React Presents, Inc v. Eagle Theater Entertainment, LLC et al

Filing 31

ORDER granting in part and denying in part Defendants' Amended 22 Motion for Judgment on the Pleadings. Signed by District Judge Denise Page Hood. (JOwe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
REACT PRESENTS, INC.,
Plaintiff,

CASE NO. 16-13288
HON. DENISE PAGE HOOD

v.
EAGLE THEATER ENTERTAINMENT,
LLC,
BLAIR MCGOWAN,
AMIR DAIZA,
MATTHEW FARRIS
Defendants.
/
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
AMENDED MOTION FOR JUDGMENT ON THE PLEADINGS [#22]
I.

BACKGROUND
A. 16-13288, Procedural Background
On September 12, 2016, Plaintiff React Presents, Inc. (“React”) filed a

Complaint against Defendants Eagle Theater Entertainment, LLC (“Eagle”), Blair
McGowan (“McGowan”), Amir Daiza (“Daiza”), and Matthew Farris (“Farris”)
(collectively, “Defendants”) alleging breach of contract (Count I), fraud (Count II),
breach of fiduciary duty (Count III), violation of the Racketeer Influenced and
Corrupt Organizations Act (“RICO”) (Count IV), and unjust enrichment (Count
V). (Doc # 1) This matter is presently before the Court on Defendants’ Amended
1

Motion for Judgment on the Pleadings, filed on May 17, 2017. (Doc # 22) React
filed a Response on June 7, 2017. (Doc # 24) Defendants filed a Reply on June
26, 2017. (Doc # 25)
B. 16-13311 (Related Case), Procedural Background
On September 13, 2016, Plaintiff SFX-React Operating LLC (“SFX”) filed a
Complaint against Defendants Eagle Theater Entertainment, LLC (“Eagle”), Blair
McGowan (“McGowan”), Amir Daiza (“Daiza”), and Matthew Farris (“Farris”)
(collectively, “Defendants”) alleging breach of contract (Count I), fraud (Count II),
breach of fiduciary duty (Count III), violation of the Racketeer Influenced and
Corrupt Organizations Act (“RICO”) (Count IV), and unjust enrichment (Count
V). (Doc # 1) Defendants filed a Motion for Judgment on the Pleadings on May
17, 2017. (Doc # 25) SFX filed a Response on June 7, 2017. (Doc # 27)
Defendants filed a Reply on June 26, 2017. (Doc # 28)
C. Factual Background
Plaintiff React was a club, concert, and festival promotion company in the
Midwest with its base of operations in Illinois. In 2014, Plaintiff SFX acquired at
least some of React’s assets. SFX is also in the business of promoting clubs,
concerts, and festivals in the Midwest with its base of operations in Illinois.
Defendants own and operate several concert venues in the Metro Detroit area
including Elektricity, a nightclub in Pontiac, Michigan. Elektricity serves as a
2

concert venue allegedly exclusively for electronic musicians, DJs, and other artists
who perform electronic dance music (“EDM”).

Defendant McGowan owns

Defendant Eagle and is its managing member. Defendant Daiza is responsible for
overseeing Eagle’s operations and overseeing the bookkeeping. Defendant Farris
is Eagle’s bookkeeper.
In late 2012, React and Defendants began putting on EDM concerts together
at Eagle. At first, React and Eagle allegedly orally agreed to split the profits (or
losses) 50-50. React was responsible for negotiating and contracting with artists,
advertising, marketing, and promoting the concerts. Eagle was responsible for
operating the venue and selling tickets at the box office. In November 2013, the
parties memorialized their agreement and practices in a written co-promotion
agreement. According to React, React and Eagle co-promoted approximately 100
concerts from 2012 until React’s assets were acquired by SFX in April 2014 under
the terms of the co-promotion agreement. After each concert, Eagle would provide
React with a “settlement” document via e-mail purporting to indicate the profits
generated. The settlements were allegedly prepared by Defendant Farris, overseen
and approved by Defendant Daiza, and approved by Defendant McGowan. React
would review the settlements, and Eagle would send a check to React via the
United States mail for React’s share of the profits.

3

In April 2014, SFX and Eagle began co-promoting concerts under the same
terms as the prior agreement between React and Eagle. According to SFX, the
transition was seamless because SFX was operated by the principals of React. On
or around May 1, 2014, SFX and Eagle entered into a written co-promotion
agreement, the material terms of which were identical to the agreement between
React and Eagle. SFX and Eagle have co-promoted at least 83 EDM concerts from
April 2014 through 2016.

