Frank W. Kerr Company, Debtor in possession v. Walnut Associates 1, L.L.C. d/b/a West Grange Pharmacy
MEMORANDUM AND ORDERGRANTING IN PART AND DENYING IN PART PLAINTIFFS MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. 20) AND DENYING DEFENDANTS DEFENDANTS MOTION TO DEFER CONSIDERATION OF PLAINTIFFS MOTION (Doc. 25) AND DENYING WITHOUT PREJUDICE DEFENDANTS MOTION TO STRIKE AFFIDAVIT OF JEFFREY TISCHLER (Doc. 24) AND DIRECTING THE MATTER BE REFERRED TO THE MAGISTRATE JUDGE. Signed by District Judge Avern Cohn. (MVer)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
FRANK W. KERR COMPANY,
Case No. 16-14307
WALNUT ASSOCIATES 1, LLC,
d/b/a WEST GRANGE PHARMACY,
HON. AVERN COHN
MEMORANDUM AND ORDER
GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR PARTIAL
SUMMARY JUDGMENT (Doc. 20)
DENYING DEFENDANT’S DEFENDANT’S MOTION TO DEFER CONSIDERATION
OF PLAINTIFF’S MOTION (Doc. 25)
DENYING WITHOUT PREJUDICE DEFENDANT’S MOTION TO STRIKE AFFIDAVIT
OF JEFFREY TISCHLER (Doc. 24)1
DIRECTING THE MATTER BE REFERRED TO THE MAGISTRATE JUDGE
This is essentially an accounting dispute. Plaintiff Frank W. Kerr Company (Kerr)
is suing defendant Walnut Associates, LLC d/b/a West Grange Pharmacy (West
Grange) seeking to collect on a debt. Kerr is a debtor in possession (DIP) following
filing for bankruptcy which is now in Chapter 11. Kerr says that West Grange owes
$1,930,943 in unpaid pharmeceutical goods delivered to West Grange from June 16,
Upon review of the parties’ papers the Court deems these matters appropriate
for decision without oral argument. See Fed. R. Civ. P. 78(b); E.D. Mich. LR 7.1(f)(2).
2015 to June 30, 2016. West Grange concedes it owes Kerr monies. It says the
amount owing under an agreed upon system of debits and credits and “frozen”
accounts, is $682,000.00–an amount West Grange is willing and ready to pay.
The complaint is in three counts: (1) breach of contract, (2) account stated, (3)
unjust enrichment. (Doc. 1)
Before the Court are the following motions:
Kerr’s motion for partial summary judgment2 (Doc. 20)
West Grange’s motion to defer consideration of Kerr’s motion (Doc. 25)
West Grange’s motion to strike the affidavit of Jeffrey Tischler (Doc. 24)
For the reasons that follow, Kerr’s motion will be granted in part and denied in
part. West Grange’s motion to defer will be denied as moot and West Grange’s motion
to strike will be denied.
The material facts as gleaned from the parties’ papers follow.
Kerr, until its bankruptcy, was a distributor of pharmaceuticals, pharmaceutical
supplies, and over the counter medications which it sold to pharmacies, including West
Grange. For more than 15 years, from 1996 to 2016, West Grange purchased
pharmaceutical goods from Kerr on credit under the terms of an Inventory Finance
In June of 2016, prior to the bankruptcy proceedings, Conway MacKenzie (CM)
It is unclear why Kerr moved for “partial” summary judgment inasmuch as it
seeks “summary judgment in its favor on liability and damages as to all counts of the
complaint.” (Doc. 20).
prepared a report entitled Meeting with JP Morgan Chase N.A. and Comerica Bank (the
“Lenders”), Senior Lenders to Frank W. Kerr Company. The report states that CM was
engaged by Kerr to provide financial advice and restructuring services. It also states
that Jeffrey Tischler of CM was appointed Chief Restructuring Officer. CM
recommended a liquidation of Kerr. Page 12 of the report is entitled Kerr Wind-Down Key Assumptions: Accounts Receivable; it also contains a column for “Frozen
Balances.” The listing for West Grange states the following amounts:
On June 30, 2016, Kerr ceased operations. Thereafter, certain unsecured
creditors of Kerr filed an involuntary petition under Chapter 7. On September 20, 2016,
Kerr consented to entry of an order converting it to a Chapter 11.
The parties vigorously dispute the accounting for West Grange’s indebtedness.
The parties’ varied description of the accounting documents is evidenced by two
competing affidavits. Kerr offers the “affidavit” of Jeffrey Tischler,3 the appointed Chief
Restructuring Officer. West Grange offers the affidavit of Richard Grossman, identified
as a member of West Grange. Grossman is also identified as a member of the Board of
Directors of Kerr.
