Lanier v. Syncreon Holdings Ltd. et al
ORDER denying 97 Defendants' Motion for Summary Judgment; granting Plaintiff's 99 Motion for Summary Judgment. Signed by District Judge Victoria A. Roberts. (CPin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
WILLIE E. LANIER, SR.,
Case No. 11-14780
Honorable Victoria A. Roberts
SYNCREON HOLDINGS, LTD.,
SYNCREON HOLDINGS, INC., and
ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
AND DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
INTRODUCTION AND BACKGROUND
In this fraud action, Willie Lanier argues that Defendants duped him into signing a
Share Purchase Agreement (the “SPA”) requiring him to sell his shares and resign as
Director and CEO of syncreon.US. Defendants are syncreon Holdings, Ltd. (“syncreon
Ltd.”), syncreon Holdings, Inc. (“syncreon Inc.”) and Brian Enright (collectively
“Defendants”). syncreon Holdings, Ltd. is the holding company of all syncreon entities;
Enright is the CEO of all syncreon entities.
Lanier says Defendants’ ploy included: (1) withdrawing many assets from
syncreon.US; (2) concealing pertinent financial information; (3) presenting misleading
data; (4) causing him to believe that the company had no value; (5) forcing a low sale;
and (6) driving him out of the company.
In 2001, Lanier, two other minorities, and syncreon Inc., formed WilLan. Lanier
owned 30%; syncreon Inc. purchased 49%. At formation, WilLan borrowed a total of
$20,500,000 from syncreon, Inc., to purchase syncreon.US. This loan was secured by
two demand notes (the “Notes”). syncreon.US entered into a Management Services
and Technology Transfer Agreement (“MSA”) which allowed syncreon.US to utilize
syncreon’s name and technology services. Without the MSA, syncreon.US could not
service clients; it lacked its own technology and support services. On January 1, 2006,
an Amended and Restated Management Services and Technology Agreement
(“MSTTA”) became effective allowing syncreon Inc., to provide accounting and business
development services to syncreonU.S. Lanier was the CEO of syncreon.US.
WilLan defaulted on the Notes; at the time of default, $11,846,000 was owed.
WilLan then entered into Amended and Restated Notes (the “Demand Notes”), allowing
syncreon Inc. to demand full payment at any time. By the end of 2008, the outstanding
debt on the Demand Notes was $8,936,923; on April 30, 2009, WilLan owed
Lanier says Defendants developed a plan to force him out: On April 8, 2009,
Lanier says that Enright advised board members of “syncreon Ltd. that Defendants
‘stripped all of the cash flows from syncreon.US,’ leaving Mr. Lanier ‘somewhat
trapped.’” Plaintiff’s Brief in Opposition to Defendants’ Joint Motion for Summary
Judgment, Doc. 103 at 7. Lanier says that Enright “proposed a plan to force [him] out
and the other African American investors: for ‘$1m to $1.5m” and this would ‘resolve the
Willie issue.’” Id. at 7-8. Lanier says that Enright proposed to replace him with GenNx,
whom Enright incorrectly thought would meet the Minority Business Entity (“MBE”)
criteria, which Lanier and his minority investors brought to the company due to their
On April 23, 2009, the syncreon group CFO proposed “pull[ing] maximum cash
back to wholly owned business,” in hopes that it “might influence discussion with
willie[sic] as well as acquisition plans . . . .” Id. at Exhibit 20, Ms. Van Landschoot’s
Email to Enright. Lanier says the CFO’s proposal was in support of Enright’s plan to
drive him out of WilLan. The cash pulled back came from WilLan and syncreon.US, not
the other syncreon owned businesses. That April, $5.5 million was transferred from
syncreon.US to syncreon Inc. without Lanier’s consent or knowledge.
Chryler’s involvement: Chrysler was WilLan’s largest client, accounting for
more than 90% of syncreon.US’s revenue. On April 30, 2009, Chrysler filed bankruptcy;
it owed syncreon.US over $7,000,000. Because of Chrysler’s bankruptcy,
syncreon.US’s cash flow was reduced.
