) summary judgment on the breach of contract claim and
an award of $794,008.22 against Anand, plus post-judgment interest
until paid and (2) partial summary judgment declaring Anand liable
for reimbursing Plaintiff’s reasonable attorney fees, with amount
to be determined later.
II. DISCUSSION
A. SUMMARY JUDGMENT
“The court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ.
month towards the Trust Fund Taxes, Anand and Chatterjee do hereby reaffirm
and recommit their obligations under the Guaranty, as amended hereby, to pay
the Trust Fund Taxes up to and including the maximum liability set forth in
the Guaranty ($1,250,000.00) for such taxes.”
4
“Defendants hereby restate and reaffirm their obligations to Plaintiffs under
Paragraphs B (pp4-7) of the 2012 Agreement (the “Tax Payment Guaranty”) to
the same extent that exists under the 2012 Agreement.”
3
P. 56(a). A “genuine dispute” exists when “a reasonable jury could
return a verdict for the non-moving party.” Olinger v. Corporation
of the President of the Church, 521 F. Supp. 2d 577, 582 (E.D. Ky.
2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986)); Smith v. Perkins Bd. Of Educ., 708 F. 3d 821, 825 (6th
Cir. 2013). In the Court’s analysis, “the evidence should be viewed
in the light most favorable to the non-moving party.” Ahlers v.
Schebil, 188 F. 3d 365, 369 (6th Cir. 1999) (citing Anderson, 477
U.S. at 255).
The initial burden
falls on the moving party, who must
identify portions of the record establishing the absence of a
genuine issue of material fact. Chao v. Hall Holding Co., 285 F.
3d 415, 424 (6th Cir. 2002) (citing Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986)). If established, the non-moving party “must
go beyond the pleadings and come forward with specific facts to
demonstrate that there is a genuine issue for trial.” Id. The nonmoving party will not overcome a motion for summary judgment by
simply showing “some metaphysical doubt as to the material facts.”
Id. (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986)). In other words, “the respondent
must adduce more than a scintilla of evidence to overcome the
motion.” Street v. J.C. Bradford & Co., 886 F. 2d 1472, 1479 (6th
Cir. 1989). As a “mere scintilla of evidence” is insufficient, the
non-movant must show the existence of “evidence on which the jury
4
could reasonably find for the non-moving party.” Sutherland v.
Mich. Dept. of Treasury, 344 F. 3d 603, 613 (6th Cir. 2003) (citing
Anderson, 477 U.S. at 251). Instead, the non-moving party is
required to “present significant probative evidence in support of
its opposition.” Chao, 285 F. 3d at 424.
“The trial court no longer has the duty to search the entire
record to establish that it is bereft of a genuine issue of
material fact.” Street, 886 F. 2d 1472 at 1479-80. Rather, “the
nonmoving party has an affirmative duty to direct the court’s
attention to those specific portions of the record upon which it
seeks to rely to create a genuine issue of material fact.” In re
Morris, 260 F. 3d 654, 655 (6th Cir. 2001).
B. THE GUARANTY
Kentucky law governs this dispute. “A guaranty agreement is
one in which the promisor protects his promisee from liability for
a debt resulting from the failure of a third party to honor an
obligation to that promisee—thus creating a secondary liability.”
Intercargo Ins. Co. v. B.W. Farrell, Inc., 89 S.W. 3d 422, 426
(Ky. Ct. App. 2002) (referencing 38 Am.Jur. 2d Guaranty § 14
(1999)). Under Kentucky law, breach of a guaranty is established
upon a showing of the terms of the guaranty and the absence of
payment. Vesey Air, LLC v. Mayberry Aviation, LLC, 2010 WL 3419423,
at *4 (W.D. Ky. Aug. 27, 2010)(citing Yager v. Kentucky Title Co.,
112 Ky. 932, 66 S.W. 1027, 1028 (Ky.1902)).
5
The terms of the Guaranty are undisputable. As Defendant
recites in his answer “The Guaranty and Indemnification Agreement
referred to in Paragraph 6 of the Complaint speaks for itself...”
[DE 7 at 2, ¶6]. The Guaranty, of which Anand is identified as the
“Guarantor” is clear:
“Guarantor has agreed to...guarantee the
payment and performance of Cumberland’s
obligations to pay the trust fund portion of
the delinquent federal and state withholding
taxes owed by Pacer Health as of October 28,
2009 not to exceed $500,000.”