As Tischler explains, to evidence the West Grange's Indebtedness, Kerr would
provide West Grange with account statements reflecting the amounts purchased, paid,
or otherwise credited. Kerr has submitted several account statements from June 16,
As noted above, West Grange has moved to strike Tischler’s affidavit on the
grounds it is not based on personal knowledge and is not notarized.
2015 to June 30, 2016 which it says establishes West Grange’s indebtness in the
requested amount of approximately $1.9 million. Kerr also points to a Wind Down plan
attached as Exhibit C to its motion for summary judgment. The Wind Down plan,
marked “draft,” states the following as to West Grange:
Balance as of 5/31/16
The Wind Down plan is attached to a Resolution of the Board of Directors of Kerr dated
June 8, 2016 and signed by Ann Y. Newman, William G. Newman, and Richard
West Grange, through Grossman, explains that starting in 2008, it objected to the
account statements sent to it by Kerr for the reasons that (1) Kerr was not, despite a
promise, offering West Grange the lowest price it was offering other customers, (2) Kerr
was not timely crediting West Grange’s account for its share of rebates. West Grange,
again through Grossman, says that in order to retain West Grange’s business, Kerr,
through Ann Newman, agreed that the published prices would not apply to Kerr
nothwithstanding account statements to the contrarty. Grossman goes on to state that
Newman advised him that she instructed the Chief Financial Officer, Thoedore Toloff, to
work with the salespeople at Kerr to account for the overcharges and adjust the
published prices. Apparently, the adjustments were made using a “frozen” account
method. Thus, Grossman says that the account statements Kerr now relies on to arrive
at the $1.9 million are not correct. West Grange also points to the CM report which
states the account receivable collectible by Kerr is “$682" - the amount West Grange is
willing to pay.
The parties’ dispute came to a head on July 8, 2016 when Tischler sent a
demand letter to West Grange in the amount of $1,748,616.02 and requesting a
“detailed accounting” showing what West Grange believes is owed. On July 18, 2016,
West Grange, through Grossman, responded and objected to the amount of the debt.
This lawsuit followed.
After a status conference, the Court entered an order stating its intention to
appoint an accounting master. (Doc. 15) The Court also directed Kerr to submit “an
itemized list of debits which total the amount claimed due and owing” and West Grange
to submit “an itemized list of credits to which it believes it is entitled which total the
amount claimed due and owing.” Id. Neither list is particularly helpful. Kerr’s list is a
series of invoices, balances, purchases, payments, credits, etc. which claims an ending
balance of $1,930,943. West Grange’s statement is nothing more that a list which
shows a “total” of $7,558,381.78. No where does it contain an explanation or
calculation to the amount it says it owes.
Given West Grange’s admission that it owes Kerr $682,000.00 and its statement
that it is willing and ready to pay this amount, partial judgment shall enter in favor of
Kerr in this amount. To this extent, Kerr’s motion for partial summary judgment is
As to whether West Grange owes additional monies, the record is unclear. The
competing statements of Tischler and Grossman together with the confusing and
conflicting accounting records do not conclusively establish that Kerr is entitled to
additional monies. As to any monies owed to Kerr beyond $682,000.00, Kerr’s motion
for partial summary judgment is DENIED.
In light of this determination, West Grange’s motion to defer consideration is
MOOT and West Grange’s motion to strike Tischler’s affidavit is DENIED WITHOUT
Finally, the matter will be referred to the magistrate judge for further proceedings,
which the Court envisions to be along the lines of an action for accounting4 to determine
what, if any, additional monies are owed to Kerr.
UNITED STATES DISTRICT JUDGE
Dated: August 10, 2017
An accounting is an equitable remedy under the common law. Basinger v.
Provident Life & Accident Ins. Co., 67 Mich. App 1, 6 (1976). The purpose of ordering
an accounting is to determine the amount due to a party. Id. In cases filed at law, such
a determination generally is left to the jury. Id. But the equitable remedy of an
accounting developed in courts of equity because it was “evident that many cases arise
in which the determination of what is justly due to a plaintiff necessarily involves long
and difficult inquiries—for instance, it may be necessary to review a series of
transactions extending over many years. For such an investigation a jury is clearly
incompetent.” Id. at 6–7 (quotation marks and citation omitted). “The necessary
prerequisite to the right to maintain a suit for an equitable accounting, like all other
equitable remedies, is...the absence of an adequate remedy at law.” Dairy Queen, Inc.
v. Wood, 369 U.S. 469, 478 (1962). The Supreme Court, in Dairy Queen, explained
that in order to maintain a suit for an equitable accounting, “the plaintiff must be able to
show that the ‘accounts between the parties' are of such a ‘complicated nature’ that only
a court of equity can satisfactorily unravel them.” Dairy Queen, 369 U.S. at 478
(quoting Kirby v. Lake Shore & Michigan Southern R. Co., 120 U.S. 130, 134 (1887)).
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