After each concert, Eagle provides SFX with a

settlement document via e-mail purporting to indicate the profits generated. The
settlements have been allegedly prepared by Defendant Farris, overseen and
approved by Defendant Daiza, and approved by Defendant McGowan.

SFX

reviews the settlements, and Eagle then sends a check to SFX via the United States
mail for SFX’s share of the profits.
According to Plaintiffs, in January 2016, a disgruntled Eagle employee
provided React and SFX with what Plaintiffs allege to be true and accurate
accounting records disclosing that Eagle kept two sets of books showing receipts
from the concerts. Plaintiffs allege that Eagle’s settlements systematically and
fraudulently underreported the true profits from almost every single one of the copromoted concerts.
According to React, it was paid approximately $82,400.00 less than what it
should have received under the co-promotion agreement. React further alleges that
4

Defendants’ scheme resulted in a $400,000.00 reduction in React’s “Earn-Out
Payment” (a multiplier on profits) under an Asset Membership Interest and
Contribution Agreement between SFX Entertainment, Inc. and SFX-React
Operating, LLC (the terms of which Defendants were allegedly aware) when SFX
acquired React assets in 2014.
According to SFX, it was paid approximately $126,200.00 less than what it
should have received under the terms of the co-promotion agreement. SFX further
alleges that Eagle has withheld payments totaling approximately $200,000.00 for
at least 16 concerts that SFX and Defendants have co-promoted since March 2016.
In September 2016, React and SFX brought actions against Defendants
alleging that they suffered hundreds of thousands of dollars in damages because, as
a result of Defendants systematic and fraudulent underreporting, React and SFX
almost always received less from the concerts than the 50 percent of the profits to
which they were entitled under the co-promotion agreements.1
Defendants now move for judgment on the pleadings and ask this Court to
dismiss React’s Complaint and SFX’s Complaint in their entirety. Defendants
argue that the breach of contract claims and unjust enrichment claims fail because
1

In February 2017, Defendants counterclaimed that React and SFX used the control they gained
over EDM artists via radius clauses in performance contracts as monopolistic leverage to enter
the Metro Detroit EDM market, and that React was unjustly enriched when it received hundreds
of thousands of dollars from alcohol sales at the co-promoted concerts. React and SFX each
moved to dismiss Defendants’ Counterclaims. On May 3, 2017, the Court held a hearing on
Plaintiffs’ motions.
5

the subject matter of the co-promotion agreements is illegal, rendering them
unenforceable.

Defendants further argue that because the co-promotion

agreements are void, React and SFX had no property rights of which they could be
defrauded, and their RICO claims fail. Defendants also argue that the fraud claims
fail because, under Michigan law, they cannot survive on the basis of performance
of contracts. Lastly, Defendants argue that the breach of fiduciary duty claims fail
because there was no fiduciary relationship between the parties.
II.

ANALYSIS
A. Standard of Review
Federal Rule of Civil Procedure 12(c) authorizes parties to move for

judgment on the pleadings “[a]fter the pleadings are closed—but early enough not
to delay trial.” Fed. R. Civ. P. 12(c). Motions for judgement on the pleadings are
analyzed under the same standard as motions to dismiss under Rule 12(b)(6). See
Warrior Sports, Inc. v. Nat’l Collegiate Athletic Ass’n, 623 F.3d 281, 284 (6th Cir.
2010). “For purposes of a motion for judgment on the pleadings, all well-pleaded
material allegations of the pleadings of the opposing party must be taken as true,
and the motion may be granted only if the moving party is nevertheless clearly
entitled to judgment.” Id.
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court
explained that “a plaintiff’s obligation to provide the ‘grounds’ of his
6

‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do. Factual allegations must
be enough to raise a right to relief above the speculative level . . . .” Id. at 555. A
plaintiff’s factual allegations, while “assumed to be true, must do more than create
speculation or suspicion of a legally cognizable cause of action; they must show
entitlement to relief.” LULAC v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007)
(emphasis in original) (citing Twombly, 550 U.S. at 555). “To state a valid claim, a
complaint must contain either direct or inferential allegations respecting all the
material elements to sustain recovery under some viable legal theory.” Bredesen,
500 F.3d at 527 (citing Twombly, 550 U.S. at 562).
When deciding a 12(c) motion for judgment on the pleadings, as a general
rule, matters outside the pleadings may not be considered unless the motion is
converted to one for summary judgment under Fed. R. Civ. P. 56. See Weiner v.
Klais & Co., 108 F.3d 86, 88 (6th Cir. 1997). The Court may, however, consider
“the Complaint and any exhibits attached thereto, public records, items appearing
in the record of the case, and exhibits attached to defendant’s motion to dismiss so
long as they are referred to in the Complaint and are central to the claims contained
therein.” Id. at 89.

