M C M G Capital Advisors Inc v. Food-N-Fun Inc et al

Filing 68

MEMORANDUM RULING re 42 MOTION for Partial Summary Judgment filed by M C M G Capital Advisors Inc. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained below, the plaintiffs motion for partial summary judgment is denied. Signed by Magistrate Judge Patrick J Hanna on 3/8/2018. (crt,Alexander, E)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
MCMG CAPITAL ADVISORS, INC.

CIVIL ACTION NO. 6: 17-cv-00614

VERSUS

MAGISTRATE JUDGE HANNA

FOOD-N-FUN, INC., ET AL

BY CONSENT OF THE PARTIES

MEMORANDUM RULING
Currently pending is the plaintiff’s motion for partial summary judgment. [Rec.
Doc. 42]. The motion is opposed and oral argument was held on January 25, 2018.
Considering the evidence, the law, and the arguments of the parties, and for the
reasons fully explained below, the plaintiff’s motion for partial summary judgment
is denied.
BACKGROUND
On February 12, 2016, the plaintiff, MCMG Capital Advisors, Inc. (“MCMG”)
entered into a Merger & Acquisition Financial Services Agreement (“Agreement”)
with Food-N-Fun, Inc. (“Food-N-Fun”) and Todd Street.1 In the Agreement, MCMG
agreed to provide certain financial consulting as well as merger and acquisition
advisory services for the sale of the equity and assets of Food-N-Fun. The agreement

1

In the Agreement, MCMG is referred to as Matrix, Food-N-Fun is referred to as
Company, and Todd Street is referred to as Seller.
1

established that MCMG was required to market Food-N-Fun to Retif Oil & Fuel, LLC
(“Retif Oil”) before any other potential buyers unless the potential buyers were
approved in advance by Todd Street. In exchange for these services, MCMG would
be compensated with a transaction fee if a closing occurred during the term of the
Agreement or if a closing occurred within fifteen months of the termination of the
Agreement and the buyer was identified or had contact with MCMG, Food-N-Fun,
or Todd Street during the term of the Agreement. MCMG alleges that Food-N-Fun
breached the Agreement when a closing occurred after the term of the Agreement
expired and MCMG was not compensated with a transaction fee.
The list of services MCMG agreed to provide are established in Section 2 of
the Agreement, which include: (1) build and maintain a data room; (2) provide
valuation guidance to the Company and Seller; (3) prepare marketing materials for
the Company; (4) identify potential Buyers; (5) run a sale marketing process and
solicit offers from potential Buyers; (6) interface, communicate and assist in the
negotiations with potential Buyers; (7) provide Company and Seller with frequent
status reports delineating the progress of conversations with potential Buyers; (8)
work with Company and its legal advisors to close the Transaction(s).
In furtherance of these services, MCMG began to prepare a Confidential
Information System (“CIM”) to use as a marketing tool. MCMG employees, Andrew
2

Lopresti and John Underwood, worked with Warren Guidry, the president of Food-NFun, to gather financial information to prepare the CIM and an electronic data room.
On March 17, 2016, the CIM was reviewed and approved by Warren Guidry on
behalf of Todd Street.2
The CIM contained confidential information regarding Food-N-Fun’s
operations, assets, and financial history. MCMG prepared the CIM by using assetlevel earnings before interest, taxes, depreciation and amortization (known as
EBITDA), and to remove from the asset-level EBITDA any non-recurring income or
expenses so that a purchaser can accurately see the anticipated income for each store.3
The CIM also contained an employee retention requirement that stated, “it is the
strong preference of Todd Street that the sale of the Food-N-Fun includes the
retention of all employees, including the corporate staff, for a period of at least two
years post-closing.”4 It is undisputed that Todd Street preferred a local buyer for
Food-N-Fun because a local buyer would be more likely to retain Food-N-Fun’s
employees. However, Todd Street’s preference that MCMG only market Food-N-Fun
to potential buyers that would retain Food-N-Fun’s employees is not contained in the

2

Rec. Doc. 42-19.

3

Rec. Doc. 42-9, p. 2.

