Heartland Materials, Inc. et al v. Warren Paving, Inc et al

Filing 67

MEMORANDUM OPINION & ORDER signed by Senior Judge Thomas B. Russell on 5/21/2018. Granting 44 Motion for Leave to File Sur-Reply; denying [] Motion to Strike ; denying 54 Motion for Summary Judgment; granting in part and denying in part 30 Motion for Summary Judgment. Telephone Conference set for 6/5/2018 at 2:00 PM before Senior Judge Thomas B. Russell. cc: Counsel(KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CIVIL ACTION NO. 5:16-CV-00146-TBR
HEARTLAND MATERIALS, INC., et. al.,

PLAINTIFFS

v.
WARREN PAVING, INC, et al.,

DEFENDANTS

MEMORANDUM OPINION AND ORDER
This matter is before the Court on cross-motions for summary judgment. First, Plaintiffs
Heartland Materials, Inc., William R. Frazer, LLC, and Southern Aggregate Distributors, Inc.
filed a motion for summary judgment, [DN 30], to which Defendants Warren Paving, Inc. and
Slats Lucas, LLC responded, [DN 40], and Plaintiffs replied, [DN 42.] Defendants also moved to
file a sur-reply, [DN 44], to which Plaintiffs responded, [DN 45], and Defendants replied, [DN
48.] Second, Defendants filed their own motion for summary judgment, [DN 54.] Plaintiffs
responded in opposition, [DN 57], and Defendants replied, [DN 58.] Fully briefed, these matters
are now ripe for adjudication. For the reasons explained in detail below, Plaintiffs’ motion for
summary judgment is GRANTED IN PART AND DENIED IN PART, Defendants’ motion to
file a sur-reply is GRANTED,1 and Defendants’ motion for summary judgment is DENIED.
FACTUAL AND PROCEDURAL BACKGROUND
This suit arises out of a contract entered into between Plaintiff Heartland Materials, Inc.
(“Heartland”) and Defendant Warren Paving, Inc. (“Warren Paving”) in 2004. In 2003, Warren
Paving sought to purchase or develop a limestone quarry in Kentucky. [DN 1 at 3, ¶ 7
(Complaint).] Heartland, who was assisting Warren Paving in this endeavor, eventually

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Ultimately, Defendants’ sur-reply did not affect the outcome in the case. Therefore, the Court’s consideration of
the sur-reply did not prejudice Plaintiffs. Accordingly, in the interests of justice, the Court is granting Defendants’’
motion, [DN 44.]

1

identified the property at issue herein, (“the “Property”), which was owned by Dennis and
Kathryn Grabowski and consisted of “approximately 339 acres of land on two contiguous tracts
located in Livingston County, Kentucky.” [Id. at 4, ¶ 12.] “After preliminary research indicated
that the Property would be an adequate site to develop a limestone quarry if purchased at or near
the Grabowskis’ asking price, Warren Paving directed Heartland to negotiate the purchase of an
option to buy the Property.” [Id.] Warren Paving paid Heartland $5,000 to acquire a 60-day
option to purchase the Property and, later, an additional $5,000 to extend the option for another
60 days. [Id. at 4–5; DN 40-1 at ¶¶ 5–6 (Lawrence Warren Declaration).]
According to Plaintiffs, Warren Paving requested that Heartland acquire the option in
Heartland’s name “in order to keep Warren Paving’s corporate plans to develop a limestone
quarry confidential” because “Warren Paving did not want its plans to purchase or develop a
limestone quarry to become publicly known.” [DN 1 at 4, ¶¶ 13, 10.] Plaintiffs contend that,
once geological testing demonstrated that the Property would be an appropriate site for the
development of a limestone quarry, Warren Paving decided to purchase the Property in its own
name, “thereby requiring an assignment of the purchase option held by Heartland to Warren
Paving.” [Id. at 5, ¶ 17.] Plaintiffs assert that Heartland’s lawyers drafted an “agreement
providing for assignment of Heartland’s option to purchase the Property to Warren Paving and
payment of certain retained royalties by Warren Paving to Heartland,” but that Warren Paving
rejected the draft agreement and had its own lawyers “draft an entirely new agreement,” which
the parties ultimately executed. [Id.]
Warren Paving tells a different version of events, however. In his Declaration, Lawrence
Warren, the majority owner of Warren Paving, stated that it was his “understanding that the
option to acquire the [ ] Property was to be made in Warren Paving’s name and not in the name

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of Heartland.” [DN 40-1 at ¶ 4.] According to Warren, he did not learn that the option had been
purchased in Heartland’s name until Warren Pacing was preparing to close on the Property. [Id.
at ¶ 7.] Warren states in his Declaration that, at that time, he “was told by Heartland and its
representatives that if Warren Paving would not agree to a $0.40 per ton [of limestone] royalty,
then Heartland would not assign the purchase option to Warren Paving and would instead sell the
option to another interested party.” [Id. at ¶ 8.] Warren asserts that Heartland’s counsel drafted
the assignment and royalty agreement “which Warren Paving reluctantly instructed its legal
counsel to review, and, where possible, edit.” [Id. at ¶ 9.]
The parties agree on what happened next; specifically, on September 1, 2004, Heartland
and Warren Paving executed the Contract for the Assignment of an Option to Purchase Real
Property with Retained Royalties, (the “Assignment Contract”). [DN 1 at 5, ¶ 18; see DN 40-1 at
2, ¶ 9; DN 1-5 (Assignment Contract).] The Assignment Contract assigned Heartland’s option to
purchase the Property to Warren Paving. [DN 1 at 5–6, ¶ 18.] It also granted Heartland the right
to be paid royalties from the limestone Warren Paving planned to mine from the Property. [See
DN 1-5 at 1–3.] In essence, provided that certain conditions precedent were met, such as
Heartland obtaining a mining permit, a loading dock permit, and other necessary permits to
assign to Warren Paving, Warren Paving agreed to “pay Heartland a retained royalty of $0.40 per
ton” for “limestone mined and loaded for transport from the Property.” [Id.] The Assignment
Contract specifies that “[q]uantities on which the royalty is to be paid will be determined from
the belt scale weights as the material is loaded.” [Id.]
The Assignment Contract outlined specific payment amounts and schedules:
Warren Paving agreed in the Contract for Assignment to pay Heartland in
advance an amount of $300,000.00, which equals Heartland’s retained royalty on
the first 750,000 tons of limestone produced from the Property. Once the first
750,000 tons of limestone were produced, Warren Paving agreed in the Contract
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for Assignment to pay Heartland in advance an amount of $300,000.00, which
equals Heartland’s retained royalty on the second 750,000 tons produced from the
Property. After 1,500,000 tons of limestone were produced, Warren Paving
agreed in the Contract for Assignment to pay Heartland its retained royalty of
$0.40 per ton of limestone produced from the Property on a monthly basis, and
Warren Paving further guaranteed the payment of a minimum royalty of
$300,000.00 per year to Heartland, regardless of the tonnage of limestone
produced during such year.
[DN 1 at 7, ¶ 23; DN 1-5 at 2.] Additionally, the Assignment Contract gave Warren Paving the
right to terminate its mining operation and sell the Property and its equipment at any time,
provided that any “third-party purchaser shall be bound by all of the terms and conditions of this
Assignment [Contract], but in particular, shall be bound by all of the obligations to pay royalties
delineated in paragraph III [t]hereof.” [DN 1-5 at 3.]
After all of the conditions precedent were satisfied, “Warren Paving then began mining
limestone from the Property and paying royalties,” including the first advance royalty payment
of $300,000. [DN 1 at 8, ¶¶ 25–26.] On June 4, 2007, Warren Paving conveyed the Property to
Defendant Slats Lucas LLC, [DN 1-7 (Quitclaim Deed)], which then “leased the Property and
limestone quarry back to Warren Paving.” [DN 1 at 8–9, ¶ 29.] Warren Paving and/or Slats
Lucas continued to make royalty payments to Heartland pursuant to the Assignment Contract.
Next, on July 30, 2009, Heartland assigned one-third of its royalty interest to Walt
Gaylord, who, on July 31, 2009, sold that one-third interest to Slats Lucas. [Id. at 9. ¶ 30.] In
essence, this transaction “reduced Warren Paving’s and Slats Lucas’s royalty obligation to
Heartland from $0.40 per ton to $0.2667 per ton, and reduced the advanced royalty and future
annual minimum royalty payment from $300,000 to $200,000. Accordingly, Warren Paving
subsequently paid Heartland the second advance royalty payment of $200,000.00.” [Id.] As a
result of this change, Heartland and Warren Paving executed an “Amendment to Contract for the

