BIANCE v. LEMIEUX et al

Filing 25

ORDER ON MOTION TO INTERVENE re:denying 8 Motion to Intervene By JUDGE NANCY TORRESEN. (mjlt)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE

MICHAEL P. BIANCE,
Plaintiff
v.
WILLIAM T. LEMIEUX, et al.,
Defendants.

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Civil No. 2:11-CV-429-NT

ORDER ON MOTION TO INTERVENE
This case involves Plaintiff Michael P. Biance’s attempt to collect from
Defendant William T. Lemieux personally a debt which was owed by a limited
liability company, SuperPlow, LLC, (“SuperPlow”) of which the Defendant was a
member and manager. Before the Court is SuperPlow’s motion to intervene in these
proceedings. Because SuperPlow was dissolved and cancelled by the Defendant on
December 29, 2010, its motion to intervene must be DENIED.
I. Background
In May, 2007, Plaintiff Michael P. Biance, owner and President of Driveway
SuperPlow, Inc., entered into an asset purchase agreement with SuperPlow, which
is a New Hampshire limited liability company. Under the terms of this agreement,
the Plaintiff agreed to sell to SuperPlow his snowplow patent, customer list and
advertising materials, goodwill, website, technical documentation and vendor lists,
and two complete and fully-assembled snow plows. He also agreed to change the

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name of his company from Driveway SuperPlow, Inc., which he had held since 1993,
to another name not involving the word “SuperPlow”, to enter into a noncompetition agreement with SuperPlow and to provide up to 540 hours of consulting
services relating to the design, manufacture, sale and distribution of the snow plows
between May, 2007 and November, 2008. The total purchase price was $475,000,
with $175,000 paid at closing. A promissory note in the amount of $300,000 from
SuperPlow to the Plaintiff, representing the value the parties placed on the
snowplow patent and secured by this patent and SuperPlow’s other assets, was to
be paid in ten annual installments of $42,713.25 each.
On May 8, 2007, the Plaintiff changed the name of his company from
Driveway SuperPlow, Inc. to M&M Welding Repairs, Inc. According to a Decision
and Order entered in New York, Biance v. SuperPlow, LLC, Index No.: 6730-10, RJI
No.: 01-10-101912, (N.Y. Sup. Ct., February 4, 2011), SuperPlow made the
payments due under the note in May, 2008 and May, 2009, but defaulted on the
May, 2010 payment. Accordingly, on February 4, 2011, judgment in the total
amount of $298,527.48 including costs, accrued interest, and attorney’s fees was
entered against SuperPlow.
The New York judgment was entered following a summary process under
N.Y. CPLR § 3213 for actions based solely upon an instrument for the payment of
money (i.e. collection actions). In such actions in New York, the plaintiff may serve
its motion for summary judgment on the defendant in lieu of a complaint, and
proceed to judgment following a hearing on the motion if the defendant fails to

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provide a defense to payment on the instrument. According to McKinney’s
Consolidated Laws of N.Y. Ann., Practice Commentaries, § 3213:17:
Since the purpose of CPLR 3213 is to give the plaintiff a quick
route to judgment on the merits when she sues on an instrument or
judgment, the existence of a claim by the defendant against the
plaintiff that could not itself be brought under CPLR 3213 should not
ordinarily hold the plaintiff up.
If the claim arises out of the same transaction as that which
founds the plaintiff’s claim, however, and would be available as a
defense to the plaintiff’s claim had it been brought in conventional
form, it may be used as such in the opposing papers…
But even if a counterclaim arises out of the “same general
transaction” as the main claim does, its interposition should not be
allowed to impede P[laintiff]’s ride to summary judgment on the main
claim in a CPLR 3213 case unless the counterclaim also amounts to
“defense to the main claim, which it didn’t do in Harris v. Miller, 136
A.D.2d 603, N.Y.S.2d 586 (2d Dep’t 1988). In Harris, where the main
claim was on a note concededly executed by D[efendant] to P[laintiff]
and the counterclaims were for legal services, the main claim got
summary judgment and the counterclaims were severed for pleading in
a formal answer and for litigation in due course.
SuperPlow opposed summary judgment in the New York action on the
ground that it had counterclaims against Biance that voided his claims and/or
denied him the relief he was requesting. In particular, SuperPlow argued that the
technical drawings it received from Biance were both incomplete and contained
design defects that led to numerous manufacturing and customer difficulties.
SuperPlow claimed that, in spite of owing 540 hours of consulting services to
SuperPlow, Biance retired to Florida and ignored SuperPlow’s communications and
difficulties. As a result, SuperPlow claimed that it was fraudulently induced to
enter into the purchase agreement with Biance, that there was a failure of
consideration that voided the agreement and the accompanying note, and that