On May 13, 2009, Lanier says that Enright “described to Syncreon Ltd.’s Board
his plan to ‘use the Chrysler [bankruptcy] situation’ to deal with ‘the MBE qualified
shareholders [(i.e., Mr. Lanier and his two African-American business partners)]’ by
‘tak[ing] them all out at once’ via a stock purchase at a ‘significantly lower’ proposed
purchase price.” Id. at 8. Lanier says that at the same time, Enright said that he
planned to prevent Mr. Lanier from presenting at syncreon.US’s Board meeting.
The offer made to Lanier: On May 18, 2009, Enright submitted an offer to
Lanier: Lanier could accept a $5.5 million loan, with a quarterly interest rate of 25% or
sell his shares to Defendants for $1.5 million.
On May 19, 2009, a Board meeting was held for syncreon.US; syncreon says
these meeting minutes are lost. Mr. Lanier says that he was not told that syncreon
intended to meet with Chrysler and would seek to transfer some of Chrysler’s contracts
from syncreon.US. At oral argument, Defendants say that they held this meeting
because Chrysler wanted to transfer contracts from syncreon.US. Lanier argued at the
hearing that Chrysler only considered transferring contracts from syncreon.US because
Enright threatened to bankrupt syncreon.US. Lanier says the threat caused Chrysler to
move business from syncreon.US because, if syncreon.US went into bankruptcy,
Chrysler could not exit its own reorganization.
On May 20, 2009, syncreon met with Chrysler to discuss payment. The next day,
an estimate of Chrysler’s standing was provided to syncreon Ltd.’s Board; it was that
Chrysler planned to exit reorganization within two weeks. Lanier was not provided the
financial information, nor was he told about the meetings.
A demand was made: As of May 21, 2009, WilLan owed syncreon Inc.
$3,552,265.49 on one Demand Note. syncreon.US owed $423,444 to syncreon Inc. on
the MSA. syncreon Inc. demanded full payment of both the Demand Note and MSA.
Lanier requested that the demands be stayed until he and his attorney could meet with
syncreon Inc. That request was granted by syncreon Inc. on May 26, 2009.
The threat made to Chrysler: On May 27, 2009, Enright and others from
syncreon met with Chrysler again. At this meeting, syncreon instructed that if Chrysler
did not comply with its terms, syncreon would put syncreon.US into bankruptcy and
interfere with Chrysler’s ability to reorganize under Chapter 11. Chrysler could not exit
reorganization if syncreon.US filed bankruptcy. Again, Mr. Lanier was not aware of this
meeting or the content of discussion prior to.
Defendants meet with Lanier: That evening, Lanier and his attorney, Mr.
Mahone, met with Enright and Ms. Van Landschoot, syncreon’s CFO. The parties
dispute what Mr. Lanier was told and differ on what was discussed. Ms. Van
Landschoot says that Lanier was informed of the earlier meeting and discussions
concerning Chrysler emerging from bankruptcy. Enright cannot recall if Lanier was
informed. Lanier says he was not given details; he says Enright threatened to terminate
the MSTTA, which would prevent syncreon.US from performing under its contracts if
Lanier tried to obtain financing for syncreon.US from any source. He says he was
forced to take Enright’s high interest offer or sell his stock.
On May 28, 2009, Lanier and his attorney met with syncreon Inc.’s
representatives. Lanier says that prior to the meeting, Ms. Van Landschoot instructed
syncreon Inc.’s representatives not to provide financial data to him. He says, she told
syncreon Inc. that if Lanier requested information, syncreon was to “strategize first on
how and what to provide.” Id. at Exhibit 31, Ms. Van Landschoot’s Email.
At the May 28th meeting, Defendants say that Lanier was provided:
[E]xtensive information and unfettered access to its CFO, vice president of
treasury and legal counsel. Plaintiff and his counsel participated in several
meetings, some together and some separate. Plaintiff’s counsel was
provided with documents related to the financial condition of syncreon.US,
the impact of the Chrysler proposal including the potential closure costs
related to the shutting down of several syncreon.US facilities, pre-petition
amounts owed by Chrysler to syncreon.US, a payment history for the
WilLan debt, and a summary of cash-on-hand. An update on the Chrysler
negotiations was provided. sncreon Inc. offered to provide any further
information Plaintiff or his counsel desired, but Plaintiff and his counsel
failed to make any specific follow-up requests.