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Assignment of an Option to Purchase Real Property With Retained Royalties”, (the “Amended
Assignment Contract”), to reflect the change in royalty obligations. [Id. at ¶ 31.]
On August 16, 2010, Heartland assigned one half of its remaining royalty interest in the
$0.2667 per ton of limestone to Plaintiff William R. Frazer, LLC, (“WRF”), and assigned the
other half to Plaintiff Southern Aggregate Distributors, Inc., (“Southern Aggregate”). [Id. at 10, ¶
32 (citing DN 1-9 (Assignment of Royalty).] As a result of these assignments, “WRF and
Southern Aggregate each retained a right to receive from Warren Paving or Slats Lucas $0.1333
per ton for each ton of limestone produced from the Property.” [Id.] According to Plaintiffs,
Warren Paving or Slats Lucas thereafter made royalty payments directly to WRF and Southern
Aggregate. [Id. at ¶ 33.]
On August 6, 2014, however, Warren Paving and Slats Lucas (collectively,
“Defendants”) brought suit against Heartland, WRF, and Southern Aggregate (collectively,
“Plaintiffs”), in this Court. See Warren Paving, Inc., et. al. v. Heartland Materials, Inc. et. al.,
No. 5:14-CV-149-TBR, 2015 WL 269204 (W.D. Ky. Jan. 21, 2015). In that suit, Warren Paving
and Slats Lucas
alleged that Heartland engaged in wrongdoing in negotiating the option contract
with Warren Paving, which entailed continuing payments of royalties to
Heartland based on the amount of limestone extracted. [Warren Paving and Slats
Lucas] sought (1) a declaratory judgment stating that the assignment contract was
void because Heartland did not hold a license to practice real estate brokerage in
Kentucky; (2) rescission of the assignment contract based on mistake of fact—
Heartland’s lack of a real estate brokerage license; (3) damages for Heartland’s
breach of fiduciary duty in surreptitiously obtaining the option in its own name
using Warren Paving’s money, requiring Warren Paving to make substantial
payments in return for an assignment of the option contract, and continuing to
receive payments from Warren Paving; (4) damages based on Heartland’s fraud
and intentional misrepresentation in obtaining the option; (5) restitution based on
the previous allegations; and (6) relief under the theories of assumpsit, unjust
enrichment, or constructive trust based on the previous allegations.

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Warren Paving, Inc., et. al. v. Heartland Materials, Inc. et. al., No. 15-6052, at *1–2 (6th Cir.
July 6, 2016). In a Memorandum Opinion issued on January 21, 2015, this Court dismissed all of
Warren Paving and Slats Lucas’s claims, finding that each were barred by a five-year statute of
limitations period as codified in KRS § 413.120. Warren Paving, 2015 WL 269204, at *1–5. The
Court also denied Warren Paving and Slats Lucas’s motion to reconsider on August 26, 2015.
Warren Paving, Inc. v. Heartland Materials, Inc., No. 5:14-CV-149-R, 2015 WL 5050553, at *1
(W.D. Ky. Aug. 26, 2015), aff'd (July 6, 2016). Thereafter, Warren Paving and Slats Lucas
appealed to the Sixth Circuit Court of Appeals, which affirmed this Court on July 6, 2016.
Warren Paving, No. 15-6052 (6th Cir. July 6, 2016). In its decision, the Sixth Circuit determined
that this Court properly dismissed Warren Paving and Slats Lucas’s claims for declaratory
judgment, mistake of fact, breach of fiduciary duty, and fraud on statute of limitations grounds.
Id.
In the instant lawsuit, the sides are switched. Herein, Heartland, WRF, and Southern
Aggregate allege that, “[s]ince entry of the Sixth Circuit’s Order on July 6, 2016, Warren Paving
and Slats Lucas have refused to pay any royalties to WRF and Southern Aggregate for limestone
produced from the Property, in violation of the Contract for Assignment.” [DN 1 at 11, ¶ 37.]
Additionally, Plaintiffs contend that they “recently discovered that Warren Paving and/or Slats
Lucas has never paid the appropriate royalty amount because the tonnage of limestone produced
from the Property was not appropriately determined ‘from the belt scale weights as the material
is loaded.’ As a result, WRF and Southern Aggregate were underpaid royalties during the term of
the agreement.” [Id. at 10, ¶ 33.] As a result, Plaintiffs brought claims against Warren Paving and
Slats Lucas for breach of contract and a declaration of their right to receive royalties under the
Amended Assignment Contract. [Id. at 12–15.]

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In their answer, Warren Paving and Slats Lucas assert that: 1) they do not legally owe the
royalty payments, which are essentially brokerage fees, due to the violation of Kentucky
brokerage licensure laws, 2) the Assignment Contract is void ab inito, 3) the Assignment
Contract is unenforceable due to a mistake of fact, 4) Heartland breached its fiduciary duties of
loyalty and good faith, 5) that the Assignment Contract was procured through fraud, breach of
fiduciary duties, or material mistake of fact, 6) Plaintiffs have “unclean hands” by engaging in
unauthorized real estate brokerage, 7) the correct amount of royalty payments has been made,
and that 8) there is no right to accelerate payments pursuant to the Assignment Contract. [DN 10
at 10–11 (Answer).]
LEGAL STANDARD
Summary judgment is appropriate when the record, viewed in the light most favorable to
the nonmoving party, reveals “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. P. 56(a). A genuine dispute of
material fact exists where “there is sufficient evidence favoring the nonmoving party for a jury to
return a verdict for that party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The
Court “may not make credibility determinations nor weigh the evidence when determining
whether an issue of fact remains for trial.” Laster v. City of Kalamazoo, 746 F.3d 714, 726 (6th
Cir. 2014) (citing Logan v. Denny's, Inc., 259 F.3d 558, 566 (6th Cir. 2001); Ahlers v. Schebil,
188 F.3d 365, 369 (6th Cir. 1999)). “The ultimate question 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.’ ” Back v. Nestlé USA, Inc., 694 F.3d 571, 575 (6th Cir.
2012) (quoting Anderson, 477 U.S. at 251–52).