7

B. Breach of Contract Claims
Defendants argue that Plaintiffs’ breach of contract claims fail because
Plaintiffs are seeking damages for bar sales. Defendants argue that the sharing
alcohol proceeds with a non-licensed person is illegal and any contract to do so is
void. Defendants also argue that the co-promotion agreements are unenforceable
because they violate public policy set forth in the administrative rules promulgated
by the Michigan Liquor Control Commission.
Plaintiffs respond that the co-promotion agreements are facially valid
because their plain language does not violate Michigan’s Liquor Control Code.
Plaintiffs also argue that the co-promotion agreements are not void ab initio, and
even if they were, the Court should sever any illegal portion to save the remainder.
Plaintiffs further argue that the co-promotion agreements do not violate public
policy because they provide that the parties were to share revenues from a host of
revenue sources including ticket sales, merchandise commissions, and sponsorship
revenue.
In this case, Eagle holds a liquor license from the Michigan Liquor Control
Commission, and the record shows that Defendant McGowan is the only person
affiliated with this license. (Doc # 25-1) React and SFX are not mentioned. The
Michigan Liquor Control Commission rules provide that “a licensee shall not allow
a person whose name does not appear on the license to use or benefit from the
8

license.” Mich. Admin. Code R. 436.1041(1).

The Michigan Liquor Control

Code, in turn, provides that “a person, other than a person required to be licensed
under this act, who violates this act is guilty of a misdemeanor.” Mich. Comp.
Laws § 436.1909(1). It further provides that “a licensee who violates this act, or a
rule or regulation promulgated under this act, is guilty of a misdemeanor
punishable by imprisonment for not more than 6 months or a fine of not more than
$500.00, or both.” Id. at § 436.1909(2).
Under the express terms of the co-promotion agreements at issue, the parties
were to split net profits or net losses from all “adjusted gross receipts” less all
“approved show costs.” “Adjusted gross receipts” was defined to include proceeds
from the sales of admissions to the events, ticket service charges, net travel
package income, refunds, rebates, merchandise commissions, concessions
commissions, sponsorship revenue, and insurance recoveries.

The term

“concessions commissions” was not defined. The co-promotion agreements also
included the following provisions:
14.5 Severability. If any provision of this Agreement or the
application thereof is held invalid, the invalidity shall not affect the
other provisions of this Agreement provided that the material terms of
this Agreement can be given their intended effect without the invalid
provisions, and to this extent the provisions of this Agreement are
declared to be severable.
...

9

14.8 Representations and Warranties; Covenants. Each Party hereby
represents, warrants and agrees that . . . (b) it shall perform its
activities under this Agreement in accordance with all applicable
Federal, state and local laws and regulations . . . .
In Michigan, the paramount goal when interpreting a contract is to give
effect to the intent of the contracting parties. Old Kent Bank v. Sobczak, 243 Mich.
App. 57, 63-64 (2000). The court is to read the agreement as a whole and attempt
to apply the plain language of the contract itself. Id. If the intent is clear from the
language of the contract itself, there is no place for further construction or
interpretation of the agreement. Farm Bureau Mut. Ins. Co. v. Nikkel, 460 Mich.
558, 566 (1999). A contract provision that is clear and unambiguous must be
“taken and understood in [its] plain, ordinary, and popular sense.” Mich. Mut. Ins.
Co. v. Dowell, 204 Mich. App. 81, 87 (1994).
Where contract language is neither ambiguous nor contrary to a statute, the
will of the parties, as reflected in their agreement, is to be carried out, and the
contract is enforced as written. See Cruz v. State Farm Mut. Auto. Ins. Co., 466
Mich. 588, 594 (2002). Because contracting parties are assumed to want their
contract to be valid and enforceable, courts in Michigan construe contracts that are
potentially in conflict with a statute and against public policy, where reasonably
possible, to harmonize them with the statute. Id. at 599.
The Court finds that the co-promotion agreements are valid and enforceable.
First, the plain language of the agreements does not include mention alcohol
10

