Sisson v. Parks at Vine, LLC

Filing 22

MEMORANDUM OPINION AND ORDER Signed by Chief Judge Joseph H. McKinley, Jr. on 1/31/2018 denying 15 Motion to Dismiss for Failure to State a Claim. cc: Counsel (JM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:17-CV-00443-JHM
PLAINTIFF

STEVE SISSON
V.

PARKS AT VINE, LLC

DEFENDANT
MEMORANDUM OPINION AND ORDER

This matter is before the Court on defendant Parks at Vine, LLC’s (“Parks”) motion to
dismiss. (DN 15.) Fully briefed, this matter is ripe for decision. For the following reasons, the
motion is DENIED.
I. BACKGROUND
According to the complaint, Parks is a recently-developed apartment complex in Hardin
County, Kentucky. (Pl.’s Compl. [DN 1-3] ¶ 4.) Plaintiff Steve Sisson agreed to serve as an
“initial representative” of Parks. (Id. ¶¶ 3–4.) Parks sought out Sisson due to his positive
relationship with the United States Department of Housing and Urban Development (“HUD”)
and his knowledge and experienced in dealing with HUD, since Parks was seeking HUD
financing for the project.

(Id. ¶¶ 3–4, 8.)

Over the course of his involvement with the

development of Parks, Sisson entered into three agreements.
First, Sisson entered into an “Operating Agreement” on May 27, 2011, with Acme
Development, LLC, (“Acme”) and Aspen Ventures, LLC (“Aspen”). (Id. ¶ 4–5; Operating
Agreement [DN 1-3] at 9–25.) This agreement named Sisson as an initial representative of
Parks, as well as making him a member of the newly-formed Parks at Vine, LLC. (Operating
Agreement [DN 1-3] at 14, 25.)

Second, Sisson entered into an “Advisory Board Agreement” on May 31, 2011, with
Parks. (Pl.’s Compl. [DN 1-3] ¶ 7; Board Agreement [DN 1-3] at 27–30.) This agreement set
forth Sisson’s rights and responsibilities as initial representative, which included interacting,
communicating, and otherwise dealing with HUD to obtain financing for the project. (Pl.’s
Compl. [DN 1-3] ¶ 7–8.) It set out the terms of compensation for Sisson, as well as the
procedure for termination. Specifically, the Advisory Board Agreement states that upon the final
closing of the HUD financing, the parties will “act in good faith to terminate any and all of the
Initial Representative[’]s responsibilities hereunder as soon as reasonably practicable.” (Id. ¶ 9.)
If the initial representative’s “obligations have not be[en] terminated within 30 days of the Final
Closing or 90% physical occupancy, which comes later, [Parks] shall pay the Initial
Representative $5,000 for every month thereafter that the Initial Representative’s obligations
have not been so terminated.” (Id. ¶ 10.)
Third, Sisson entered into a “First Amended Operating Agreement” on May 1, 2013, with
Acme and Aspen. (Id. ¶ 14; First Amended Operating Agreement [DN 1-3] at 32–54.) As
relevant to Sisson’s claim, the agreement states that a “member” of Parks may resign or
withdraw from the LLC only with the consent of the Manager of Parks, Deutsche Bank
Berkshire Mortgage, HUD, and the holders of a majority of the membership units in Park. (Pl.’s
Compl. [DN 1-3] ¶ 15.)
Sisson successfully obtained HUD financing for the project, and final closing on the
financing occurred on March 19, 2013. (Id. ¶ 11–12.) However, Parks did not take action within
30 days of final closing to terminate Sisson’s responsibilities as initial representative, despite the
project being at 90% occupancy. (Id. ¶ 13.) On July 22, 2016, HUD gave its consent to Sisson’s
withdrawal as a member of Parks. (Id. ¶ 16.)

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Sisson filed this action in Hardin Circuit Court on June 27, 2017, bringing a single claim
of breach of contract against Parks. (Id. ¶ 24.) Sisson alleges that he is owed the $5,000
monthly payment stated in the Advisory Board Agreement for every month following the March
2013 closing until June 2016, when HUD gave its consent to his withdrawal as a member of
Parks. (Id. ¶ 24.) Parks removed to this Court (DN 1) and has now moved to dismiss the
complaint. (DN 15.)
II. STANDARD OF REVIEW
Upon a motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6),
a court “must construe the complaint in the light most favorable to plaintiffs,” League of United
Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), “accept all
well-pled factual allegations as true,” id., and determine whether the “complaint . . . states a
plausible claim for relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the
plaintiff must provide the grounds for its entitlement to relief, which “requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when it “pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint falls short if it pleads facts
“merely consistent with a defendant's liability” or if the alleged facts do not “permit the court to
infer more than the mere possibility of misconduct.” Id. at 678–79. Instead, a complaint “must
contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.’”
Id. at 677 (quoting Fed. R. Civ. P. 8(a)(2)). “But where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has