4

Rec. Doc. 42-11, p. 20, Section 4.1.
3

Agreement.
MCMG used the CIM to market Food-N-Fun to Retif Oil and Gaubert Oil. As
a result, Retif Oil signed a letter of intent to purchase Food-N-Fun for twenty million
dollars. However, after a meeting between Todd Street and Ryan Retif, vice president
of Retif Oil, the sale did not occur. Todd Street testified that he was offended by Retif
Oil’s offer because he believed Food-N-Fun was worth more than the offer.5 At the
time, it was believed that Food-N-Fun’s value was twenty-five million dollars based
on MCMG’s representation.6
When the sale to Retif did not occur, Todd Street had a meeting with MCMG
representatives to discuss whether to expand the marketing of Food-N-Fun to
potential national buyers.7 At the meeting, Todd Street testified that MCMG advised
him that one of the consequences of going to a national process was that it was
unlikely that Food-N-Fun’s employees would be retained.8 With this knowledge,
Todd Street agreed that MCMG could expand their marketing of Food-N-Fun to
potential national buyers. As a result, a new CIM was created to market Food-N-Fun

5

Rec. Doc. 55-10, p.14.

6

Rec. Doc. 55-7, pp. 12 and 32.

7

Rec. Doc. 55-10, p. 15.

8

Rec. Doc. 55-10, p.16.
4

nationally. The national CIM did not contain the employee retention requirement.9
MCMG received offers from potential national buyers, including Travelers
Centers of America, LLC (“Travel Centers”), but a closing did not occur. Todd Street
began discussions with Retif Oil about purchasing Food-N-Fun after several
unrelated meetings with their representatives. Todd Street and Warren Guidry
testified that MCMG was not part of the negotiations with Retif Oil and that they
provided Retif Oil with their own financial information and did not use the CIM.
It is undisputed that the Agreement expired by its own terms on or about
November 11, 2016 and Food-N-Fun was sold to Retif Oil, a buyer that the parties
to the Agreement had contact with during the terms of the Agreement, on or about
March 17, 2017. As a result, MCMG filed a complaint against Food-N-Fun and Todd
Street for breach of contract, recovery of contractual attorney’s fees, and to revoke
the transfer of the proceeds of the sale of Food-N-Fun’s assets to Todd Street. In
response, the defendants filed an answer that asserted affirmative defenses based on
failure to state a claim upon which relief can be granted and MCMG’s alleged breach
of fiduciary duties and obligations under the Agreement.
In the present motion for partial summary judgment, MCMG contends that
Food-N-Fun’s affirmative defenses do not establish a defense to MCMG’s breach of
9

Rec. Doc. 42-12.
5

contract claim.
ANALYSIS
A. The Summary Judgment Standard
Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment
is appropriate when there is no genuine dispute as to any material fact, and the
moving party is entitled to judgment as a matter of law. A fact is material if proof of
its existence or nonexistence might affect the outcome of the lawsuit under the
applicable governing law.10 A genuine issue of material fact exists if a reasonable
jury could render a verdict for the nonmoving party.11
The party seeking summary judgment has the initial responsibility of informing
the court of the basis for its motion and identifying those parts of the record that
demonstrate the absence of genuine issues of material fact.12 If the moving party
carries its initial burden, the burden shifts to the nonmoving party to demonstrate the
existence of a genuine issue of a material fact.13 All facts and inferences are
10

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Sossamon v. Lone
Star State of Tex., 560 F.3d 316, 326 (5th Cir. 2009); Hamilton v. Segue Software, Inc., 232 F.3d
473, 477 (5th Cir. 2000).
11

Brumfield v. Hollins, 551 F.3d 322, 326 (5th Cir. 2008), citing Anderson v. Liberty
Lobby, Inc., 477 U.S. at 252; Hamilton v. Segue Software, Inc., 232 F.3d at 477.
12

Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007), citing Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
13