proceeds and cannot be said to violate Michigan’s Liquor Control Code or the
public policy reflected therein. Indeed, the co-promotion agreements expressly
exclude Defendants’ sharing of alcohol proceeds with Plaintiffs because Plaintiffs’
names do not appear on Eagle’s liquor license to use or benefit from the liquor
license as required by Michigan laws and regulations, and all parties expressly
agreed to perform under the co-promotion agreements in accordance with
Michigan laws and regulations.
Second, even if the Court were to find an ambiguity regarding the sharing of
alcohol proceeds, the Court would construe the co-promotion agreements in a
manner that renders them compatible with the existing public policy as reflected in
the administrative rules promulgated by the Michigan Liquor Control Commission,
so as to give effect to the intent of the parties that their co-promotion agreements
be enforced as written.

And should there be questions of fact regarding the

meaning of any ambiguous language, judgment on the pleadings would be
inappropriate. See Galeana Telecomm. Invs., Inc. v. Amerifone Corp., 202 F.
Supp. 3d 711, 720 (E.D. Mich. 2016).
Third, even if the Court were to find a provision for illegal sharing of
alcohol revenue that could potentially render the co-promotion agreements void,
the Court could sever any such provision. As described above, under the express
terms of the co-promotion agreements, the parties were to split net profits from
11

several revenue sources that were unrelated to the sale of alcohol and do not
violate public policy, and the co-promotion agreements contained severability
provisions. See Tata Consultancy Servs., a Div. of Tata Sons Ltd. v. Sys. Int’l, Inc.,
31 F.3d 416, 428 (6th Cir. 1994) (noting that to invalidate a contract in its entirety
based on a single provision, in that case the liquidated damages provision, would
be to render the severability clauses meaningless).
Lastly, Defendants in this case rely on Krause v. Boraks, 341 Mich. 149
(1954), and Turner v. Schmidt Brewing Co., 278 Mich. 464 (1936), in support of
their argument that the co-promotion agreements are void—that is that they never
came into existence and were a nullity from the outset, so they could not confer
rights or obligations on the parties. Plaintiffs argue that if the Court does not find
that the co-promotion agreements are valid, then they are at least not void ab initio,
but rather, voidable at the option of the parties. The Court need not reach this
argument because, as discussed above, the Court finds that the co-promotion
agreements are facially valid.

However, the Court notes that the Michigan

Supreme Court recently explained, citing both Krause and Turner, that courts in
Michigan “have been known to be imprecise with their use of the term ‘void,’ and
have on occasion mistakenly employed that term to describe a contract when what
is actually meant is that a contract is voidable or otherwise enforceable, and not

12

that it is void ab initio.” Epps v. 4 Quarters Restoration LLC, 498 Mich. 518, 537
(2015).
The Court denies Defendants’ Motions for Judgment on the Pleadings as to
the breach of contract claims.
C. Unjust Enrichment Claims
Defendants argue that Plaintiffs’ unjust enrichment claims fail because there
was an express contract to promote the concerts. Defendants also argue that even
if an express contract did not address the subject matter under dispute, an illegal
and void contract cannot be enforced through equity. Defendants further argue that
Eagle was not unjustly enriched because it was the only person who had any right
to proceeds from a Michigan liquor license.
Plaintiffs respond that the Complaints expressly plead that the unjust
enrichment claims are brought in the alternative to the breach of contract claims,
and if the co-promotion agreements are found unenforceable, Plaintiffs should be
permitted to proceed on their unjust enrichment claims. Plaintiffs also argue that
even if the co-promotion agreements were deemed unenforceable, Plaintiffs can
still recover through equity from Defendants, the greater wrongdoers. Plaintiffs
further argue that the Complaints sufficiently plead the elements of unjust
enrichment.

