ECIMOS, LLC v. Carrier Corporation

Filing 727

Order ADOPTING 717 Report and Recommendations. Signed by Judge Jon Phipps McCalla on 11/9/2022. (wrb)

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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

ECIMOS, LLC,
Plaintiff,
v.
CARRIER CORPORATION,
PATRICK L. WHITE, AND
ENGINEERED CONTROLS
AND INTEGRATION, LLC,
Defendants,
PATRICK L. WHITE, AND
ENGINEERED CONTROLS
AND INTEGRATION, LLC,
Counter-Plaintiffs/Third Party Plaintiffs,
v.
ECIMOS, LLC AND STEPHEN G. OLITA,
INDIVIDUALLY AND AS A MEMBER OF
ECIMOS, LLC
AND ENGINEERED CONTROLS
AND INTEGRATION, LLC,
Counter-Defendant and Third Party
Defendant.

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Case No. 2:15-cv-02726-JPM-cgc

ORDER ADOPTING REPORT AND RECOMENDATION

Before the Court is the Report and Recommendation of United States Magistrate
Judge Charmaine Claxton filed on July 18, 2022 (ECF No. 717) with respect to Patrick L.
White’s (“White”) Motion to Enforce Partial Assignment of Judgment against ECIMOS, LLC

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(“ECIMOS”), filed on November 2, 2020.

(ECF No. 641.)

recommends that the Court grant White’s Motion.

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The Magistrate Judge

(ECF No. 717 at PageID 16016.)

ECIMOS filed a timely objection to the Magistrate Judge’s Report and Recommendation on
August 1, 2022. (ECF No. 720.)
Upon de novo review, the Court ADOPTS the Report and Recommendation of the
Magistrate Judge. Accordingly, White’s Motion to Enforce Partial Assignment of Judgment
is GRANTED.
I.

BACKGROUND
The underlying case is a suit by ECIMOS against Carrier Corporation (“Carrier”),

alleging breach of contract, trade secret misappropriation, conversion, and violations of the
Digital Millennium Copyright Act and the Copyright Act of 1976 regarding Carrier’s use of
ECIMOS’s Interprocess Communication Status (“IPCS”) software. (ECF No. 1-3.) Carrier
argued that a parallel case in Shelby County Chancery Court, Patrick L. White and
Engineered Controls and Integration, LLC v. Stephen G. Olita and ECIMOS (CH-15-1283),
“placed at issue the question of who was the true owner” of this software. (ECF No. 717 at
PageID 16010.) The Court ordered ECIMOS to serve White and Engineered Controls and
Integration (“ECI”) with an amended complaint, and bring them into this action, on May 16,
2016. (ECF No. 39.)
Following mediation, White and ECI entered into a written settlement agreement (the
“2017 Settlement Agreement”) with ECIMOS and its owner, Stephen G. Olita (“Olita”). (ECF
No. 653-2 at PageID 15146–82). The parties also filed a Joint Stipulation of Dismissal. (ECF
No. 209.)