[DE
34-1,
ID
#210].
Anand
signed
the
Guaranty.
In
the
case
presently before the Court, Anand has not offered any defenses in
formation, lack of capacity, or fraud. The terms clearly state
that the guarantor is obligated to pay the trust fund taxes owed.
Defendant’s response is incapable of refuting the unambiguous
terms of the contract that was voluntarily entered into by Anand.
In fact, Defendant in his response to the motion for summary
judgment,
never
attacks
his
obligations
articulated
in
the
guaranty portion of the agreement. Defendant does not make any
argument claiming that he is not actually contractually bound to
be a guarantor for Cumberland.
Presenting no arguments claiming the contractual language
does not bind him, Anand instead claims there is no liability
because
his
obligations
have
already
been
satisfied.
Anand
presents three unpersuasive arguments. First, Anand points to his
6
Answer [DE 7] to show that he “denies the averments in Paragraph
15.” Paragraph 15 of the Complaint [DE 1] states that Defendant
“failed and refused to pay the delinquent taxes as required under
the Guaranty and Indemnification Agreement.” A mere blanket denial
will not overcome the undeniable contractual terms that hold
Defendant
liable
as
the
Guarantor
nor
will
the
unsupported
declaration refute the Account Statements showing the trust fund
taxes remain unpaid. [DE 31-5 and 31-6].
Second, Defendant reminds the Court of more denials made in
Defendant’s Restated and Supplemental Response and Answers to
First
Discovery
Request
and
Answers
and
Responses
to
Second
Discovery Requests [DE 34-3]. Similar to Defendant’s Answer, Anand
simply responds “Deny” to the allegations with no explanation other
than a belief that certain documentation about the “delinquent
taxes” are possessed by Plaintiffs. Again, mere denials wain in
comparison to the uncontradicted contractual evidence.
Third, Defendant presents his own Declaration, where Anand
claims it is his “understanding and belief that all claims by the
United States Internal Revenue Service regarding obligations of
the Pacer Entities for trust fund taxes have been fully and
completely
settled,
satisfied
and
released
(the
“IRS
settlement”).” [DE 34-4, ID #334]. The Court finds this statement
inconsequential to Defendant’s responsibility to be a guarantor.
Defendant’s guaranty obligations are undisputed. The trust fund
7
taxes remain outstanding. Whether a settlement did or did not occur
between the IRS and Defendant has no bearing upon the legal
obligations owed to the plaintiffs. The Guaranty unequivocally
shows Defendant made a commitment to be a guarantor. Additionally,
the Guaranty, signed by Defendant, prevents the obligations from
being discharged by an “arrangement” or “compromise” involving
Cumberland.5 [DE 34-1, ID #210-211]. Lastly, Defendant offers no
information about this IRS settlement other than the attorneys
involved and that a request for the information was executed. There
is no indication of when the settlement occurred, the parties
involved,
or
any
details
about
its
contents.
Anand
himself
recognizes “his lack of documentation or any type of payment or
other specific information [that] may defeat his request that the
Motion be currently overruled.” [DE 34 at 7].
There
is
no
genuine
issue
of
material
fact
regarding
Defendant’s obligations under the Guaranty as Anand has failed to
“adduce more than a scintilla of evidence to overcome the motion.”
Street v. J.C. Bradford & Co., 886 F. 2d 1472, 1479 (6th Cir.
1989).
Defendant
voluntarily
signed
a
contract
making
him
a
guarantor for Cumberland’s obligations to pay the trust fund taxes.
“The obligations of Guarantor hereunder shall be absolute, continuing, and
unconditional, and shall remain in full force and effect without regard to
and shall not be released, discharged, or in any way affected by…any
bankruptcy, insolvency, arrangement, compromise, assignment for the benefit
of creditors or similar proceedings commenced by or against Cumberland, its
successors or assigns.”
5
8
Defendant does not refute this responsibility. Similarly, it is
undisputed that the trust fund taxes remain outstanding. The only
argument against liability presented by Defendant is the IRS
settlement. However, the Defendant admits the absence of any
documentation, evidence, or even minimal factual details related
to the settlement and ultimately the settlement is inconsequential
to the issue of whether the guaranty was breached.