Id. at 7-8.
On May 29, 2009, Lanier met with syncreon Inc. again. Lanier says that Enright
urged him to sign a letter of intent (“LOI”) for the sale of his shares. As instructed by
Enright, by the end of the day, Lanier and GenNx signed the LOI, agreeing to sell their
WilLan stock for $1.5 million combined, to syncreon Inc.
Next, the parties executed the Share Purchase Agreement. Many proposed
revisions were exchanged before Lanier signed it. The proposed SPA said at
paragraph 13: “Familiarity With Business: Sellers are familiar with the business and
affairs of the Company and have been furnished with any and all information which they
wished to have in order for each of them to have decided to enter into this Agreement.”
The SPA was executed on June 10, 2009. Before its execution, Defendants
knew that Chrysler would pay all pre-petition debt but did not tell Lanier: On June
6, 2009, Chrysler informed syncreon that it would immediately transfer payment of all
pre-petition amounts owed in addition to other compensation. Id. Exhibit 37, syncreon’s
email. Lanier was not informed of this change in finances.
Two days after the SPA was executed -- on June 12, 2009 -- Chrysler signed an
agreement paying syncreon.US monies owed. Lanier says that syncreon expected this
result at the outset of negotiations, but did not advise him of its expectation.
Defendants say Lanier cannot establish fraud because none of their assertions
was false. Alternatively, they argue that, because Lanier did not rely on any statement
made, fraud in the execution must be dismissed. They say Lanier’s non-disclosure
fraud claim fails because they had no duty to disclose all financial information to Lanier,
even if he was their business partner and CEO.
syncreon Inc. also asserts a counterclaim for fraud and breach of contract. It
says a provision in the SPA required that Lanier agree he was familiar with the business
of syncreon.US and had “all information which [he] wished to have in order to have
decided to enter into th[e] Agreement.” Because he now argues that information was
not disclosed, syncreon Inc. says he owes money damages.
The parties move for summary judgment on each other’s claim. The Court heard
arguments on April 10, 2014.
Defendants’ motion is DENIED. Whether Defendants’ actions rise to the level of
fraud is a question for the jury.
Lanier’s motion is GRANTED. Defendants cannot hold Lanier liable for fraud or
breach of contract. His testimony is that, at the time, he thought he had sufficient data
to execute the SPA. Defendants say they gave him all the data he required, and what
he learned at a later date has no bearing on the SPA’s clause.
STANDARD OF REVIEW
The Court will grant summary judgment “if the movant shows 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); Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
250-57 (1986). On a motion for summary judgment, the facts must be viewed in the
light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).
A fact is material for purposes of summary judgment if proof of that fact would
have the effect of establishing or refuting an essential element of the cause of action or
a defense advanced by the parties. Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir.
Lanier’s Motion for Summary Judgment
syncreon Inc. alleges a counterclaim of fraud and breach of contract. syncreon
Inc. says that Lanier withheld information, but nonetheless continued with the sale of his
stock, defrauding it into executing the SPA. syncreon Inc. says its counterclaim is
“based upon the testimony of Plaintiff and his lawyer” that Lanier did not have all
information he desired at the time the SPA was signed.
In Belle Isle Grill Corp v Detroit, 256 Mich. App. 463 (2003), the Michigan
Appeals Court set forth the elements a plaintiff must show to fraud based on
(1) the defendant made a material representation; (2) the
representation was false; (3) when the defendant made the
representation, the defendant knew that it was false, or
made it recklessly, without knowledge of its truth and as a
positive assertion; (4) the defendant made the
representation with the intention that the plaintiff would act
upon it; (5) the plaintiff acted in reliance upon it; and (6) the
plaintiff suffered damage.
Belle Isle Grill Corp, 256 Mich. App. 463, 477; 666 N.W.2d 271 (2003).