Washburn v. Harvey, 504 F.3d at 508.
6

construed in the light most favorable to the nonmoving party.14
If the dispositive issue is one on which the nonmoving party will bear the
burden of proof at trial, the moving party may satisfy its burden by pointing out that
there is insufficient proof concerning an essential element of the nonmoving party's
claim.15 The motion should be granted if the nonmoving party cannot produce
evidence to support an essential element of its claim.16
When both parties have submitted evidence of contradictory facts, a court is
bound to draw all reasonable inferences in favor of the nonmoving party.17 The court
cannot make credibility determinations or weigh the evidence, and the nonmovant
cannot meet his burden with unsubstantiated assertions, conclusory allegations, or a
scintilla of evidence.18 “When all of the summary judgment evidence presented by
both parties could not lead a rational trier of fact to find for the nonmoving party,

14

Brumfield v. Hollins, 551 F.3d at 326, citing Matsushita Elec. Indus. Co. v. Zenith
Radio, 475 U.S. 574, 587 (1986).
15

Norwegian Bulk Transport A/S v. International Marine Terminals Partnership,
520 F.3d 409, 412 (5th Cir. 2008), citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
16

Condrey v. Suntrust Bank of Ga., 431 F.3d 191, 197 (5th Cir. 2005).

17

Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005).

18

Boudreaux v. Swift Transp. Co., Inc., 402 F.3d at 540.
7

there is no genuine issue for trial and summary judgment is proper.”19
B. MCMG’S Objections
MCMG’s contends in their reply memorandum that portions of Food-N-Fun’s
opposition should be stricken. This Court will construe MCMG’s argument as an
objection based on Fed.R.Civ.P.56(c). When material cited to support or dispute a
fact cannot be presented in a form that would be admissible in evidence, a party may
object to the materials offered.20 Specifically, MCMG objects to: (1) portions of
Food-N-Fun’s opposition on pages 1-2, and 6 that contains alleged facts that are
unsupported by evidence; (2) the affidavit of Warren Guidry because it contains
hearsay; and (3) and the hand-written notes that are attached to the opposition
because the notes were not produced in discovery and do not have sufficient
evidentiary foundation to be admissible.
1. Warren Guidry’s Affidavit
“An affidavit or declaration used to support or oppose a motion must be made
on personal knowledge, set out facts that would be admissible in evidence, and show
that affiant or declarant is competent to testify on the matters stated.”21 MCMG
19

Greene v. Syngenta Crop Protection, Inc., 207 F.Supp.2d 537, 542 (M.D. La.
2002), citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
20

Fed. R. Civ. P. 56(c)(2).

21

Fed. R. Civ. P. 56(c)(4).
8

contends that Warren Guidry’s affidavit contains hearsay, but does not specifically
identify the portions that they seek to strike. After a review of the affidavit, Warren
Guidry’s statement regarding what Kent Oil’s attorney allegedly indicated is hearsay
and there is no applicable exception that can be determined from the record.
Accordingly, paragraph 15 of Warren Guidry’s affidavit will not be considered as part
of the summary judgment evidence.
2. Handwritten Notes
MCMG objects to certain documents that are attached as exhibits to Food-NFun’s opposition and Warren Guidry’s affidavit because they contain handwritten
notes. There are five pages attached to Warren Guidry’s affidavit. The first page
consists of an email from John Underwood to Warren Guidry with handwritten notes
and the second page is a continuation of the handwritten notes. The same documents
are also attached to Food-N-Fun’s opposition as an exhibit.22 In the affidavit, Warren
Guidry avers that the email was forwarded to him from John Underwood regarding
the retention of Food-N-Fun’s employees by a perspective purchaser, Travel Centers
of America. Warren Guidry further avers that he received the email and contacted
Shawn Cryan with Travel Centers and made contemporaneous notes on the email as
he spoke with Mr. Cryan. Therefore, the handwritten notes are admissible and will
22