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not ‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P.
8(a)(2)).
III. ANALYSIS
While the Court will allow Sisson’s claim to proceed, it is appropriate to first discuss the
allegations in the complaint that do not state a claim for relief. Sisson’s complaint addresses the
requirements in the First Amended Operating Agreement for the resignation or withdrawal of a
“member” of Parks, which include obtaining the consent of HUD. Sisson appears to allege that
his responsibilities as initial representative were not terminated, within the meaning of the
Advisory Board Agreement, until his withdrawal as a member of Parks was complete in June
2016. But this is not a plausible interpretation of the two documents. There is nothing in the
complaint or the three agreements, which were attached to the complaint when it was filed in
state court, indicating that Sisson’s role as initial representative was in any way connected to his
membership in the LLC. This is demonstrated by the roles being defined in different documents:
the Advisory Board Agreement governed his responsibilities, compensation, and termination as
an initial representative, while the Operating Agreements governed his role as a member of the
LLC. Thus, the allegations pertaining to the Operating Agreements and Sisson’s withdrawal as a
member of the LLC are not relevant to his claim that Parks breached the Advisory Board
Agreement. See generally James River Ins. Co. v. Bates Contracting & Constr., Inc., 2015 WL
1197532, at *3 (Ky. Ct. App. Mar. 13, 2015) (“We interpret a contract by solely looking to the
four corners of the agreement . . . without resort to extrinsic evidence”) (quotations and citations
omitted).
However, even if the Court disregards these allegations, Sisson has stated a claim against
Parks for breach of the Advisory Board Agreement. “Under Kentucky law, a cause of action for

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breach of contract must state the contract, the breach and the facts which show the loss or
damage by reason of the breach.” Derby City Capital, LLC v. Trinity HR Servs., 949 F. Supp. 2d
712, 724 (W.D. Ky. 2013) (quotations and citations omitted).

Sisson’s complaint alleges that

the Advisory Board Agreement required Parks to “act in good faith to terminate any and all of
the Initial Representative[’]s responsibilities . . . as soon as reasonably practicable,” and that “if
for whatever reason the Initial Representative’s obligations have not be[en] terminated within 30
days of Final Closing or 90% physical occupancy . . . the Company shall pay the Initial
Representative $5,000 for every month thereafter that the Initial Representative’s obligations
have not been so terminated.” (Pl.’s Compl. [DN 1-3] ¶¶ 9–10.) He also alleges that his
responsibilities as initial representative were not terminated within 30 days of final closing. (Id.
¶ 13.) As a result, he is owed $5,000 for every month in which Parks failed to terminate his
responsibilities, and Parks has failed to make these payments. (Id. ¶ 17–18.) These facts
plausibly allege the existence of the contract, the manner in which it was breached, and his
damages. As such, Sisson has stated a claim for breach of contract.
Parks argues that Sisson has failed to state a claim since the complaint does not allege
that he continued to perform his obligations as initial representative in the months following the
final closing. It argues that no duties remained for Sisson as initial representative after he
obtained HUD financing; as such, there were no obligations for it to terminate, and Sisson could
not have continued to act as an initial representative, even if it did not terminate his obligations.
However, the Advisory Board Agreement lists the duties of the initial representative as
“interact[ing], communicat[ing], and otherwise deal[ing] with HUD to obtain the HUD
Financing and contribute to the project’s viability.” (Advisory Board Agreement [DN 1-3] at
27) (emphasis added). At this stage, the Court cannot accept Parks’ assertion that Sisson had no

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remaining obligations as initial representative once HUD financing was secured. Discovery may
reveal that Sisson had no remaining obligations after he secured the financing, but the complaint
sufficiently alleges that obligations did remain that would require termination under the terms of
the Advisory Board Agreement. As such, Sisson has plausibly alleged a claim for breach of
contract, and his claim may proceed.
IV. CONCLUSION
For the reasons set forth above, IT IS HEREBY ORDERED that the motion to dismiss
by defendant Parks at Vine, LLC (DN 15) is DENIED.

January 31, 2018

cc: counsel of record

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