Guttman v. Chemence, Inc. et al
MEMORANDUM. Signed by Judge William M Nickerson on 1/11/2017. (jnls, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
In re: COMMERCE, LLC
ZVI GUTTMAN, TRUSTEE
CHEMENCE, INC. et al.
Bankr. Case No. 13-12598-JFS
Bankr. Adv. No. 15-69-JFS
* Civil No. WMN-15-1294
Before the Court is a Motion for Summary Judgment filed by
Defendants Chemence, Inc. (CI) and Chemence Medical Products,
Inc. (Chemence Medical).
ECF No 26.
The motion is fully
Upon review of the filings and the applicable case
law, the Court determines that no hearing is necessary, Local
Rule 105.6, and that the motion should be granted.
I. FACTUAL1 AND PROCEDURAL BACKGROUND
This action was initially filed as an adversary action in
the bankruptcy case of Debtor Commerce, LLC. (Commerce).
Plaintiff Zvi Guttman is the Debtor’s Chapter 7 Trustee.
Commerce was once a major wholesale distributor of lawn, garden,
outdoor living, and holiday products.
Malcolm Cork was the
The underlying facts giving rise to this suit are generally
undisputed, except where noted.
president of Commerce from 2004 until August 2012, when his
employment was terminated.
Cork, while still the president of Commerce, formed a new
company, Medical Solutions International, Inc. (Medical
Solutions), of which he was the sole owner.
On or about January
8, 2011, Medical Solutions entered into a Sales, Marketing and
Distribution Agreement (Sales Agreement) and a License Agreement
with Chemence Medical, an enterprise which is engaged in the
manufacture of medical adhesives.
The Sales Agreement
established Medical Solutions as a distributor for a particular
medical adhesive manufactured by Chemence Medical, SURE+CLOSE®,
and the License Agreement permitted Medical Solutions to use the
trademark for that product in its marketing efforts.
terms of the License Agreement, Medical Solutions was to pay
Chemence Medical the sum of $750,000.00 in four installments:
one for $100,000.00; one for $275,000.00; and two for
On or about July 15, 2011, Cork caused Commerce to
wire $187,500.00 from Commerce’s account to Chemence Medical and
represented to Chemence Medical that this was Medical Solutions’
third required payment under the License Agreement.
represented to Chemence Medical that he had the authority to
make this wire transfer.
In August of 2012, Commerce filed a suit in this Court
against Medical Solutions relating to a $150,000.00 Commerce
check that Cork allegedly had issued to Medical Solutions.
Commerce LLC v. Med. Solutions Int’l, Inc. Civ. No. WMN-12-2393.
Also in August 2012, Commerce filed a separate suit in this
Court against Cork alleging that he had breached his agreement
to repay a $450,000.00 shareholder loan made to him by Commerce.
Commerce LLC v. Cork, Civ. No. RDB-12-2513.
These cases were
On January 18, 2013, Commerce and Commerce’s
chairman of the board and president, Richard Lessans, entered
into a Settlement Agreement with Cork, Cork’s wife, and Medical
Solutions which purported to resolve any and all claims between
ECF No. 26, Ex. 8.
That Settlement Agreement
provided that “[t]he parties wish to enter into a complete and
final resolution of all disputes, business dealings and other
matters between them and related Parties, and have reached a
full, complete, voluntary and amicable settlement of any and all
disputes, claims and causes of action between them.”
Id. at 4.
The agreement specifically identified as one of the claims being
settled the “$187,500, paid via wire transfer on or about July
15, 2011, and noted that “this claim is not the subject of a
currently pending lawsuit, but has been asserted in
correspondence between legal counsel.”
Id. at 2.
Pursuant to the Settlement Agreement, Cork made an initial
payment of over one half a million dollars.
On February 19,
2013, the parties submitted a stipulation of dismissal, with
prejudice, which the Court granted on February 21, 2013.
however, has defaulted on subsequent payments due under the
On March 20, 2014, Cork was indicted in
this Court on wire fraud charges related to the July 15, 2011,
wire transfer of funds from Commerce to Chemence Medical.
United States v. Cork, Crim. No. CB-14-134.2
On March 26, 2014, Cork and Medical Solutions entered into
an Asset Purchase Agreement with Chemence Medical.
terms of that agreement, Chemence Medical purchased back Medical
Solution’s SURE+CLOSE® business and related assets, including
the license to use the SURE+CLOSE® trademark, for the sum of
The agreement also included an indemnification
provision whereby Medical Solutions and Cork agreed to indemnify
Chemence Medical for any losses, damages, or liabilities related
to Medical Solutions’ business operations.
On February 13, 2015, Plaintiff filed the instant adversary
action seeking to recover from Chemence Medical the $187,500.00
that was wired to it by Cork.