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The moving party must shoulder the burden of showing the absence of a genuine dispute
of material fact as to at least one essential element of the nonmovant’s claim or defense. Fed. R.
Civ. P. 56(c); see also Laster, 746 F.3d at 726 (citing Celotex, 477 U.S. at 324). Assuming the
moving party satisfies its burden of production, the nonmovant “must—by deposition, answers to
interrogatories, affidavits, and admissions on file—show specific facts that reveal a genuine issue
for trial.” Laster, 746 F.3d at 726 (citing Celotex, 477 U.S. at 324). “[N]ot every issue of fact or
conflicting inference presents a genuine issue of material fact.” Street v. Bradford & Co., 886
F.2d 1472, 1477 (6th Cir. 1989). The test is “whether the party bearing the burden of proof has
presented a jury question as to each element in the case.” Hartsel v. Keys, 87 F.3d 795, 799 (6th
Cir. 1996). Nor will mere speculation suffice to defeat a motion for summary judgment: “[t]he
mere existence of a colorable factual dispute will not defeat a properly supported motion for
summary judgment. A genuine dispute between the parties on an issue of material fact must
exist to render summary judgment inappropriate.” Monette v. Elec. Data Sys. Corp., 90 F.3d
1173, 1177 (6th Cir. 1996).
DISCUSSION
Both sides have filed motions for summary judgment. Because the same general issues
are raised in both parties’ motions and are intertwined, the Court will consider the motions
together.2

2

One of the arguments Defendants make in their response to Plaintiffs’ motion for summary judgment is that
Plaintiffs’ motion “is procedurally premature” because “[t]he factual discovery deadline” had not yet passed at the
time the motion was filed and, “[a]lthough the parties have exchanged initial written discovery, no depositions have
been taken.” [DN 40 at 1.] While this is correct, it is ultimately irrelevant, as the only claims and defenses on which
the Court has granted summary judgment in favor of Plaintiffs and against Defendants in this case were decided
based on purely legal issues. Further discovery would not affect the disposition of those claims and defenses.

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A. Warren Paving and Slats Lucas’s Affirmative Defenses
Plaintiffs, in essence, seek summary judgment on the grounds that this Court already
addressed and decided Defendants’ affirmative defenses in the prior lawsuit between the same
parties, and therefore that Defendants have no basis on which to invalidate the Assignment
Contract/Amended Assignment Contract or cease making payments required thereunder. In that
suit, the Court granted Heartland’s motion to dismiss, finding that all of Warren Paving and Slats
Lucas’s claims seeking to invalidate the Assignment Contract were barred by the applicable
statutes of limitations. Warren Paving, 2015 WL 269204, at *1–5. The Sixth Circuit affirmed
that decision. Warren Paving, No. 15-6052 (6th Cir. July 6, 2016). In their motion for summary
judgment, Plaintiffs argue that, in “[t]he same month in which the Sixth Circuit Court of Appeals
rendered its Order affirming [this Court], the defendants . . . stopped paying royalties thus
forcing the Plaintiffs herein to file this lawsuit so Warren Paving could resurrect its same line of
attacks which earlier were found to be time-barred.” [DN 30-1 at 9.] In support of their argument
that Defendants acted deliberately to invite the present lawsuit, Plaintiffs rely, in part, on
statements that Defendants made in filings in the prior lawsuit in which Warren Paving and Slats
Lucas were the plaintiffs. Specifically, in their memorandum in support of their motion to
deposit funds in that suit, Defendants stated that they
could have simply discontinued payments purportedly owed to Defendants as per
the terms of the Contract for Assignment thereby forcing Defendants to bring a
claim under the Contract for Assignment, and Plaintiffs would defend by, among
other things, asserting that the Contract for Assignment is unenforceable for
being in violation of Kentucky law. Instead, Plaintiffs have brought the
declaratory judgment action presently before this Court, and now seek to deposit
the disputed funds with the Court. [T]his Court should not force Plaintiffs into the
position of choosing to cease payments under the Contract for Assignment or
paying funds in dispute, and should instead allow Plaintiffs to deposit the funds
with the Court.

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[DN 10-1 at 6 in 5:14-CV-149; DN 30-13 at 6 (emphasis added).] Defendants do not deny that
they ceased making royalty payments in July 2016. According to Plaintiffs, this is further
evidence that “Warren Paving intended to deny Heartland and Southern Aggregate the right to
receive these payments” in order to force them to bring the instant action for breach of contract.
Indeed, Defendants do raise several arguments as affirmative defenses in this lawsuit that
were rejected as time-barred claims in the prior lawsuit in which Warren Paving and Slats Lucas
were the plaintiffs. For instance, Defendants asserted the following as claims in the prior lawsuit
and as affirmative defenses in this lawsuit: that the Assignment Contract is void and
unenforceable, and therefore that Plaintiffs are not entitled to any payments under it, mistake of
fact, breach of the fiduciary duties of loyalty and good faith, and fraud. [See DN 1 in 5:14-CV149 (Warren Paving’s Complaint in Prior Lawsuit); DN 10 (Warren Paving’s Answer in Current
Lawsuit).] Each of these claims and defenses were and are aimed at invalidating the Assignment
Contract, specifically, the royalty provision, and from preventing Plaintiffs from asserting their
right to payments thereunder. [See DN 1 in 5:14-CV-149 at 13–14; DN 10 at 10–11.]
In response, however, Warren Paving argues that, “[t]o the extent Warren Paving’s
affirmative claims of breach of fiduciary duties, fraud, and material mistake of fact were barred
by statutes of limitations in the prior litigation, they are entitled to be litigated as part of Warren
Paving’s affirmative defenses here.” [DN 40 at 27.] Additionally, Warren Paving asserts that the
affirmative defenses it repeats here “were not decided on the merits in the prior litigation” and
further that “Warren Paving has asserted additional defenses that are wholly distinct from its
claims in the prior litigation. [Id. at 4.] Specifically, Warren Paving asserts that Heartland has
‘unclean hands’ and it not entitled to the relief it seeks; that, assuming the enforceability of the
royalty provision, it has paid the correct amount of royalties; and, that there is no right to

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accelerate the Contract of Assignment.” [Id. (emphasis added).] Similarly, in its motion for
summary judgment, Warren Paving argues that “the royalty provision of the Contract for
Assignment is unenforceable,” [DN 54-1 at 15], because “Kentucky has indisputably adopted a
rigid rule precluding enforcement of commission contracts procured by unlicensed brokers.” [id.
at 17 (quoting Kirkpatrick v. Lawrence, 908 S.W.2d 125, 129 (Ky. Ct. App. 1995)).]
On the whole, Heartland is correct that Warren Paving is barred from litigating nearly all
of its affirmative defenses in this action.3 The Court rests this conclusion on two primary,
overlapping grounds: 1) the rule adopted by the Ninth Circuit in City of Saint Paul, Alaska v.
Evans and 2) res judicata.
1. The Evans Rule
First, multiple courts have recognized a rule prohibiting parties from skirting statute of
limitations by bringing time-barred claims as affirmative defenses. In City of Saint Paul, Alaska
v. Evans, the Ninth Circuit held that the Plaintiff, City of Saint Paul, whose “claims were barred
by the six-year statute of limitations that Alaska law imposes on lawsuits by municipalities”
could not “raise the identical allegations as defenses to [defendant] TDX’s counterclaims.” City
of Saint Paul, Alaska v. Evans, 344 F.3d 1029, 1031 (9th Cir. 2003).
According to the Evans court, “[t]o hold otherwise would permit plaintiffs, through a sort
of jurisdictional jujitsu, to evade the limitations statutes by bringing a time-barred declaratory
judgment action, waiting for the defendant to assert its interests in the form of a counterclaim,
and then raising the identical time-barred claims as defenses.” Id. In reaching this conclusion, the
Evans court first acknowledged that “courts generally allow defendants to raise defenses that, if
raised as claims, would be time-barred.” Id. at 1033. However, the court went on to explain that,
3

As the Court will explain in greater detail below, Warren Paving and Slats Lucas are not barred from asserting its
final two affirmative defenses: that the correct amount of royalties have been paid and that there is no right to
accelerate payments under the Assignment Contract.