13

To establish a claim for unjust enrichment in Michigan, a plaintiff must
show: (1) receipt of a benefit by the defendant from the plaintiff, and (2) an
inequity resulting to the plaintiff because of the defendant’s retention of the
benefit. Belle Isle Grill Corp. v. Detroit, 256 Mich. App. 463, 478 (2003). “If
both elements are established, Michigan courts will then imply a contract to
prevent unjust enrichment. However, a contract will not be implied where an
express contract governing the same subject matter exists.” Joseph v. JPMorgan
Chase Bank, Nat’l Ass’n, No. 12-12777, 2013 WL 228010 (E.D. Mich. Jan. 22,
2013). “Where a contract governs the relationship of the parties, a cause of action
for unjust enrichment will not be recognized.” E3A v. Bank of America, N.A., No.
13-10277, 2013 WL 1499560, at *4 (E.D. Mich. Apr. 11, 2013).
The relationship between Defendants and Plaintiffs was governed by express
contracts, the co-promotion agreements. Under the agreements’ express terms, the
parties were to split net profits or net losses from all “adjusted gross receipts” less
all “approved show costs” for all co-promoted concerts.

The Complaints

themselves allege that the parties co-promoted dozens of concerts under the terms
of the co-promotion agreements, and the Plaintiffs attached the written express
contracts to the Complaints. The basis of this dispute, the splitting of net profits
from the co-promoted concerts is the subject matter governed by the express copromotion agreements between the parties.
14

The co-promotion agreements

expressly provide which proceeds the parties were to split and how. The Court
declines to imply another contract between the parties under an unjust enrichment
theory.
The Court grants Defendants’ Motions for Judgment on the Pleadings as to
the unjust enrichment claims.
D. Fraud Claims
Mentioning the economic loss doctrine, Defendants argue that Plaintiffs’
fraud claims fail because they are predicated on contractual duties. Defendants
argue that Plaintiffs have not identified a duty that is separate and distinct from any
duty owed under the co-promotion agreements.
Plaintiffs respond that the economic loss doctrine does not bar their fraud
claims because this doctrine only applies to transactions involving the sale of
goods. Plaintiffs also argue that duty is not an element of their fraud claim.
Plaintiffs further argue that Defendants’ knowing, false representations go above
and beyond mere failure to perform under the co-promotion agreements. Plaintiffs
assert that, at the very least, the fraud claims must survive as to individual
Defendants McGowan, Daiza, and Farris because they are not parties to the copromotion agreements (only Defendant Eagle is) and did not owe Plaintiffs any
contractual duty.

15

Plaintiffs’ breach of contract claims allege that Defendant Eagle breached
the co-promotion agreements by failing to perform, that is, by failing to split the
profits equally. Plaintiffs’ fraud claims allege that Defendants Eagle, McGowan,
Daiza, and Farris willfully and intentionally created false settlement documents
that underreported Eagle’s profits.
1. Economic Loss Doctrine
“Where a claim for damages arises out of the commercial sale of goods, and
the losses incurred are purely economic, the ‘economic loss doctrine’ bars tort
recovery and limits the plaintiff’s remedies to those available under the Uniform
Commercial Code.” Cargill, Inc. v. Boag Cold Storage Warehouse, Inc., 71 F.3d
545, 550 (6th Cir. 1995) (citing Neibarger v. Universal Coop., Inc., 439 Mich. 512,
515 (1992)). Michigan courts apply the economic loss doctrine only in situations
involving the sale of goods, not in situations involving transactions in services.
Cargill, 71 F.3d at 550.
Because the co-promotion agreements at issue do not involve the sale of
goods, the economic loss doctrine does not bar Plaintiffs’ fraud claims.
Defendants’ reliance on Fultz v. Union-Commerce Assocs., 470 Mich. 460 (2004),
is misplaced because Fultz did not involve a fraud claim and the court in Fultz did
not discuss or apply the economic loss doctrine. To the extent that Defendants rely
on Huron Tool & Eng’g Co. v. Precision Consulting Servs., Inc., 209 Mich. App.
16