The Complaint includes counts for
“Unjust Enrichment” (Count I), “Constructive Trust” (Count II),
“Declaratory Relief” (Count III), and “Turnover” (Count IV) and
names the following entities as Defendants: Chemence Medical;
Cork subsequently pled guilty and was sentenced to a 15 month
term of imprisonment.
CI; Chemence Medical, Inc.; and Chemence, LLC.3
and CI have answered the Complaint, the other two entities have
On July 1, 2015, this Court granted a motion filed by
Chemence Medical and CI, and opposed by Plaintiff, to withdraw
the reference over this action to the bankruptcy court.
On July 8, 2015, Chemence Medical filed a third party
complaint against Cork and Medical Solutions for
On January 7, 2016, the Clerk of the Court
entered default against the third party defendants for want of
Chemence Medical and CI have now moved for summary judgment
as to all claims brought against them.
Defendant CI asserts
that it had no connection, whatsoever, with the wire transfer
and has never conducted business with Commerce, Medical
Solutions, or Cork.
Chemence Medical argues that Commerce fully
and finally settled all claims related to the wire transfer when
it settled the previous suits against Cork and Medical
In the alternative, Chemence Medical argues that it
was not unjustly enriched by the wire transfer because it
provided equivalent value for the payment in the form of the
SURE+CLOSE® trademark license.
As for the remaining three
counts, this Court has already concluded that these counts are
Defendant explains that the wire transfer went to a bank
account titled “Chemence LLC,” and it was unclear which entity
actually received the funds.
more in the nature of remedies, not causes of action, and each
are dependent on a finding of liability under the unjust
ECF No. 4 at 7.
II. LEGAL STANDARD
A motion for summary judgment will be granted only if there
exists no genuine dispute as to any material fact and the moving
party is entitled to judgment as a matter of law.
See Fed. R.
Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250
Summary judgment is inappropriate if any material
factual issue “may reasonably be resolved in favor of either
Liberty Lobby, 477 U.S. at 250; JKC Holding Co. LLC v.
Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001).
The moving party bears the burden of showing that there is no
genuine dispute as to any material fact.
However, no genuine
dispute of material fact exists if the nonmoving party fails to
make a sufficient showing on an essential element of his or her
case as to which he or she would have the burden of proof.
Celotex, 477 U.S. at 322–23.
Therefore, on those issues on
which the nonmoving party has the burden of proof, it is his or
her responsibility to confront the summary judgment motion with
an “affidavit or other evidentiary showing” demonstrating that
there is a genuine issue for trial.
Supp. 2d 415, 420 (D. Md. 2012).
See Ross v. Early, 899 F.
“A mere scintilla of proof ...
will not suffice to prevent summary judgment.” Peters v. Jenney,
327 F.3d 307, 314 (4th Cir. 2003).
A “party cannot create a
genuine dispute of material fact through mere speculation or
compilation of inferences.”
Shin v. Shalala, 166 F. Supp. 2d
373, 375 (D. Md. 2001) (citation omitted).
Indeed, this court
has an affirmative obligation to prevent factually unsupported
claims and defenses from going to trial.
See Drewitt v. Pratt,
999 F.2d 774, 778–79 (4th Cir. 1993) (quoting Felty v. Graves–
Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987)).
In arguing that the January 18, 2013, Settlement Agreement
also released the claim against it, Chemence Medical relies on a
decision of the Maryland Court of Special Appeals, Chicago Title
Insurance Company v. Lumbermen’s Mutual Casualty Company, 707
A.2d 913 (Md. Ct. Spec. App. 1998).
In Chicago Title, a title
insurance company sued one of its agents and the principal of
that agent alleging that the agent had misappropriated funds
from its escrow account.
The insurance company also sued the
entity that had provided the agent’s surety bond.
the agent and its principal had entered into an agreement with
that surety to indemnify it for any losses on the bond.
the litigation was pending, the plaintiff title insurance
company reached a mediated settlement with the agent and its
Those parties then executed a release, and the
claims against the agent and its principal were dismissed with
When the plaintiff attempted to continue to press its claim
against the surety, the surety moved for summary judgment,
arguing that the release of the claims against the agent and its
principal also discharged the surety claim against it.
trial court granted that motion, and the plaintiff appealed.
affirming that decision, the Maryland Court of Special Appeals
acknowledged that it was undisputed that, in the settlement
agreement, the plaintiff did not intend to release the surety.
Id. at 918.
Nevertheless, the court noted that, under
longstanding Maryland case law, “in order to pursue a surety, a
release must demonstrate not only that the parties did not
intend to release the surety, but that the creditor expressly
reserved its right to pursue the surety.”
Id. at 920.
the settlement did not contain such an expressed reservation of
rights, the claim against the surety was discharged.
reasoned that, without that expressed reservation of rights,
it would seem unfair to allow [the plaintiff] to
pursue [the surety], which, in turn, would be able to
pursue the [the agent and its principal] for
indemnity, even though they had been fully released by
[the plaintiff]. Although [the plaintiff] argues that
a construction of the Release resulting in a finding
of discharge of the surety is bad policy, because it
would discourage settlements, we believe just the
opposite. In our view, such a result would encourage
informed settlements and would prevent creditors from
sandbagging unsophisticated debtors.