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in cases in which courts have allowed this practice, “[a] common thread running through these
cases is the emphasis on the respective roles of the parties in the litigation as a whole.” Id. at
1035. Specifically, “[i]t is important that the party asserting the defense is not, simultaneously or
in parallel litigation, seeking affirmative recovery on an identical claim. Thus, whether
affirmative defenses are exempt from statutes of limitations largely hinges on a realistic
assessment of the parties’ litigation posture.” Id. “In other words, a plaintiff cannot engage in a
subterfuge to characterize a claim as a defense in order to avoid a temporal bar.” Id.
The Evans court additionally relied on an instructive Second Circuit case, 118 E. 60th
Owners, Inc. v. Bonner Properties, Inc., 677 F.2d 200, 202–03 (2d Cir. 1982), to exemplify what
it means to examine “the respective roles of the parties in the litigation as a whole.” Id. at 1035.
In that case,
a group of property owners sought, among other things, rescission and
modification of a ten-year-old lease agreement, alleging that the property
company had inserted unfair and unconscionable terms into the lease. Although
the owners admitted that their claims for affirmative relief were time-barred, they
sought a declaratory judgment that would entitle them to a setoff and defense
against future claims by the company to enforce lease obligations. Concluding
that the “plaintiff is ... more of an aggressor than defendants” and that the
“[d]efendants have done nothing concrete to change the basic relations between
the parties as they have existed for over ten years,” the Second Circuit rejected the
owners’ argument and held that New York’s statute of limitations barred the
declaratory judgment claims.
Id. (citing 118 E. 60th Owners, 677 F.2d at 202–204) (internal citations omitted). Relying on 118
E. 60th Owners, the Evans court explained that “the City cannot escape the conclusion that it is
the aggressor in this litigation. The City initiated the lawsuit and there is no question that the City
‘disturbed the equilibrium between the parties’ by first challenging the validity of the Agreement
in court.” Id.
Similarly, here, Warren Paving and Slats Lucas are the aggressors. They brought suit in
2014 seeking to rescind the Assignment Contract, ten years after it was first entered into and
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during which time they continuously paid the royalties enumerated therein. When this Court
determined that Defendants’ claims for declaratory judgment, mistake of fact, breach of fiduciary
duty, fraud, and misrepresentation were all time-barred, and after the Sixth Circuit affirmed that
determination, Defendants stopped making their royalty payments, thereby inviting the instant
lawsuit, in which they now seek to bring many of the same time-barred claims as affirmative
defenses. In other words, it is Defendants who “disturbed the equilibrium between the parties.”
118 E. 60th Owners, 677 F.2d at 205. Here, as in Evans, “this lawsuit boils down to the
[Defendants’] effort to invalidate the Agreement,” and Defendants’ “defenses . . . are mirror
images of [their] time-barred claims.” Evans, 344 F.3d at 1035. Accordingly, the Court agrees
that, in these circumstances, Defendants “cannot hide behind the maxim applicable to defenses
asserted in the normal course nor may [they] sidestep the temporal bar to [their] claims.” Id. at
1036.
In 2014, the District Court for the District of Delaware adopted Evans and explained that
“24HFW is indeed the initial aggressor in this case, despite being the defendant in litigation.”
Davis v. 24 Hour Fitness Worldwide, Inc., 75 F. Supp. 3d 635, 639 (D. Del. 2014). In reaching
this holding, the Davis court explained that the case arose when defendant 24HFW’s board of
directors repudiated the phantom stock agreement (“PSA”), which required payments to be made
to the board chairman, plaintiff Davis. Id. The court found that “[t]his repudiation ‘disturbed the
equilibrium’ between the parties, as it had existed for several years while the PSA was presumed
valid.” Id. And, “rather than initiate a lawsuit of its own, 24HFW elected simply to repudiate the
PSA and invite a lawsuit from Davis.” Id.
In Davis, 24HFW “asserted identical affirmative defenses and counterclaims for
affirmative relief,” arguing that even though the claims for affirmative relief may be untimely,

13

the court should still consider the affirmative defenses. Id. Applying Evans, the court disagreed,
explaining that, “[u]nder these circumstances, the court finds that 24HFW ‘abandoned its right to
seek solace in the status of a defendant’ and ‘cannot hide behind the maxim applicable to
defenses asserted in the normal course nor may it sidestep the temporal bar to its claims.’” Id.
(quoting Evans, 344 F.3d at 1036). The facts of Davis are highly analogous to the facts of this
case. Here, it was Warren Paving and Slats Lucas who stopped paying royalties as required
under the Assignment Contract, which invited the instant breach of contract lawsuit from
Plaintiffs. Now, Defendants wish to assert their formerly time-barred claims as affirmative
defenses to argue that the Assignment Contract is unenforceable due primarily to a violation of
Kentucky real estate brokerage laws. Like the Davis court, however, the Court finds that Warren
Paving and Slats Lucas are “the initial aggressor[s] in this case, despite being the defendant[s] in
litigation.” Id. Accordingly, “[a]lthough the general rule is that affirmative defenses face no such
time bar, the court is persuaded that an exception applies here.” Id.
Most recently, the Fourth Circuit also adopted the exception enumerated in Evans. In
Agnew v. United Leasing Corp., “[t]he Agnews [ ] attempt[ed] to avoid the statute of limitations
by styling their breach of contract claims as seeking a declaratory judgment on an affirmative
defense.” 680 F. App’x 149, 154 (4th Cir. 2017). Applying Evans, the Fourth Circuit held that, in
essence, the Agnews’ lawsuit boiled down to an effort to invalidate a forbearance agreement
between them and defendant United Leasing, which the Agnews owed money under a
promissory note and several leases. Id. at 150–51, 154 (citing Evans, 344 F.3d at 1035).
Therefore, the court concluded that “the Agnews cannot characterize these time-barred claims as
affirmative defenses in order to invalidate the Forbearance Agreement.” Id. at 154.