Rec. Doc. 55-8.
9

be considered.
The third page attached to the affidavit contains a handwritten statement that
is not referenced in the affidavit. However, the Court can identify the handwritten
statement because it was referenced and read during Todd Street’s deposition.23
Therefore, the third page that is attached to the affidavit will not be considered
because the proper foundation is not laid to attach it to the affidavit. However, Todd
Street’s statement can be considered because it is identified and read in its entirety by
Todd Street in his deposition.
The fourth and fifth page that are attached to the affidavit are identified in the
affidavit as a CIM that was prepared by MCMG, but does not identify the source of
the handwritten notes that appear on the document. The CIM is also attached to FoodN-Fun’s opposition as an exhibit.24 No information is provided regarding who wrote
the notes on the CIM, when the notes were written, or the reasoning for the notes.
Therefore, the CIM with the handwritten notes attached to Warren Guidry’s affidavit
and to Food-N-Fun’s opposition is not admissible as submitted and will not be
considered.
3. Unsupported Evidence in Opposition

23

Rec. Doc. 55-10, p. 45.

24

Rec. Doc. 55-3.
10

MCMG contends that many of Food-N-Fun’s alleged facts in their opposition
on pages 1-2 and 6 are purported statements that are inadmissable hearsay. However,
MCMG does not specifically identify the statements to which they are objecting.
Pages one and two contain Food-N-Fun’s arguments in support of their opposition.
Page one contains conclusory allegations, but does not reference specific evidence
or any alleged statements. Page two contains an allegation that John Underwood
made false and intentionally misleading statements to Food-N-Fun. The Court has
determined that the email between Warren Guidry and John Underwood is admissible
and as a result this allegation will be considered in the opposition.
Page 6 contains statements regarding Kent Oil that are not supported by
admissible evidence. In Warren Guidry’s deposition, he testified to statements that
MCMG allegedly made to Kent Oil. This statement, like the previous statement
regarding Kent Oil’s attorney’s alleged statement, is inadmissible hearsay and will
not be considered.
C. Breach of Contract
The Court applies substantive state law in a diversity action.25 In addition,
Section 6.3 provides that the Agreement “shall be construed and enforced under the

25

Erie v. Railroad Co. v. Tompkins, 304 U.S. 64 (1983); see ACS Construction CO.,
Inc. of Mississippi v. CGU, 332 F.3d 885, 888 (5th Cir. 2003). (“We look to state law for rules
governing contract interpretation.”).
11

laws of the State of Louisiana.” Therefore, Louisiana law will be applied.
In order to state a valid claim for breach of contract under Louisiana law, a
plaintiff must allege: (1) an undertaking of an obligation to perform, (2) a failure to
perform the obligation, and (3) damages resulting from the failure to perform.26 A
failure to perform an obligation “results from nonperformance, defective
performance, or delay in performance.”27
MCMG contends Food-N-Fun breached the contract because MCMG was not
paid a transaction fee when Food-N-Fun was sold to Retif Oil. Food-N-Fun contends
that they are not obligated to pay the transaction fee because MCMG substantially
breached the Agreement by: (1) altering Food-N-Fun’s financial information and
providing the false information to potential buyers, and (2) failing to properly
represent Food-N-Fun’s interest and desire to find a purchaser that would retain
Food-N-Fun’s employees.
In Louisiana, when one party to a contract substantially breaches a contract,
the other party has a defense and an excuse for non-performance.28 Food-N-Fun
essentially contends that MCMG breached their fiduciary duties and failed to act in
26

Sanga v. Perdomo, 167 So.3d 818. 822 (La. App. 5 Cir. 2014); Meyer &
Associates, Inc. V. Coushatta Tribe of Louisiana, 185 So.3d 222, 246 (La. App. 3 Cir. 2016).
27

La. C.C. art. 1994.