Id. at 922-23.
This Court finds that the same principle applies here.
Settlement Agreement stated that it was “intended to be a
general release of all rights, obligations and liabilities
between the parties” and included “all claims that were or could
have been asserted in the [Earlier] Actions,” specifically
mentioning the July 15, 2011, wire transfer.
ECF No. 26, Ex. 8.
This settlement between Cork and Medical Solutions and Commerce
would be rendered meaningless if Plaintiff is permitted to
assert a claim based on the same factual predicate against
Chemence Medical when Chemence Medical certainly would, as it
did, file a third party claim against Cork and Medical Solutions
to indemnify it for any judgment obtained.
Plaintiff contends that the teaching of Chicago Title is
limited to cases involving surety liability.
ECF No. 31-1 at 8-
To the contrary, the Second Circuit Court of Appeals,
applying Maryland law, noted that, while Chicago Title was
specifically concerned with reservation of rights against a
surety it was simply extending to sureties a general principle
previously applicable to judgment debtors.
Koehler v. Bank of
Bermuda, Ltd., 544 F.3d 78, 84 (2nd Cir. 2008).
there was a clearly and definitively expressed reservation of
rights in the settlement agreement between a judgment creditor
and a judgment debtor.
Based upon that reservation of rights,
the court permitted a judgment creditor to bring an action
against a garnishee.
Before reaching that result, however,
the court agreed with the trial court’s conclusion that
“‘ordinarily, a settlement between judgement creditor and
judgment debtor eliminates the right of the judgment creditor to
pursue claims against a judgment debtor’s garnishee . . .
because the settlement removes the underlying debt upon which
the judgment creditor’s claim against the garnishee is based.’”
Id. (quoting Koehler v. The Bank of Bermuda Ltd., Civ. No. M18302, 2005 WL 551115, at *3 (S.D.N.Y. Mar. 9, 2005)).
Here, Commerce was certainly aware where the $187,500.00
was wired and could have at least attempted to reserve its
rights against Chemence Medical when it entered into the
It did not.
Accordingly, the Court finds
that Plaintiff is not entitled to a second bite of the apple by
now going after Chemence Medical.4
The Court also finds that the unjust enrichment claim
against Chemence Medical would fail on its merits even if not
Plaintiff complains that after making the initial one half
million dollar payment under the Settlement Agreement, Cork
defaulted on his remaining obligations under that agreement.
The claims against Cork and Medical Solutions were dismissed,
with prejudice in the prior litigation. By extension, under the
principle discussed in Chicago Title, the claims against
Chemence Medical were also resolved, with prejudice. A default
on the terms of the Settlement Agreement might give rise to
breach of contract action against Cork and Medical Solutions,
but does not resurrect claims that were dismissed with
barred by the Settlement Agreement.
To prevail on a claim of
unjust enrichment, a plaintiff must establish these three
1. A benefit conferred upon the defendant by the
2. An appreciation or knowledge by the defendant of
the benefit; and
3. The acceptance or retention by the defendant of the
benefit under such circumstances as to make it
inequitable for the defendant to retain the benefit
without the payment of its value.
Hill v. Cross Country Settlements, LLC, 936 A.2d 343 (Md. 2007).
Chemence Medical challenges Plaintiff’s ability to establish the
third element, noting that, because Chemence Medical provided
good and valuable consideration for the payment at-issue, i.e.,
the license for SURE+CLOSE®, there is nothing inequitable in
Chemence Medical retaining that benefit.
Plaintiff makes a feeble argument that the value of the
license for the use of the SURE+CLOSE® trademark somehow was not
equal to the price Chemence Medical paid, noting that when
Chemence Medical bought back the rights to sell SURE+CLOSE®
products, only $15,000.00 was allocated for the purchase of
intellectual property under the Asset Purchase Agreement.
observation ignores the fact that Chemence Medical paid
$910,000.00 for Customer Contract Rights to sell those products
and those rights would have no value without the right to use
the SURE+CLOSE® trademark.
suggestion to the contrary, the Court finds that there is no
evidence from which it can be inferred that the price given and
received for the License Agreement was not a fair and equitable
price, considering it was the result of an arms-length
negotiation between sophisticated business entities.
v. Burson, 14 A.3d 6, 16 (Md. Ct. Spec. App. 2011) (concluding
that an “arm's length transaction,” i.e., “a transaction
negotiated by unrelated parties, each acting in his or her own
self interest” is “the basis for a fair market value
For these reasons, the motion for summary judgment will be
A separate order will issue.
William M. Nickerson
Senior United States District Judge
DATED: January 11, 2017
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