365 (1995), that case involved a contract for the sale of goods, unlike the copromotion agreements at issue here. The court in Huron found that fraud in the
inducement was an exception to the economic loss doctrine, but that the plaintiff
had failed to plead such a fraud and was therefore restricted to contractual
remedies available under the UCC. Id. at 368; see Dell’Orco v. Brandt, No. 0371929, 2005 WL 1355088, at *5 (E.D. Mich. May 3, 2005) (discussing Huron and
finding that the economic loss doctrine has not been extended beyond disputes
between purchasers and sellers).
2. Separate and Distinct Duty
In general, a tort action for the nonperformance of a contract cannot be
maintained in Michigan. DBI Invs., LLC v. Blavin, 617 F. App’x 374, 381 (6th
Cir. 2015) (quoting Ferrett v. Gen. Motors Corp., 438 Mich. 235 (1991)). Where
there is a contract between the parties, an action in tort generally requires a breach
of duty separate and distinct from a breach of contract. Galeana, 202 F. Supp. 3d
at 723.
This “separate and distinct duty” analysis has its roots in Hart v.
Ludwig, 347 Mich. 559 (1956), a case involving a negligence claim
against the defendant for the nonperformance of an oral agreement to
care for and maintain the plaintiffs’ apple orchard. The Michigan
Supreme Court held that the plaintiffs could not maintain their
negligence action because the tort required “some active negligence or
misfeasance,” as opposed to the defendant’s nonfeasance. According
to the court, there must be some breach of duty distinct from breach of
contract. . . .
17

The Hart principle makes sense in the context of a tort claim, like
negligence, which is premised on the breach of a legal duty.
However, a claim for fraudulent misrepresentations differs in that
there is no duty as one of its elements. Under Michigan law, a plaintiff
asserting a claim of common-law fraud must prove the following
elements:
(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 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.
Bennett v. MIS Corp., 607 F.3d 1076, 1100–1101 (6th Cir.2010)
(quoting Cummins v. Robinson Twp., 283 Mich. App. 677, 770 (2009)
(per curiam)). Unlike the elements of a negligence claim, the elements
of a classic fraud claim do not include a legal duty owed or breach of
any duty. As such, the Hart principle does not apply . . . .
Galeana, 202 F. Supp. 3d at 723 (some internal quotations and citations omitted).
The Court applies the same reasoning to this case. Duty is not an element of
the Plaintiffs’ fraud claims, so the Hart principle does not apply here. Defendants
rely on Fultz, but Fultz is distinguishable from this case because the plaintiff in
Fultz brought a negligence claim, not a fraud claim. Fultz, 470 Mich. at 462. The
court therefore correctly applied the Hart principle and concluded that the plaintiff
failed to establish that the defendant owed her a duty (a required element of her
negligence claim) that was separate and distinct from the defendant’s contractual
duty.
18

The Court concludes that Defendants’ arguments fail and denies Defendants’
Motions for Judgment on the Pleadings as to the fraud claims.
E. Breach of Fiduciary Duty Claims
Defendants argue that Plaintiffs’ breach of fiduciary duty claims fail because
the co-promotion agreements expressly state that the agreements shall not be
construed as creating joint ventures. Defendants assert that nothing in the parties’
relationships has traditionally been recognized as involving fiduciary duties; rather,
the parties are competitors in the music business.
Plaintiffs respond that the Complaints sufficiently allege all the elements of
a joint venture. Plaintiffs argue that the language in the co-promotion agreements
is not dispositive as to the parties’ legal relationships, but rather just one factor to
be considered. Plaintiffs argue that the facts alleged in the Complaints and the
language in the co-promotion agreements raise a question of fact regarding
whether the parties were, despite any statements about themselves, engaged in joint
ventures.

Plaintiffs further note that they have not alleged that they are

competitors of Defendants, and that, in any event, competitors can and do form
joint ventures.
A joint venture is an association to carry out a single business enterprise for
a profit, and whether or not a joint venture exists is a legal question for the trial
court to decide. Berger v. Mead, 127 Mich. App. 209, 214 (1983). The key
19

consideration is whether the parties intended a joint venture. Id. at 215. This
intention is to be determined in accordance with the ordinary rules governing the
interpretation and construction of contracts. Kay Inv. Co. v. Brody Realty No. 1,
L.L.C., 273 Mich. App. 432, 439 (2006) (internal quotations and citation omitted).
The elements of a joint venture are: (1) an agreement indicating an intention to
undertake a joint venture; (2) a joint undertaking of; (3) a single project for profit;
(4) a sharing of profits as well as losses; (5) contribution of skills or property by
the parties; and (6) a joint proprietary interest and a right of mutual control over the
subject matter of the enterprise. Meyers v. Robb, 82 Mich. App. 549, 557 (1978);
In re Valley-Vulcan Mold Co., 5 F. App’x 396, 400 (6th Cir. 2001). The stipulated
share of net profits does not in itself create a joint venture. Gleichman v. Famous
Players-Lasky Corp., 241 Mich. 266, 275 (1928). “When two persons are engaged
in the prosecution of a joint enterprise, each has authority to act for both in respect
to the means or agencies employed to execute the common purpose and the
negligence of one in the management thereof will be imputed to both.”