Breach of contract requires breach of a material term in a contract. Holtzlander
v. Brownell, 182 Mich.App. 716, 721, 453 N.W.2d 295 (1990). Michigan courts hold
In determining whether a breach is material, the court should consider
whether the nonbreaching party obtained the benefit it reasonably
expected to receive. Id. at 722, 453 N.W.2d 295. Other considerations
include the extent to which the injured party may be adequately
compensated for damages for lack of complete performance, the extent to
which the breaching party has partly performed, the comparative hardship
on the breaching party in terminating the contract, the wilfulness of the
breaching party's conduct, and the greater or lesser uncertainty that the
party failing to perform will perform the remainder of the contract. Walker
& Co. v. Harrison, 347 Mich. 630, 635, 81 N.W.2d 352 (1957).
Omnicom of Michigan v Giannetti Investment Co, 221 Mich App 341, 348; 561 NW2d
Lanier says syncreon Inc. mischaracterizes the testimony it relies upon to
support its counterclaim. During deposition, Lanier testified:
Q. Well, at the time you entered into the share purchase agreement which
is identified as Lanier 14, you were presented with any and all information
you wished to have in order to decide to enter in this agreement; did you
not? . . .
A. I was offered information.
Q. Did you get all the information you felt you needed to make a decision
to enter into the shareholder purchase agreement?
A. I was offered information.
Q. And were you furnished with any and all information that you wished to
have in order to enter into the agreement? . . .
A. I was offered information – any and all?
Q. Yes. I’m asking any and all information that you wished to have in
order to enter into the agreement.
A. I entered into the agreement.
Q. Did you have any and all – do you agree you were provided with any
an all information you needed to enter into the agreement?
A. I entered into the agreement. I’m not sure on the any and all. I agreed
to the agreement.
Q. Was there any information you requested that you did not receive at
hat time before entering into the agreement?
A. Not that I’m aware of.
Lanier’s attorney testified:
Q. Paragraph 13 of the share purchase agreement, “Sellers are familiar
with the business affairs of the company and have been furnished with
any and all information which they wished to have in order for each of
them to have decided to enter into this agreement.” Is that correct? Is
that a correct statement?
A. Correct reading.
Q. Do you have any reason to believe that this was not accurate? . . .
When this was executed, do you believe it was accurate?
A. I think – not without reservation.
Q. I’m sorry, I don’t understand your answer.
A. You said do I think that – Read the question back, please. Reservation
being embodied in my request for the inclusion of the language on page
Q. Talking about in paragraph 13 on 1191?
A. 13 on 1191.
Q. So you believe or you believed at the time that there was information,
specifically information regarding Chrysler, that had not been provided?
A. I wasn’t sure. That’s why I suggested that the language clarify that
point. And that language was rejected.
Lanier’s attorney also said:
Q. Do you recall if there were any documents you requested that your
A. I don’t recall having requested documents that were not furnished either
then or there.
When specifically questioned about documents received when executing the
SPA, Lanier’s attorney stated:
Q. . . . Do you recall asking for any documents on May 27 or May 28 that
you were not provided?
This deposition testimony does not support the proposition that Lanier knew he
had incomplete information but still entered into the SPA. Dismissal is warranted for
this reason alone.
This claim is subject to dismissal also because syncreon Inc. present no
evidence which shows why their reliance on Lanier’s alleged fraud was reasonable.
Furthermore, fraud is an equitable remedy. Rose v Nat'l Auction Group, 466
Mich. 453, 461; 646 N.W.2d 455 (2002)(citing Flood v. Welsh, 334 Mich. 583, 591-592,
55 N.W.2d 104 (1952) (describing the cancellation of an executed contract on the basis
of fraud as a power of a court of equity)). To recover under equity, one must have clean
hands. Unclean hands is an equitable doctrine: “[t]hose who seek equity must first do
equity.” Lemke v. H&R Block Mortgage Corp., No. 11-14979, 2012 (E.D. Mich. March
6, 2012). Defendants’ actions preclude cancelling the SPA.
The most logical inference to be made is that Defendants thought Lanier wanted
more information. Defendants knew at the time of signing the SPA that all dealings
regarding Chrysler were not disclosed, and they knew Chrysler would pay the money
owed and that syncreon.US could then afford to pay the Demand Notes. Lanier sought
affirmation that the information was complete.