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Biance breached various covenants and warranties in the agreement entitling
SuperPlow to damages.
Whatever the merits of these claims, the New York court found that they did
not constitute “a complete defense to payment on the note,” and that summary
judgment on the note was therefore appropriate. Biance v. SuperPlow, LLC, Index
No.: 6730-10, RJI No.: 01-10-101912 at *3. In particular, the court found that
Biance’s purported failure to provide adequate documentation (most likely referring
to the technical drawings) did not establish any fraudulent intent on Biance’s part,
nor establish a failure of consideration that would support rescission of the
agreement. Id. at *2-3.
While this suit was pending in New York, on December 29, 2010 the
members of SuperPlow voted to dissolve the company. They voted that LeMieux
“will be responsible for winding-up as reasonably as possible per the terms of the
LLC agreement.” That same day, LeMieux filed the company’s certificate of
cancellation with the State of New Hampshire, effective on the date of filing.
On November 10, 2011, the Plaintiff brought the present action against the
Defendant personally and doing business as “EZ Plow”, claiming that: (1) the
Defendant is responsible for failing to wind up SuperPlow’s business properly under
New Hampshire law, particularly because of SuperPlow’s to notify the Plaintiff of
its dissolution so as to give the Plaintiff an opportunity to enforce his judgment
against the assets of the company, (2) the Defendant secreted SuperPlow’s assets in
Maine and continues to use them to his benefit (a claim under Maine’s Fraudulent

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Transfers Act), (3) the Defendant is both personally benefiting from the use of those
assets and, with EZ Plow, holds successor liability for SuperPlow’s debt, and (4) the
Defendant is personally liable on SuperPlow’s judgment debt due to his failure to
observe the corporate formalities with that company.
II. Discussion
On a timely motion to intervene pursuant to Fed. R. Civ. P. 24, the court
must permit anyone to intervene who “is so situated that disposing of the action
may as a practical matter impair or impede the movant’s ability to protect its
interest.” It may also permit intervention by anyone who “has a claim or defense
that shares with the main action a common question of law or fact.”

Id. The

Plaintiff does not dispute that the motion is timely or that SuperPlow’s claims are
related enough to this litigation that it should otherwise be allowed to intervene.
The Plaintiff, rather, claims that SuperPlow’s intervention is prevented by (1)
lack of corporate capacity to sue, (2) improper venue, and (3) res judicata.1 The
pertinent issues may be framed as:
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whether SuperPlow, LLC is a cognizable legal entity;

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If SuperPlow does exist, whether it nevertheless required by the
parties’ agreement to bring its claims against Biance in New York; and

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If SuperPlow exists and is not precluded by contract from bringing its
claims in Maine, whether the New York judgment nevertheless res
judicata regarding SuperPlow’s claims against the Plaintiff and
proposed counter-claim defendants.

The Plaintiff also claims that neither his wife nor son can properly be joined as counterclaim
defendants to SuperPlow’s claims. The Court, however, addresses this issue in its related order on
the Defendant’s motion to add counterclaim defendants.
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A. SuperPlow LLC’s legal status
SuperPlow is not a cognizable legal entity. When the Defendant filed the
company’s certificate of cancellation on December 29, 2010, he ended the company’s
existence and along with it, any capacity on SuperPlow’s part to sue or (with certain
exceptions discussed below) be sued. SuperPlow argues that, because its claims
against the Plaintiff have not yet been adjudicated, its existence cannot be at an
end. In support of this argument, it points to cases from Delaware and New York in
which courts have ordered the nullification of an LLC’s certificate of cancellation for
purposes of allowing claimants who had not received proper notice of the company’s
cancellation to proceed with their claims against the company. Under such
circumstances presumably the resurrected LLC would be able to present any
defenses or counterclaims.
This argument, however, ignores the fact that no claims are being asserted
against SuperPlow in this case. Rather, SuperPlow is asking to insert itself into
litigation against its former member and manager, Lemieux, because it contends
that it has claims against the Plaintiff which can offset Lemieux’s alleged personal
responsibility for SuperPlow’s debts. SuperPlow has failed to point to any authority
that would allow SuperPlow to do this. The structure of New Hampshire’s LLC
statutes are such that, in the period between dissolution and cancellation, (the
“winding-up” period), an LLC has the general ability to sue and be sued. See N.H.
Stat. 304-C:56. However, this ability ends with the effective date of cancellation
stated on the filed certificate of cancellation. See N.H. Stat. 304-C:12 (IV) (“A