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In sum, when conducting a “realistic assessment of the parties’ litigation posture,” it is
clear to the Court that Warren Paving and Slats Lucas are the “the aggressor[s] in this litigation.”
Evans, 344 F.3d at 1035.4 Though it does not appear that the Sixth Circuit has addressed this
specific issue, and “[n]otwithstanding the fact that Evans is non-binding authority, the court is
convinced that its analysis (and result) should apply in this case.” Davis, 75 F. Supp. 3d at 638–
39. Accordingly, the affirmative defenses Warren Paving and Slats Lucas asserted as claims in
the prior litigation and which were found to be time-barred in that case are likewise barred in the
present case. Because the analysis of which affirmative defenses were previously litigated and
are therefore barred in this action overlaps with the Court’s application of res judicata principles
below, the Court will identify exactly which affirmative defenses are barred below in its
application of that doctrine.
2. Res Judicata
Defendants are also barred from asserting most of their affirmative defenses in this action
under the doctrine of res judicata, as most of the defenses have already been litigated and
decided as claims in the prior litigation. The Sixth Circuit recently discussed the “fundamental
precept of common-law adjudication, embodied in the related doctrines of collateral estoppel and
res judicata, [ ] that a ‘right, question or fact distinctly put in issue and directly determined by a
court of competent jurisdiction ... cannot be disputed in a subsequent suit between the same

4

Defendants make only one attempt to distinguish Evans and Davis. Specifically, Defendants make a distinction on
the basis that, in those cases, parties tried to assert affirmative defenses in the same case as the case in which they
tried to assert their time-barred claims. [DN 40 at 24 n. 33.] According to Defendants, because this situation
involves two separate cases, Evans is inapplicable. [Id.] The Court disagrees. The basic principle of Evans, that
Courts must conduct a “realistic assessment of the parties’ litigation posture” to determine whether a party may raise
affirmative defenses that, if brought as claims, would be time barred, can be applied equally in cases in which two
different lawsuits are involved. Indeed, Defendants make an argument that is identical to one rejected in Davis, that
even if “Warren Paving’s affirmative claims of breach of fiduciary duties, fraud, and material mistake of fact were
barred by statutes of limitations in the prior litigation, they are entitled to be litigated as part of Warren Paving’s
affirmative defenses here.” [Id. at 27.] For the same reasons as the courts explained in Evans and Davis, this
“jurisdictional jujitsu” is impermissible. Evans, 344 F.3d at 1031.

15

parties.’ ” FCA US, LLC v. Spitzer Autoworld Akron, LLC, 887 F.3d 278, 288 (6th Cir. 2018)
(quoting Montana v. United States, 440 U.S. 147, 153 (1979)). “The doctrine of res judicata
includes two kinds of preclusion: ‘issue preclusion’, [also called collateral estoppel], and ‘claim
preclusion’, [also called res judicata].” Brooks v. Whirlpool Corp., 499 F. App’x 450, 451 (6th
Cir. 2012) (citing Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n. 1 (1984)); see
also Heyliger v. State Univ. & Cmty. Coll. Sys. of Tennessee, 126 F.3d 849, 851 (6th Cir. 1997)
(“This court reviews de novo a district court’s decision with regard to issue preclusion (collateral
estoppel) or claim preclusion (res judicata in its narrow sense).”). However, “[m]ost of the
decisions use the terms ‘issue preclusion’ and ‘claim preclusion’ rather than ‘collateral estoppel’
and ‘res judicata,’ to avoid confusion of the use of ‘res judicata’ to mean the entire body of
preclusion law with its narrow use as a synonym for ‘claim preclusion.’” DLX, Inc. v. Kentucky,
381 F.3d 511, 521 (6th Cir. 2004).
“[I]ssue preclusion prevents parties from ‘raising an argument that they already fully
litigated in an earlier legal proceeding.’” W.J. O’Neil Co. v. Shepley, Bulfinch, Richardson &
Abbott, Inc., 700 F. App’x 484, 488–89 (6th Cir. 2017) (quoting Anderson v. City of Blue Ash,
798 F.3d 338, 350 (6th Cir. 2015)). More specifically, “issue preclusion, bars ‘successive
litigation of an issue of fact or law actually litigated and resolved in a valid court determination
essential to the prior judgment, even if the issue recurs in the context of a different claim.’”
Arkansas Coals, Inc. v. Lawson, 739 F.3d 309, 320 (6th Cir. 2014) (emphasis added) (quoting
Taylor v. Sturgell, 553 U.S. 880, 891 (2008)). Issue preclusion “bars the relitigation of issues,
regardless of the nature of the legal claims.” W.J. O’Neil, 700 F. App’x at 490 (emphasis added).
For issue preclusion to apply, four elements must be met:
(1) the precise issue must have been raised and actually litigated in the prior
proceedings; (2) the determination of the issue must have been necessary to the
16

outcome of the prior proceedings; (3) the prior proceedings must have resulted in
a final judgment on the merits; and (4) the party against whom estoppel is sought
must have had a full and fair opportunity to litigate the issue in the prior
proceeding.
Arkansas Coals, 739 F.3d at 320–21 (quoting Georgia-Pac. Consumer Prod. LP v. Four-UPackaging, Inc., 701 F.3d 1093, 1098 (6th Cir. 2012)). The Court will address each of these
elements in the context of each of the affirmative defenses Warren Paving and Slats Lucas assert
in this case.5
(a) Mistake of Fact, Breach of Fiduciary Duty, Fraud, and Voidness
With regard to Defendants’ affirmative defenses of mistake of fact, breach of fiduciary
duty, fraud, and that the Assignment Contract is void ab initio, (Defendants’ fourth, fifth, sixth,
and seventh defenses), it is clear that the elements of issue preclusion are satisfied. First, each of
these issues were raised and actually litigated in the prior proceedings. Specifically, in their
complaint in the prior lawsuit, Defendants brought claims for 1) mistake of fact based on the
mistaken belief that “Heartland had the authority and proper licensing in Kentucky to engage in
real estate brokerage,” 2) breach of fiduciary duties in purchasing the option to buy the Property
and in requiring Warren Paving to agree to royalty payments in exchange for assignment of the
option, 3) fraud and intentional misrepresentation regarding the purchasing of the option in
Heartland’s name, and Defendants 4) sought a declaratory judgment finding that “[t]he Contract
for Assignment is . . . void,” that Heartland and Southern Aggregate “are not entitled to any
payments under it.” [DN 1 at 8–13 in 5:14-CV-149.] First, each of these claims, and whether
they were barred by the applicable statutes of limitations, were “actually litigated” by the parties.
5

Defendants identify “eleven” defenses in their answer. [See DN 10.] However, the first defense asserts failure to
state a claim, which is not at issue in the pending motions, and the second defense merely consists of Defendants’
responses, admissions, and denials of the specific allegations in Plaintiffs’ complaint. Additionally, the eleventh
defense merely reserves the right to argue additional defenses set forth in Rule 8(c) of the Federal Rules of Civil
Procedure. None of these affirmative defenses are alleged to be time-barred. Accordingly, the only affirmative
defenses the Court will address herein are Defendants’ third through tenth defenses.

17

Both sides submitted extensive briefing on the issue of whether these claims were time-barred
and Defendants filed an additional motion to reconsider after the Court issued its initial
Memorandum Opinion granting Heartland’s motion to dismiss on limitations grounds.
Second, the determination of these issues was necessary to, and indeed, determined, the
outcome of the prior proceedings because the Court could not proceed without first determining
whether Defendants’ claims in the prior lawsuit were timely filed.
Third, the prior proceeding resulted on a final judgment on the merits; specifically, the
Court dismissed each claim on statute of limitations grounds. The Court determined that a fiveyear statute of limitations applied to each of Defendants’ claims for declaratory judgment finding
the contract void, mistake of fact, breach of fiduciary duties, and fraud and misrepresentation.
Warren Paving, 2015 WL 269204, at *3–5. As part of that decision, the Court rejected
Defendants’ arguments that certain of the statutes of limitations, such as for its mistake of fact
and fraud claims, were tolled on the basis of the discovery rule. Id. at *4–5. In detail, the Court
explained that Defendants failed to
explain[ ] why, with exercise of reasonable diligence, they did not discover that
Heartland was not in possession of a real estate license for nearly ten years. There
was no allegation presented in the Complaint that Heartland actively hid this fact,
nor any indication that Plaintiffs made an attempt to discover Heartland’s
licensing status, despite this being a matter of public record.
Id. at *4. The Sixth Circuit affirmed this holding, explaining that Warren Paving and Slats Lucas
contend that the exercise of due diligence did not require them to seek this
information, but they have not provided any Kentucky or Sixth Circuit precedent
in support of this contention, nor have they provided any facts or arguments
establishing that they could not obtain information regarding Heartland’s lack of a
license earlier.
Warren Paving, No. 15-6052, at *3–4 (6th Cir. July 6, 2016).