Because the existence of the IRS settlement would not affect
the undisputed fact that Anand is a guarantor of the trust fund
taxes, there is no need for this Motion to be deferred pursuant to
Rule 56(d)(1) for this matter of liability. Defendant entered into
a
contractual
agreement
obligating
himself
to
this
guaranty
arrangement. Defendant is, therefore, bound to those promises.
C. Indemnification
Because
the
plaintiffs
are
not
seeking
to
enforce
the
indemnification portion of the contract, there is no need for the
Court to address the issues presented by Defendant. Any matter
relating exclusively to the indemnification clause, is therefore,
immaterial.
D. Amount
While
there
is
no
dispute
that
Anand
is
liable
as
the
guarantor, the amount owed under the Guaranty remains a genuine
issue of material fact. The plaintiffs seek $794,008.22, plus postjudgment interest, compounded annually. Viewing the evidence in
9
the light most favorable to the non-moving party, the Court is not
satisfied that the plaintiffs have met their burden.
The Guaranty states that “the trust fund portion” guaranteed
is “not to exceed $500,000.” [DE 34-1, ID #209]. However, the
guaranty section goes on to state that “[t]he amount of the maximum
aggregate
liability
of
the
Guarantor
hereunder
shall
be
the
principal amount $1,250,000.” [Id. at 211]. While Defendant denies
that Plaintiffs are entitled to any judgment, they additionally
assert any judgment would be limited to $500,000. Plaintiffs argue
the $500,000 is only limited to the trust fund portion, not total
liability. Instead, Plaintiffs claim maximum aggregate liability
of $1,250,000, which includes late payment interest. According to
Plaintiffs’ calculations the $794,008.22 amount is a combination
of the account balance plus accruals.
Even if the Court were to concede that the $500,000 cap only
applies to the “trust fund portion” and not the “maximum aggregate
liability”,
Plaintiffs
have
failed
to
adequately
explain
the
calculations. Additionally, Plaintiffs provide no clear rationale
concerning why certain numbers are used in those calculations and
where
those
numbers
originated.
The
chaotic,
and
at
times
contradictory, calculations combined with certain undecipherable
exhibits,
even
confused
the
10
plaintiffs
who
originally
miscalculated the amount themselves.6 The Court finds the amount
of damages, therefore, to be a genuine dispute unfit for summary
judgment.
E. Attorney Fees
The
Guaranty,
cited
by
both
parties,
contains
a
clear
provision for the allocation of attorneys’ fees:
“Parties agree to pay or reimburse reasonable
attorneys’ fees, incurred in connection with
the preservation or protection of the rights
and remedies of the successful party in any
such legal action brought or defendant by the
successful party to such action.”
[DE 34-1, ID #215]. Neither party disputes the validity of the
contractual clause. However, both parties claim they are entitled
to attorneys’ fees as “the successful party.” As this Court is
granting summary judgment regarding Defendant’s liability under
the Guaranty, Plaintiffs are “the successful party” entitled to
the attorneys’ fee award. While the Court agrees that Plaintiffs
are entitled to attorneys’ fees, the amount of the award is not to
be determined at this time. Instead, a separate order or judgement
will be made at a later date, after appropriate submission of proof
has been given to the Court.
6
In Plaintiffs’ Motion for Summary Judgment they calculated their damages to
be $729,916.48 [DE 31, at 9] and asked the Court for relief in that amount.
However, in Plaintiffs’ Reply, they admit their erroneous calculation, and
now petition the Court to grant summary judgment in their favor for
$794,008.22.
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III. Conclusion
Having
considered
the
matter
fully,
and
being
otherwise
sufficiently advised,
IT IS ORDERED as follows:
(1)
Plaintiffs’ Motion for Summary Judgement [DE 31] is GRANTED
IN PART, insofar as it pertains to Defendant being liable
for breach of the Guaranty Agreement (Count I), and DENIED
IN PART, insofar as it pertains to the amount of damages
to be awarded for breach of the Guaranty Agreement.
(2)
Plaintiffs’ Motion for Summary Judgement [DE 31] is GRANTED
IN PART, insofar as it pertains to Defendant being liable
for attorneys’ fees with amount of the award to be deferred
for later proceedings and after such submissions of proofs.
This the 22nd Day of September, 2021.
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