Id.

(internal quotations and citation omitted).
In Gleichman, the plaintiff ran a movie theatre, and the defendant produced
and distributed films.

The parties entered into a contract providing for the

exclusive exhibit of the defendant’s films at the plaintiff’s theatre for a term of five
years under the terms of a “booking contract” to be entered into each year. Id. at
20

268. The court found that the parties were not joint venturers, explaining as
follows.
Under the contracts defendant had no voice in the manner in which
the business should be conducted by plaintiff except its insistence that
the advertising it prepared should be used and a minimum admission
fee be charged, and these solely for the purpose of increasing its
license or rental charge. It incurred no liability to any person other
than the plaintiff. The parties had no joint investment in property. The
contracts fixed their rights and liabilities in every respect. On a breach
by either, the other might declare the contract at an end and have an
action for damages sustained thereby. The time within which plaintiff
might bring such action was fixed in the contract. Except as fixed and
determined by the contract itself, neither party had or was to exercise
any proprietary interest or control over that which the other had and
exclusively controlled. There was no common property interest in
what either party contributed to the business. . . .
Under the provisions of these contracts, both the plaintiff and the
defendant incurred certain obligations personal to each. There was no
joint obligation. There was no service to be rendered by them jointly.
There could be no indebtedness incurred for which they were jointly
liable. There was no sharing of losses. While they were both
interested in the success of the venture, such success, even if both of
the parties fully performed, was dependent upon the patronage of the
public, over which, except by the class of pictures exhibited, the
advertising, and the conduct of the theater by plaintiff, they had no
control. Suppose plaintiff had refused to accept the films from
defendant and exhibit them as agreed. Would it be contended that
defendant might then have taken possession of the theater and
exhibited them itself? Clearly, its only relief would have been an
action for damages for breach. . . . In our opinion, the contracts did
not constitute the parties joint adventures.
Id. at 276–78.
In this case, Plaintiffs correctly note that competitors can and do form joint
ventures. See Beverage Distribs., Inc. v. Miller Brewing Co., 690 F.3d 788, 790
21

(6th Cir. 2012). However, aside from a formulaic recitation of the elements of a
joint venture, the Complaints lack factual allegations supporting Plaintiffs’ position
that the parties intended to form joint ventures. Even assuming, without deciding,
that the Plaintiffs have sufficiently pled the second, third, fourth, and fifth elements
of a joint venture, Plaintiffs have not shown that they could meet the first or sixth
element. As to the first element of a joint venture, there is no agreement indicating
any intention to undertake joint ventures. Indeed, the plain language in the copromotion agreements expressly indicates the opposite intent:
INDEPENDENT CONTRACTOR. The relationship created by this
Agreement is that of independent contractors, and nothing contained
in this agreement shall be deemed or construed as creating any
partnership, joint venture, employment relationship, agency or other
relationship between the parties, nor does it grant either Party any
authority to assume or create any obligation on behalf of or in the
name of the other, except as expressly provided herein.
(Doc # 1-1)
As to the sixth element of a joint venture, the Complaints fail to allege joint
proprietary interests or rights of mutual control over the subject matter of the
enterprises. The co-promotion agreements fixed the parties’ rights and liabilities in
every respect, and there was no common property interest in what each party
contributed to the concert co-promotions. Under the co-promotion agreements,
there was no joint obligation or service to be rendered by the parties jointly.

22

Additionally, there is no allegation of a joint venture name, joint venture
accounts, joint venture property, or comingling of funds or property between the
parties. See Gleichman, 241 Mich. at 272. There is no allegation that any one
party acted as agent for any other, or that any one party was able to direct the
conduct of any other; there is no allegation of common responsibility among the
parties for negligent conduct on the part of any one party. See Berger, 127 Mich.
App. at 216-17.
While language in a contract may not always be dispositive as to the legal
relationship between the parties,2 it is an important factor in determining the
parties’ intent—the paramount consideration as to whether any joint venture exists.
The Court concludes that Plaintiffs in this case have not shown entitlement to relief
because they have failed to allege sufficient facts constituting indicia of joint
ventures between the parties. Plaintiffs’ breach of fiduciary duty claims fail, and
the Court grants Defendants’ Motions for Judgment on the Pleadings as to the
breach of fiduciary duty claims.
2