18

Defendants argue, however, that the issues of mistake of fact, breach of fiduciary duty,
fraud, and voidness “were not decided on the merits in the prior litigation” because “the
affirmative claims were dismissed solely on the basis of various statutes of limitation.” [DN 40 at
3–4 (emphasis added).] However, this argument flies in the face of Sixth Circuit precedent. The
Sixth Circuit has long held that “a dismissal for failing to comply with a statute of limitations is a
decision on the merits for [ ] preclusion purposes.” Mitchell v. Chapman, 343 F.3d 811, 820 (6th
Cir. 2003) (citing Nathan v. Rowan, 651 F.2d 1223, 1226 (6th Cir. 1981)); see also Wheeler v.
Dayton Police Dep’t, 807 F.3d 764, 767 (6th Cir. 2015) (“We reached the merits of the
excessive-force challenge, because dismissals on statute-of-limitations grounds are judgments on
the merits.”). Therefore, the dismissal of Defendants’ claims of mistake of fact, breach of
fiduciary duty, fraud, and voidness on statute of limitations grounds was a judgment on the
merits for issue preclusion purposes.
Fourth, Defendants, against whom issue preclusion is asserted in this case, “had a full and
fair opportunity to litigate the issue[s] in the prior proceeding.” Arkansas Coals, 739 F.3d at
320–21. This element is satisfied here for the simple reason that Defendants were a party in the
prior litigation. While claim preclusion requires that the present and former action be “between
the same parties,” Chapman, 343 F.3d at 819, issue preclusion does not. However, the fact that
this element is nonetheless satisfied here demonstrates that Defendants certainly had a full and
fair opportunity to litigate their own claims in the prior action. As the Court already noted, both
parties extensively argued and briefed the statute of limitations issues in the prior lawsuit.
In sum, all four elements of issue preclusion are satisfied with regard to Defendants’
affirmative defenses of mistake of fact, breach of fiduciary duty, fraud, and voidness. Defendants
attempt to distinguish the issues in their affirmative defenses in this case from their claims in the

19

prior lawsuit based on the specific type of relief they seek in the present case. Specifically,
Defendants state in their answer, at the end of their third, sixth, and seventh defenses, that
because Plaintiffs were never entitled to royalty payments due to the breach of KRS §
324.020(2), they “are entitled to set-off or recoupment as to any amounts claimed by plaintiffs.”
[DN 10 at 10–11.] According to Defendants, therefore, their “claims for set-off or recoupment
are not time-barred” because they were not raised in the prior lawsuit. [DN 40 at 3.] This
argument is unpersuasive, however, in light of the fact that Defendants’ claims for a set-off or
recoupment are included in the same paragraphs as their third, sixth, and seventh defenses, each
of which is time-barred. [See DN 10 at 10–11.] Because the affirmative defenses themselves are
time-barred, any claim for set-off or recoupment on the basis of those defenses also fails.
Accordingly, Defendants’ fourth, fifth, sixth, and seventh affirmative defenses are barred by the
doctrine of issue preclusion.
(b) The Enforceability of the Royalty Provision
Warren Paving’s third defense reads as follows:
It is undisputed that, at all times relevant hereto, neither Heartland nor its officers
were licensed real estate brokers under Kentucky law. The royalties which
Plaintiffs seek in this lawsuit are tantamount to a “brokerage fee” or real estate
commission. As such, they are not legally owed. Additionally, Defendants are
entitled to set-off or recoupment as to any amounts claimed by Plaintiffs.
[DN 10 at 10.] In response to Plaintiffs’ motion for summary judgment, Defendants explain that,
because Heartland allegedly violated Kentucky law by failing to possess a brokerage license,
“the contractual provision requiring the payment of royalties which are, in essence, a real estate
commission, is void or unenforceable.” [DN 40 at 2.] According to Defendants, this affirmative
defense is distinct from its other, time-barred defense that “the Contract of Assignment is void ab
initio and unenforceable under Kentucky law.” [DN 10 at 10.] Specifically, Defendants argue

20

that “a claim that the entire Contract of Assignment is void ab initio (which was Warren
Paving’s claim in the prior litigation) is separate and distinct from the potential unenforceability
of a real estate commission provision in the Contract of Assignment.” [DN 44-1 at 2 (emphasis
added).]
The distinction Defendants attempt to make is a distinction without a difference for issue
preclusion purposes. In the prior suit, Defendants alleged that Heartland engaged in real estate
brokerage without a license in violation of KRS § 324.020(2), which provides that “No person
shall practice real estate brokerage with respect to real estate located in this state unless . . . (a)
The person holds a license to practice real estate brokerage under this chapter.” Ky. Rev. Stat.
Ann. § 324.020(2)(a). Defendants claimed, therefore, that “Heartland was prohibited from . . .
obtaining the consideration it negotiated in the Contract for Assignment.” [DN 1 at 8 in 5:14CV-149.] Accordingly, Defendants asserted that the Assignment Contract was “void” and that
“Defendants are not entitled to any payments under the Contract.” [Id.] In dismissing that claim,
this Court explained that, “Plaintiffs are suing based on a statutory violation, Heartland’s failure
to possess a real estate license. Without ruling on whether the statute was violated in this case,
the proper statute of limitations to apply is [the five year statute of limitations in] KRS §
413.120(2).” Warren Paving, 2015 WL 269204, at *4. Applying that limitations period, the
Court dismissed the claim.
Here, the issue is identical. Defendants assert in their third defense that, because “neither
Heartland nor its officers were licensed real estate brokers under Kentucky law[,] [t]he royalties
which Plaintiffs seek . . . are not legally owed.” [DN 10 at 10.] Once again, then, the issue is the
violation of KRS § 324.020(2), which the Court has already determined is time-barred by the
five-year statute of limitations codified in KRS § 413.120(2). “The ‘identity of issues’ element