This claim would be dismissed even if the Court assumed that Lanier knew he
was not being provided accurate information. There can be no breach of contract
unless the alleged breach is material.
This counterclaim requires the Court to assume that Lanier desired additional
financial information, syncreon Inc. knew Lanier wanted certain financial documentation,
but syncreon Inc. did not provide the data. These inferences would show that syncreon
Inc. prevented Lanier from fully performing; and thus, Lanier’s breach could not be
material. Omnicom of Michigan, 221 Mich App at 348 (finding that breach is not material
if the contracting party is prevented from performing under the contract).
Because syncreon Inc. executed the SPA while thinking that Lanier felt he was
not fully informed and did not provide disclosure, it cannot now recover for fraud and
breach of contract: it knew of the alleged fraud at the time of contracting.
syncreon Inc.’s counterclaim is DISMISSED.
Defendants’ Motion for Summary Judgment on Lanier’s Claim
Defendants challenge Lanier’s standing “to bring the fraud claims in Count
I(A)(D) and (F) of the Fourth Amended Complaint.” Defendants’ Joint Motion for
Summary Judgment, Doc. 97 at 32. Defendants say the contracts executed were
corporate assets of WilLan and syncreon.US, not Lanier’s; and thus, Lanier cannot
recover from the removal of money from these corporations.
To have standing, Lanier must satisfy three requirements: (1) injury in fact; (2) a
causal connection between the injury and the challenged conduct; and (3) the likelihood
that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife,
504 U.S. 555, 560-61 (1992). The party invoking federal jurisdiction has the burden to
establish that he has standing. Lujan, 504 U.S. at 561 (citing FW/PBS, Inc. v. Dallas,
493 U.S. 215, 231 (1990)).
Lanier met his burden. Individual enforcement of corporate rights requires a
shareholder to show that he suffered a specific injury, distinct from all shareholders.
Meathe v. Ret, 903 F.Supp.2d 507. (6th Cir. 2013). Lanier successfully shows that he
suffered a loss distinct from other shareholders: he lost his shares in the company, as
well as his job as CEO, his position on the Board, and his investment. Other
shareholders, namely syncreon Inc., benefitted from its own fraud; it suffered no loss at
all and gained total control of WilLan. syncreon Inc. even had a minority purchaser in
line to buy Lanier’s sold shares.
Lanier has standing; he has an injury which is causally connected to Defendants’
harm, and a decision in Lanier’s favor can redress his injury.
Enright and Syncreon Ltd. as Parties
In two paragraphs Defendants simply say that the fraud claim against Enright
and syncreon Ltd. should be dismissed because they were not parties to the SPA.
Lanier says that all Defendants acted in a scheme to defraud him. He says, at
times, Enright spoke on his own behalf, without the authority of syncreon; thus, he can
be held individually liable. Lanier says that syncreon Ltd. may be held liable because it
knowingly participated in the scheme by hosting meetings with Chrysler and concealing
information from Lanier.
Because Defendants fail to adequately develop this argument, it is waived. See
United States v. Robinson, 390 F.3d 853, 886 (6th Cir. 2004)(“We have cautioned that
issues adverted to in a perfunctory manner, unaccompanied by some effort at
developed argumentation, are deemed waived, and that it is not sufficient for a party to
mention a possible argument in the most skeletal way, leaving the court to . . . put the
flesh on the bones.) (citations and internal quotations omitted).
Lanier’s Fraud Claim
Lanier alleges one fraud claim, which is rooted in a scheme of
misrepresentations and non-disclosures. He says that Defendants’ scheme included
giving him inaccurate and misleading information, while failing to disclose other
He alleges that Defendants represented: Count I(A): syncreon.US had only
$15,000; Count I(B): MBE status was not important to Chrysler; Count I(C):
syncreon.US did not have any value; Count I(D): refusing to allow Lanier to pay down
the debt; and Count I(E): Enright’s statement that Lanier would be on the path to wealth.
He also alleges in Count I(F): that Defendants failed to disclose the company’s true
Defendants say these statements do not establish fraud because they are true.
Defendants say Lanier’s claim of silent fraud should also be dismissed because Lanier
knew they were not providing complete financial information; and thus, he could not
have relied on their information.