The Court notes that Plaintiffs cite only employment cases (all of which involved other statutes
not at play in this contract case) in support of their argument that the independent contractor
language in the co-promotion agreements is relevant but not dispositive. See Weary v. Cochran,
377 F.3d 522, 524-28 (6th Cir. 2004) (analyzing whether the plaintiff was an employee or
independent contractor in a civil rights, age discrimination case); Wolcott v. Nationwide Mut. Ins.
Co., 884 F.2d 245, 249-51 (6th Cir. 1989) (analyzing whether the plaintiff was an employee
within the meaning of ERISA); City of Detroit v. Salaried Physicians Prof’l Ass’n, UAW, 165
Mich. App. 142, 146-49 (1987) (upholding Michigan Employment Relations Commission’s
finding that the appellees physicians were employees and not independent contractors for
purposes of union certification election); Cimorelli v. N.Y. Cent. R. Co., 148 F.2d 575, 577-80
(6th Cir. 1945) (analyzing whether the plaintiff was an employee within the meaning of the
Federal Employers’ Liability Act).
23

The Court further notes that the co-promotion agreements contain the
following merger clause: “This Agreement contains the entire agreement between
the parties and merges any prior representations, warranties, or understandings
they may have had regarding the subject matter of this Agreement.

This

Agreement may not be modified, altered or amended, except by a written
instrument signed by both parties.”

(Doc # 1-1)

The Court finds that this

provision unambiguously expresses the parties’ intent to fully integrate their
agreements, which could have but did not formalize the parties’ relationships as
joint ventures. See John Harris & Assocs., Inc. v. Day, 916 F. Supp. 651, 656–57
(E.D. Mich. 1996). Plaintiffs may not, as a matter of law, introduce evidence
which seeks to vary or contradict the express and unambiguous provisions of the
co-promotion agreements, including evidence of conduct indicating that the parties
were engaged in a joint venture. Id. at 657.
F. RICO Claims
Defendants argue that Plaintiffs’ RICO claims fail because these are gardenvariety business disputes, which RICO has not federalized. Next, Defendants
again argue that Plaintiffs had no property rights to share in “bar sales,” so
Plaintiffs were not deprived or defrauded out of anything under the “void” copromotion agreements. As to this second argument, Defendants merely rely on

24

their previous arguments that the Court has already discussed and rejected above,
so the Court will not address them again.
Plaintiffs respond that Defendants’ alleged conduct is the type of long-term
criminal activity that gives rise to a claim under RICO. Plaintiffs further argue that
they were defrauded, that the Complaints adequately allege that Defendants made
false statements to Plaintiffs, and that Plaintiffs had a property interest under the
co-promotion agreements in revenue from sales of admissions to the events, ticket
service charges, net travel package income, refunds, rebates, merchandise
commissions, concessions commissions, sponsorship revenue, and insurance
recoveries.
Defendants cite a single Seventh Circuit case in support of their one
remaining argument that these are garden-variety business disputes, which RICO
has not federalized. See Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1025 (7th
Cir. 1992). However, Defendants do not present any clear argument or identify
which element of the RICO claims has not been properly alleged based on the cited
case. In Midwest Grinding, the court affirmed dismissal of RICO counts because
the plaintiff had not met the continuity prong showing a threat of continued
criminal activity. Id. at 1023-25. However, Defendants in this case fail to argue or
explain how Plaintiffs may have failed to meet the continuity prong (or any other

25

prong). The Court denies Defendants’ Motions for Judgment on the Pleadings as
to the RICO claims.
III.

CONCLUSION
For the reasons set forth above,
IT IS HEREBY ORDERED that Defendants’ Amended Motion for

Judgment on the Pleadings (Doc # 22) is GRANTED IN PART as to the unjust
enrichment claim and breach of fiduciary duty claim, and DENIED IN PART as to
the breach of contract claim, fraud claim, and RICO claim.

Dated: August 23, 2017

s/Denise Page Hood
Chief, U.S. District Court

I hereby certify that a copy of the foregoing document was served upon counsel of
record on August 23, 2017, by electronic and/or ordinary mail.
s/Julie Owens
Acting in the absence of LaShawn Saulsberry
Case Manager

26