21

requires that ‘the key issue in both cases is the same....’” Georgia-Pac., 701 F.3d at 1098
(quoting Nat’l Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 908–09 (6th Cir. 2001)).
Accordingly, “[w]here a litigant brings repeated actions based upon the same operative facts,
issue preclusion may still properly apply despite a change in legal theory.” Id. (citing Randles v.
Gregart, 965 F.2d 90, 93 (6th Cir. 1992)). The core issue in both instances is the allegation that
Plaintiffs are not entitled to royalty payments due to a violation of KRS § 324.020(2). As Sixth
Circuit precedent makes clear, simply repackaging one legal theory, (voidness of a contract due
to a statutory violation), into another, (unenforceability of a contract provision due to a statutory
violation), is insufficient to avoid issue preclusion.
Whether Defendants use the phrase “void” or “unenforceable” in seeking to invalidate the
royalty provision does not change the fact that this issue was already litigated and decided on the
merits in the prior lawsuit. Issue preclusion “bars the relitigation of issues, regardless of the
nature of the legal claims.” W.J. O’Neil, 700 F. App’x at 490 (emphasis added). Because the
determination of this issue was necessary to the prior judgment and because Defendants likewise
had a full and fair opportunity to litigate this issue in the prior case, Defendants third defense is
also barred under the doctrine of issue preclusion.
(c) Unclean Hands
Warren Paving’s eighth defense states:
Alternatively, as a further defense, Defendants contend that by engaging in the
real estate practice in violation of KRS §§ 324.010(1), 324.010(5), and
324.020(2), as well as engaging in fraudulent conduct, Plaintiffs have “unclean
hands” and are precluded from obtaining the judicial relief they seek.
[DN 10 at 11.] According to Defendants, the defense of “unclean hands” is “wholly distinct from
its claims in the prior litigation.” [DN 40 at 4.] The Court disagrees, for largely the same reasons
that Defendants’ third defense is barred by the doctrine of issue preclusion. Specifically, this
22

argument is once-again a mere reiteration of Defendants’ time-barred claims. Defendants assert
that Plaintiffs have unclean hands due to a violation of KRS § 324.020(2), Kentucky’s brokerage
licensing statute. However, claims based on a violation of § 324.020(2) are precisely what both
this Court and the Sixth Circuit already determined are time-barred in Defendants’ prior lawsuit.
Once again, the same “operative facts” are at issue, despite Defendants’ “change in legal theory.”
Georgia-Pac., 701 F.3d at 1098. Regardless of how Defendants phrase their legal theory of
“unclean hands,” the issue of the violation of KRS § 324.020(2) was already litigated and
decided on the merits in the prior lawsuit. Further, the determination of this issue was necessary
to the prior judgment and Defendants had a full and fair opportunity to litigate the issue in the
prior case. Accordingly, Defendants’ eighth affirmative defense also is barred under the doctrine
of issue preclusion.
The Court further notes that “the question of preclusion . . . turns on case-specific factual
questions . . . [and] likewise turns on the court’s ‘sense of justice and equity.’” Roberson v.
Torres, 770 F.3d 398, 404–05 (6th Cir. 2014) (quoting Blonder–Tongue Labs., v. Univ. of Ill.
Found., 402 U.S. 313, 334 (1971)). Here, in addition to the fact that the elements of issue
preclusion are satisfied as a matter of law, justice and equity also weigh strongly in favor of
applying the doctrine in this case. The evidence in this case points directly to a finding that
Defendants’ decision to cease making royalty payments pursuant to the Assignment Contract
almost immediately following the Sixth Circuit’s affirmance of this Court was a calculated effort
to invite the instant lawsuit from Plaintiffs so that Defendants could assert their time-barred
claims as affirmative defenses. With regard to Defendants’ third, fourth, fifth, sixth, seventh, and
eight defenses, this effort is unsuccessful. “To hold otherwise would permit [defendants],
through a sort of jurisdictional jujitsu, to evade the limitations statutes by bringing a time-barred

23

. . . action, waiting for the [plaintiff] to assert its interests . . . and then raising the identical timebarred claims as defenses.” Evans, 344 F.3d at 1031. The Court will not allow this.
Finally, because the sole ground on which Defendants move for summary judgment is the
allegation that, “[u]nder Kentucky law, the royalty fee provision of the Contract for Assignment
is unenforceable,” [DN 54-1 at 18], and because all of Defendants’ affirmative defenses in
support of this argument are barred by the Evans rule and the doctrine of issue preclusion,
Defendants’ motion for summary judgment is denied.
(d) The Amount of Royalties Paid and Acceleration of the Assignment Contract
The only affirmative defenses that remain for the Court to consider are Defendants’ ninth
and tenth defenses, which read:
NINTH DEFENSE
Alternatively, as a further defense, Defendants contend that the correct amount of
the purported royalty (i.e., real estate brokerage) payments have been made under
the terms of the Contract for Assignment.
TENTH DEFENSE
Alternatively, as a further defense, Defendants contend that there is no right to
accelerate payments under the terms of the Contract of Assignment.
[DN 10 at 11.]
Unlike the affirmative defenses of mistake of fact, breach of fiduciary duty, fraud,
voidness, unenforceability of the royalty provision, and unclean hands, the issues raised in
Defendants ninth and tenth defenses were not raised in the prior lawsuit because those issues had
not yet arisen. It is axiomic “that res judicata simply cannot bar a claim that did not exist at the
time of the first proceeding.” BellSouth Telecommunications, Inc. v. Kentucky Pub. Serv.
Comm’n, No. CIV.A.3:08-33-DCR, 2008 WL 5173334, at *8 (E.D. Ky. Dec. 10, 2008). Here,
Defendants’ ninth defense is a direct response to Plaintiffs’ allegation in this action that:
24

WRF and Southern Aggregate recently discovered that Warren Paving and/or
Slats Lucas has never paid the appropriate royalty amount because the tonnage of
limestone produced from the Property was not appropriately determined “from the
belt scale weights as the material is loaded.” As a result, WRF and Southern
Aggregate were underpaid royalties during the term of the agreement.
[DN 1 at 10, ¶ 33.] Because Plaintiffs only “recently discovered” the allegedly underpaid royalty
payments, it is clear that this allegation was not an issue in the prior lawsuit. Therefore,
Defendants’ ninth affirmative defense is not barred under the doctrine of issue preclusion.
Nor is the tenth defense barred, because the issues of breach and specific performance
also were not at issue in the prior litigation. That being said, however, it does not appear that
Plaintiffs have requested “acceleration of payments” at all. Plaintiffs do not mention acceleration
once in their complaint, [see DN 1.] Rather, Plaintiffs merely request the payment of any missed
payments since July 2016 and specific performance of future payments which will become due
under the Assignment Contract. [DN 2 at 15–16.] Accordingly, Defendants’ tenth affirmative
defense is inapplicable to this case and does not affect the Court’s determination of whether
Plaintiffs are entitled to summary judgment on their claims.
B. Heartland, WRF, and Southern Aggregate’s Claims
Now that the Court has determined which of Defendants’ affirmative defenses are viable,
the Court must determine whether Plaintiffs are entitled to summary judgment on their claims.
Plaintiffs’ first claim alleges breach of the Assignment Contract and the Amended Assignment
Amended, while their second, related claim is for a judgment declaring that Warren Paving and
Slats Lucas are contractually obligated to pay royalties on limestone pursuant to the Amended
Assignment Contract.6

6

Plaintiffs initially brought a third claim seeking a judgment against Trustmark National Bank “declaring that
[Heartland’s] right of first refusal is superior to Trustmark’s security interest in the Property.” [DN 1 at 15, ¶ 63.]
However, Plaintiffs later “dismiss[ed] . . . their claims filed against Trustmark National Bank.” [DN 13.]
Accordingly, only Plaintiffs’ first two claims remain pending before the Court.