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limited liability company formed under this chapter shall be a separate legal entity,
the existence of which as a separate legal entity shall continue until cancellation of
the limited liability company’s certificate of formation.”) In addition to ending the
LLC’s legal existence, the certificate of cancellation has the effect of notifying the
public at large that it no longer has capacity to transact business—thus, the end of
its general ability to be sued. See N.H. Stat. 304-C:57.
SuperPlow points out that, under certain circumstances, creditors may still
sue an LLC even after its certificate of cancellation has been filed. See N.H. Stat.
304-C:60 (allowing a known creditor to file suit against a defunct LLC within 90
days after receiving a notice of rejection of its claim) and 304-C:61 (allowing all
other creditors to sue a defunct LLC within five years after the filing of the
certificate of cancellation and publication in a newspaper of a notice of dissolution).
The Court also assumes, without deciding, that once suit has been filed against an
otherwise defunct LLC, it may bring any appropriate defenses and counterclaims
against its creditor. However, no reasonable reading of these statutes would allow
for an LLC that has chosen to dissolve and cancel itself to revive itself at any time
so as to insert itself and any claims it might have had into third-party litigation. It
was the Defendant’s duty to wind up SuperPlow’s affairs prior to the effective date
of his certificate of cancellation, including liquidating all of its claims against third
parties. See N.H. Stat. 304-C:53 (“A limited liability company administratively
dissolved continues its existence, but may not carry on any business except that
necessary to wind up and liquidate its business and affairs”) and 304-C:56 (listing

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the powers of a member / manager of a dissolved LLC, including “(a) prosecute and
defend suits; (b) settle and close the business of the LLC; (c) dispose of and transfer
the property of the LLC; d) discharge the liabilities of the LLC; and (e) distribute to
the members any retaining assets of the LLC.”) To the extent it did not do so prior
to cancellation, it has no independent power to do so at this time.
B. Assertion by SuperPlow of its claims in Maine
SuperPlow has indicated that it is currently attempting to obtain an order
from a New Hampshire court nullifying its certificate of cancellation. The Court,
therefore, finds it worthwhile as well as expedient to address the Plaintiff’s other
objections to SuperPlow’s motion to intervene. While the Court will not stay these
proceedings pending resolution of SuperPlow’s efforts in New Hampshire, it will
entertain a renewed motion to intervene should SuperPlow be able to resurrect its
corporate existence.
If SuperPlow were still legally in existence, it would be able to bring its
claims against the Plaintiff in this Court.

The purchase and sale agreement

contains a clause designating New York courts as the exclusive forum “[i]f any party
sues another party in a suit under or relating to this Agreement.” Agreement Among
Driveway Super Plow, Inc., SuperPlow, LLC, and Others Concerning Sale and
Purchase of Assets and Related Matters, Section 19.4 (“P&S Agreement”) (Doc. #
8-2). However, the P&S Agreement also contains a provision allowing suit “in a
court of competent jurisdiction,” “[i]f there is any dispute among the parties under
or relating to this Agreement that they cannot resolve voluntarily.” Id. at Section

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19.14. This is not a case in which the Court can harmonize the provisions of the
contract by interpreting a more specific provision as governing or limiting a more
general one; these provisions are simply contradictory. If the parties intended to
limit their claims to resolution in New York-based courts, their contract fails to
adequately reflect that intent.
As asserted by the Plaintiff in the Complaint at ¶ 5, this Court has
jurisdiction to hear his case pursuant to 28 U.S.C. § 1332(a)(1). If SuperPlow is able
to revive its existence, it will be a New Hampshire limited liability company, thus
maintaining complete diversity among the parties. Accordingly, this Court is a
“court of competent jurisdiction” under the P&S Agreement.
C. Res Judicata
SuperPlow’s claims are also not barred by res judicata. It is unclear from the
New York court’s order whether SuperPlow’s claims would have been allowed to
proceed in the same case following judgment on the note (akin to a partial summary
judgment), or whether SuperPlow would have needed to file a separate action to
pursue its claims against the Plaintiff. It appears beyond doubt, however, given the
structure of CPLR § 3213 and the treatment of those claims by the New York court,
that SuperPlow’s claims against Biance were not actually adjudicated. The New
York court merely found that SuperPlow’s counterclaims and defenses did not
constitute a complete defense to the Plaintiff’s action on the note, and therefore that
they did not bar New York’s summary proceeding on such claims.

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Accordingly, SuperPlow, LLC’s motion to intervene in this litigation is
DENIED without prejudice.
SO ORDERED.
/s/ Nancy Torresen
United States District Judge
Dated this 27th day of April, 2012.

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