28

Olympic Ins. Co. v. H.D. Harrison, Inc., 463 F.2d 1049, 1053 (5th Cir. 1972).
12

good faith when performing their required services under the Agreement.
The Agreement does not establish that the parties to the contract have fiduciary
duties or a duty to act in good faith such that a breach of the contract is created.
Likewise, while Louisiana law provides that good faith shall govern the conduct of
parties performing their obligations and that all contracts in Louisiana must be
performed in good faith,29 Louisiana law does not recognize a separate and distinct
obligation of good faith, the breach of which would be equivalent to a breach of the
contract between the parties.30 Therefore, MCMG’s failure to conduct their services
in good faith is not sufficient to establish a breach of the Agreement.
Food-N-Fun’s arguments that were presented in opposition to MCMG’s partial
motion for summary judgment are better asserted in their counterclaim based on
agency law. Nevertheless, there are genuine issues of material fact regarding whether
MCMG substantially breached their duties to perform certain services under the
Agreement. Specifically, there are genuine issues of material fact that MCMG
substantially breached the Agreement by not providing valuation guidance to FoodN-Fun and not providing Food-N-Fun with frequent status reports delineating the
progress of conversations with potential buyers.
29

La. C.C. art. 1759; La. C.C. art. 1983.

30

Gulf Coast Bank and Trust Co. v. Warren, 125 So.3d 1211, 1219 (La. App.4 Cir.

2013).
13

On behalf of Food-N-Fun, Warren Guidry testified that Food-N-Fun was
convinced that the value of the company was twenty-five million dollars.31 This
evidence is corroborated by Todd Street’s testimony that his understanding is that
MCMG made a take it or leave it proposition to Retif Oil based on a value of twentyfive million dollars.32 However, there is no evidence that MCMG directly provided
valuation guidance to Food-N-Fun and/or Todd Street as required under the
Agreement. Furthermore, the evidence establishes that the lack of valuation guidance
and the uncertainty regarding the value of Food-N-Fun may have been a substantial
factor in the unsuccessful negotiations between Food-N-Fun and Retif Oil.
Todd Street testified that he had a meeting with Retif Oil and turned down their
offer based on the value of the company.33 It is undisputed that MCMG was not at the
meeting and not part of the discussions that occurred at the meeting between Food-NFun and Retif Oil. The lack of MCMG’s presence and the lack of evidence to
establish that MCMG provided valuation guidance to Food-N-Fun regarding the
value of Food-N-Fun create genuine issues of material fact whether MCMG breached
the Agreement by failing to fulfill their obligations.

31

Rec. Doc. 55-7 p. 12.

32

Rec. Doc. 55-10, p. 37.

33

Rec. Doc. 55-10, p.14.
14

There is also a genuine issue of material fact whether MCMG breached the
Agreement by failing to provide frequent status reports delineating the progress of
conversations with potential buyers. The email between Warren Guidry and John
Underwood indicates that John Underwood provided a status report on his
discussions with Travel Centers, but there are factual issues regarding whether the
report provided an update that delineated the progress of conversations. Warren
Guidry testified that he had a conversation with Shawn Cryan of Travelers Centers
regarding the email from John Underwood.34 There are discrepancies in the
information provided by John Underwood and the information provided by Shawn
Cryan. These discrepancies create an issue of whether MCMG was aware of more
information and failed to provide Food-N-Fun with a status update that delineated the
progress of conversations with Travelers Centers as required by the Agreement.
MCMG further contends that any potential breach of the Agreement cannot be
considered a substantial breach of the Agreement and summary judgment should be
granted as a matter of law. However, the genuine issues of fact regarding whether
MCMG’s potential breaches are considered substantial breaches are questions of fact
that should be decided by a jury. Because a substantial breach of the Agreement
would excuse Food-N-Fun’s non-performance, the Court finds that disposition of this
34

Rec. Doc. 55-4, p. 30.
15

matter on summary judgment is not proper.
Moreover, the merits of MCMG’s original action, Food-N-Fun’s defense, and
Food-N-Fun’s counterclaim will rely on the same evidence. The Court cannot, as a
practical matter, treat the suits as separate and sound judicial administration favors
allowing the cases to proceed together. Therefore, MCMG’s motion for summary
judgment is denied.
CONCLUSION
Because there are genuine issues of material fact whether MCMG substantially
breached the Agreement, MCMG’s motion for summary judgment [Rec. Doc. 42] is
DENIED.
Signed at Lafayette, Louisiana on this 8th day of March 2018.

___________________________________
PATRICK J. HANNA
UNITED STATES MAGISTRATE JUDGE

16