25

1. Breach of Contract
Plaintiffs allege two different breaches: 1) breach since the Assignment Contract was
entered into in 2004 for failure to properly weigh the limestone “from the belt scale weights as
the material is loaded” for purposes of calculating royalty payments, and 2) breach for ceasing
making royalty payments beginning in July 2016. [DN 1 at 13, ¶¶ 44–45.]
With regard to the claim that Defendants have breached the Assignment Contract by
failing to determine the correct royalty weight from the belt scale weights, however, Plaintiffs
have submitted no evidence in support of this assertion. Plaintiffs attach five affidavits to their
motion for summary judgment; however, none of the affiants assert that the limestone was not
properly weighed using the belt scale method. [See DN 30-4 at 1–8 (William Frazer Affidavit);
DN 30-9 at 1–3 (John William Bogle, Jr. Affidavit); DN 30-10 at 1–4 (Robert Frazer Affidavit);
DN 30-11 at 1–2 (Zachary Greenwell Affidavit).] Other than various contractual and real estate
documents at issue in the case, Plaintiffs attach no other evidence to their motion. Moreover,
Defendants assert, in their ninth affirmative defense, that “the correct amount of the purported
royalty . . . payments have been made under the terms of the Contract for Assignment.” [DN 10
at 11.] Federal Rule of Civil Procedure 56 provides that “[a] party asserting that a fact cannot be .
. . genuinely disputed must support the assertion by . . . (A) citing to particular parts of materials
in the record, including depositions, documents, electronically stored information, affidavits or
declarations, stipulations . . . admissions, interrogatory answers, or other materials.” Fed. R. Civ.
P. 56(c)(1)(A). Without citation to evidence that Defendants have, since 2004, underpaid
royalties as a result of failing to measure limestone using belt scale weights, Plaintiffs are not
entitled to summary judgment on this portion of their breach of contract claim at this time.

26

With regard to the second allegation of breach, however, Plaintiffs have successfully
shown that Defendants breached the Amended Assignment Contract, [DN 30-3 at 1–5], by
ceasing all royalty payments after June 2016. The 2009 Amendment to the Assignment Contract
states that Heartland’s retained royalty interest is $0.2667 “per ton for limestone mined and
shipped or loaded for transport from the Property.” [Id. at 3.] As the Court explained above, the
$0.2667 figure represents Heartland’s remaining royalty interest following the assignment of
one-third of its royalty interest to Walt Gaylord, who, on July 31, 2009, sold that one-third
interest back to Slats Lucas. [DN 1 at 9. ¶ 30.] As a result of Heartland’s subsequent
assignments, WRF and Southern Aggregate are each entitled to half of that amount, or $0.1333
each per ton of limestone.
Both William Frazer, manager of WRF, and John William Bogle, Jr., owner and
shareholder of Southern Aggregate, allege in their affidavits that no payments have been
received since the end of June 2016. [DN 30-4 at 7 (William Frazer Affidavit); DN 30-9 at 3
(Bogle Affidavit).] Defendants do not dispute these contentions in their response or sur-reply to
Plaintiffs’ motion for summary judgment, [see DN 40; DN 44.], or in their own motion for
summary judgment, [see DN 54.] Accordingly, the allegation that Warren Paving ceased making
payments after June 2016 is undisputed. Moreover, other than Defendants’ third through eighth
affirmative defenses, each of which the Court has rejected as time-barred and precluded,
Defendants have made no argument that the Assignment Contract, the Amended Assignment
Contract, or the royalty provisions, are unenforceable. Additionally, there is no assertion that the
terms of the agreements are ambiguous, and the Court cannot discern any ambiguity.
Under Kentucky law, “[i]f a contract is not ambiguous, it ‘will be enforced strictly
according to its terms, and a court will interpret the contract’s terms by assigning language its

27

ordinary meaning and without resort to extrinsic evidence.’” Cogent Sols. Grp., LLC v. Hyalogic,
LLC, 712 F.3d 305, 310 (6th Cir. 2013) (quoting Hazard Coal Corp. v. Knight, 325 S.W.3d 290,
298 (Ky. 2010)). Here, the Amended Assignment Contract makes clear that Heartland has a
retained royalty interest of $0.2667 collectively “per ton for limestone mined and shipped or
loaded for transport from the Property.” [DN 30-3 at 3.] It is undisputed that Defendants made
payments as required under the terms of the Assignment Contract from 2004 to 2009, and then
under the terms of the Amended Assignment Contract from 2009, when the Amendment was
executed, to late June 2016, after which time Defendants ceased making payments. Accordingly,
Defendants have breached the plain and unambiguous terms of the Amended Assignment
Contract, specifically, with regard to the obligation to pay royalties to Plaintiffs. Therefore,
Plaintiffs’ motion for summary judgment on its breach of contract claim with regard to the lack
of royalty payments since June 2016 is granted. As to the missed payments Plaintiffs are owed
from July 2016 to the present, Plaintiffs are entitled to monetary damages, the amount of which
shall be determined through a damages hearing. As to future payments, Plaintiffs are entitled to
specific performance.
2. Declaratory Judgment
Next, to clear up any future confusion or debate, Plaintiffs seek a declaration that Warren
Paving and Slats Lucas are contractually obligated to pay royalties on limestone pursuant to the
Amended Assignment Contract. 28 U.S.C. § 2201(a) provides that a
court of the United States, upon the filing of an appropriate pleading, may declare
the rights and other legal relations of any interested party seeking such
declaration, whether or not further relief is or could be sought. Any such
declaration shall have the force and effect of a final judgment or decree and shall
be reviewable as such.
28 U.S.C.A. § 2201(a). “Declaratory judgments are often pursued to determine parties’
contractual obligations. ‘[W]here there is controversy as to the meaning and effect of a written
28

contract[,] interpretation may be sought from and made by the declaratory judgment of a court
having jurisdiction over the parties.’” Jesa Enterprises Ltd v. Thermoflex Corp., No. 16-10885,
2016 WL 4376176, at *5 (E.D. Mich. Aug. 17, 2016) (quoting Panhandle Eastern Pipe Line Co.
v. Michigan Consol. Gas Co., 177 F.2d 942, 944 (6th Cir. 1949)).
As the Court explained above, the terms of the Amended Assignment Contract are clear
and unambiguous. Therefore, the Court will grant Plaintiffs’ request for a declaration of the
parties’ rights under the agreement. Specifically, the Court declares that Warren Paving and Slats
Lucas are contractually obligated to pay royalties for all limestone mined and shipped or loaded
for transport from the Property pursuant to the terms of the Amended Assignment Contract and
the royalty obligation enumerated therein.
CONCLUSION
For the reasons explained in detail above, IT IS HEREBY ORDERED as follows:
(1) Plaintiffs’ motion for summary judgment, [DN 30], is GRANTED IN PART AND
DENIED IN PART. It is granted with regard to Plaintiffs’ request for declaratory
judgment and their claim for breach of the Amended Assignment Contract due to
Defendants’ failure to make royalty payments after June 2016. It is denied with respect to
Plaintiffs’ claim that Defendants have also breached the Assignment Contract and the
Amended Assignment Contract by underpaying royalties since 2004 by failing to
determine payments using the belt scale weights.
(2) Defendants’ motion to file a sur-reply, [DN 44], is GRANTED. Therefore, Plaintiffs’
motion to strike this motion and the proposed sur-reply, [DN 45], is DENIED.
(3) Defendants’ motion for summary judgment, [DN 54], is DENIED.
(4) A Telephonic Status Conference is SET for June 5, 2018 at 2:00 p.m. Central Time.
The Court shall place the call.
(5) IT IS SO ORDERED
cc:

Counsel
D
a
:

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May 21, 2018