Fraudulent misrepresentation elements are stated above. Additionally, the
Michigan Court of Appeals explains that a plaintiff’s reliance on an assertion must be
reasonable. Novak v. Nationwide Mut. Ins. Co., 599 N.W.2d 546, 553-54(Mich. Ct. App.
To establish “[a] claim for negligent misrepresentation [a] plaintiff [must] . . .
prove that [he] justifiably relied to his detriment on information prepared without
reasonable care by one who owed the relying party a duty of care.” Alfieri v. Bertorelli,
813 N.W.2d, 775 (Mich. Ct. App. 2012)(quoting Unibar Maint. Servs., Inc. v. Saigh, 769
N.W.2d 911 (Mich. Ct. App. 2009)).
To recover on a claim of silent fraud, also known as fraudulent concealment,
Lanier needs to show that Defendants had a duty to disclose a material fact and failed
to do so. Lorenzo v. Noel, 522 N.W.2d 724, 725 (Mich. Ct. App. 1994).
Under Michigan law, "[a] fraud arising from the suppression of the truth is as
prejudicial as that which springs from the assertion of a falsehood, and courts have not
hesitated to sustain recoveries where the truth has been suppressed with the intent to
defraud.'’ Williams v Benson, 3 Mich. App. 9, 18-19; 141 N.W.2d 650 (1966)(quoting
Tompkins v Hollister, 60 Mich. 470, 483; 27 N.W. 651 (1886)).
These Statements are Actionable
Defendants say the statements are true. Next, Defendants argue that, at a
minimum, Lanier’s claim Count I(D) -- that he was told that the debt would not be called
-- should be dismissed because it is barred by the parol evidence rule. Finally,
Defendants argue that many of these statement are not actionable because they relate
to future promises.
An issue of fact exists concerning whether facts and circumstances made the
statements untruthful; and the parol evidence rule is not implicated. See generally,
Radar Safety Techs. Llc v. Pinnacle Holdings Llc, 2012 Mich. App. LEXIS 76 (Mich. Ct.
App. Jan. 17, 2012) (citing Marx v. King, 162 Mich 258, 263-264; 127 NW 341
(1910)("The parol evidence rule only precludes the admission of understandings
between the parties that were not included in the contract if those understandings
occurred prior or contemporaneously to the contract, not anything that occurred
thereafter"). These statements were asserted after the Demand Notes were executed.
The Demand Notes were signed in 2004; Lanier says that these statements and actions
to support these assertions were made in December, 2008. And, fraud is an exception
to the parol evidence rule. The statement which Defendants seek to exclude based on
the parol evidence rule is admissible.
Future statements may constitute actionable fraud. Custom Data Solutions, Inc.
v. Preferred Capital, Inc., 274 Mich App 239, 242-243; 733 NW2d 102 (2007)(“[f]raud in
the inducement occurs where a party materially represents future conduct under
circumstances in which the assertions may reasonably be expected to be relied upon
and are relied upon . . . .”); Gugel v. Neitzel, 248 Mich. 312, 226 N. W. 869, 870 (‘Where
a false representation of value is intentionally made to a person ignorant of value, with
the purpose that such statement is to be relied upon, the representation is in the nature
of a statement of fact, and will support an action of fraud.'); Szarkowski v. Pfister, 262
Mich. 226 (1933)(“Where a fraud is committed partly by false promises and partly by
false representations of fact, representations, though promissory in character which are
not made in good faith but as a part of a scheme to defraud, are nevertheless
fraudulent”); Matteson v. Weaver, 229 Mich. 495, 201 N. W. 473, 474()("[W]here a
promise is made in bad faith with no present intent to perform it, and it dovetails into and
forms a part of the scheme to defraud, it may be considered by the court.").
Duty to Disclose
Defendants argue that there was no duty to disclose complete financial
information. However, as a minority shareholder, Lanier was owed a duty to receive
accurate information when selling his stock. United States v. Byrum, 408 U.S. 125, 137,
92 S.Ct. 2382 (1972) (“[a] majority shareholder has a fiduciary duty not to misuse his
power by promoting his personal interests at the expense of corporate interests.”);
Production Finishing Corp. v. Shields, 158 Mich.App. 479, 486, 405 N.W.2d 171 (1987);
Wagner Electric Corp. v. Hydraulic Brake Co., 269 Mich. 560, 564, 257 N.W. 884
(1934); see also Wallad v. Access BIDCO, Inc., 236 Mich. App. 303, 600 N.W.2d 664,
666 (Mich. Ct. App. 1999)(“[T]he directors of a corporation owe fiduciary duties to
stockholders and are bound to act in good faith for the benefit of the corporation.).
Even if there was not a legal duty to disclose accurate financial information, there
was an equitable duty. Michigan’s Supreme Court holds there is a duty to disclose
certain facts if parties have “generally discussed the condition at issue – when the
purchaser has expressed some particularized concern or made a direct inquiry – and
the seller fails to freely disclose the material facts within the seller’s knowledge.” M&D,
Inc v McConkey, 231 Mich. App. 22, 29; 585 N.W.2d 33 (1998)(citing Groening v
Opsata, 323 Mich. 73; 34 N.W.2d 560 (1948)).
Lanier constantly asked for financials of the company. He reviewed financial
documentation with the CFO and other officials who had a better understanding and
control of the finances. He asked if he was being provided accurate financial
information. Instead of offering complete details, Lanier was told that his company had
no value. But, evidence suggests that Defendants left out one key piece of information - and may have purposefully withheld -- that the company did have value and would be
thriving in the days to come. Evidence suggests that the CFO instructed officials not to
provide Lanier with complete financial information. Lanier’s company did not have its
own financial department; he relied solely on syncreon Inc. for accounting information.
This, too, can support Lanier's fraud claim.
Questions of fact exists concerning Lanier’s inquiries and Defendants
representations, and their duty to disclose accurate, complete financial information.
Alternatively, Defendants say Lanier’s claim fails because Lanier did not believe
their assertions; thus, there could be no reasonable reliance. They offer Lanier’s
testimony as proof, and a representation and warranty clause which Lanier’s attorney
requested, but which they declined to incorporate in the SPA.
Lanier says that he relied on the statements made to him; he says he believed
that his company had no value, but questioned why. And, whether his reliance was
reasonable is a question of fact for the jury.
No evidence shows that Lanier knew of the representation and warranty that was
rejected by Defendants; it cannot be used to show that Lanier did not rely on their
However, Lanier’s testimony is confusing. At oral argument, Lanier conceded
that he testified that at the time of signing the SPA, he thought his stock was worth more
money. He did clarify his reason for providing that testimony. Lanier explained that he
believed his stock was worth more because he did not think Defendants had the right to
transfer $5.5 million from syncreon.US. Had the transfer not been made, his stock
value would have been worth more. Defendants say this testimony shows he did not
rely on the alleged scheme employed. They say it shows that Lanier just entered into a
bad business deal. This is a dispute that a jury must decide.
Defendants argue that even if they did act fraudulently, they have no liability
because Lanier was not damaged; they say they could have simply demanded payment
under the Notes and MSTTA without paying Lanier any money.
Lanier says that what could have been done is irrelevant; what occurred is what
is pertinent. Lanier also says that there was a novation agreement that the Notes would
not be called; he says with that in place they could not have demanded payment.
Alternatively, Lanier argues that Defendants could not have demanded payment on the
Notes because of the stay.
These arguments present questions of fact that will be submitted to a jury.
Lanier’s motion is GRANTED. Lanier cannot be liable for fraud or breach of
contract because syncreon Inc. withheld information. Basic equity and contract law
Defendants’ motion is DENIED. Questions of fact exist, including:
Were false promises part of a scheme to defraud Lanier?
Did Defendants intend to defraud Lanier when they said syncreon.US had
Was there a fraudulent scheme?
Did Lanier rely on the statements?
Was there a novation/modification to the Demand Notes?
If there was a novation/modification, what were the terms of the new
Were the Demand Notes callable?
Did Defendants prematurely demand payment?
Did Defendants withhold financial information?
IT IS ORDERED.
S/Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: April 17, 2014
The undersigned certifies that a copy of this
document was served on the attorneys of record
by electronic means or U.S. Mail on April 17,
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