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The 2017 Settlement Agreement obligated Olita and ECIMOS to, among other
things, pay to White directly $40,000, assume responsibility for and repay a loan
that White and . . . ECI had in the principal amount of $500,000, and pay fifty
percent (50%) of any judgment or settlement obtained in the instant matter
towards the principal balance of the loan.
(ECF No. 717 at PageID 16011.) The 2017 Settlement Agreement was secured by a
first lien security interest granted to White in ECIMOS. (ECF No. 653-2 at PageID 15142.)
ECIMOS prevailed in a June 19, 2018 jury trial, with the award in the amount of
$7,500,000. (ECF No. 359.) Carrier appealed. (ECF No. 470.) The Sixth Circuit Court of
Appealed subsequently affirmed in part, reversed in part, and remanded the matter on August
21, 2020. (ECF No. 615.) The amount of the judgement was reduced to $5,566,050. (Id. at
PageID 14125.)
ECIMOS sold part of its interest in the matter to Law Finance Group (“LFG”) in
exchange for $1,000,000 to fund the litigation on appeal. (ECF No. 658-2 at PageID 15223–
53.) As part of this agreement, “ECIMOS acknowledged that . . . ECI was an existing lien
holder, that . . . ECI had a security interest in ECIMOS’ assets and that ECIMOS would use
the amount received from LFG to pay off . . . ECI in full.” (ECF No. 717 at PageID 16012.)
A partial assignment of proceeds was executed by Olita in favor of LFG on November 2,
2018. (ECF No. 658-2 at PageID 15242–43.)
Olita subsequently breached the 2017 Settlement Agreement, and White and ECI
entered into the 2018 Settlement Agreement with Olita and ECIMOS. (ECF No. 653-2 at
PageID 15142-45.) “In the 2018 Settlement Agreement, White agree[d] not to exercise his
foreclosure rights in exchange for Olita and ECIMOS assigning the first $750,000.00 to be
paid out by Carrier Corporation pursuant to the judgment.” (ECF No. 717 at PageID 16012.)

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By the terms of the 2018 Settlement Agreement, the 2017 Settlement Agreement continued to
bind the parties. (ECF No. 653-2 at PageID 15142.)
LFG sent a check for $400,000 to White. (ECF No. 701-1.) That check is dated
January 31, 2019. (Id.) The memo line of the check reads “Pat White settlement”. (Id.) That
check was accompanied by a cover letter, which was conveyed via email on February 1, 2019,
which stated that it was “to Fulfill Mr. Steve Olita /ECIMOS, LLC’s Pat White Settlement
Obligations and in Exchange for Release of the UCC Filing No. 427759804.” (ECF No. 7012 at PageID 15492.)
“Carrier satisfied the judgment on or about September 29, 2021. Demand was made by
White for the balance owed on the 2018 Settlement Agreement. Olita and ECIMOS denied
that any further amounts were owed. White filed the instant motion.” (ECF No. 717 at
PageID 16012–13.) White argues that he is still owed $400,000, the amount remaining on the
2018 Settlement Agreement and an additional $50,000 from an unsigned agreement to
subordinate his lien which proposed increasing the amount owed in that agreement. (ECF No.
641 at PageID 14859–60.) Olita and ECIMOS contend that the $400,000 check LFG sent to
White was a full settlement of their obligations to White. (ECF No. 653.)
II.
A.

LEGAL STANDARD
Standard of Review
“Within 14 days after being served with a copy of the recommended disposition, a

party may serve and file specific written objections to the proposed findings and
recommendations.” Fed. R. Civ. P. 72(b)(2). “When no timely objection is filed, the court

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need only satisfy itself that there is no clear error on the face of the record in order to accept
the recommendation.” Fed. R. Civ. P. 72(b) advisory committee notes.
When a timely objection has been filed, “[t]he district judge must determine de novo
any part of the magistrate judge’s disposition that has been properly objected to.” Fed. R.
Civ. P. 72(b)(3). The portions of a magistrate judge’s recommendation as to which no
specific objections were filed are reviewed for clear error. See Fed. R. Civ. P. 72(b) advisory
committee notes; Howard v. Sec’y of Health & Human Servs., 932 F.2d 505, 509 (6th Cir.
1991) (noting that when a party makes a general objection, “[t]he district court’s attention is
not focused on any specific issues for review, thereby making the initial reference to the
magistrate useless”). “A general objection to the entirety of the magistrate’s report has the
same effects as would a failure to object.” Howard, 932 F.2d at 509. Moreover, the “failure
to properly file objections constitutes a waiver of appeal.” See id. at 508 (citing United States
v. Walters, 638 F.2d 947, 950 (6th Cir. 1981)).
III.

ANALYSIS
a. ECIMOS’s Objections Without Merit
Several of Plaintiff’s objections to the Report and Recommendation “do not address

the substance of the Magistrate Judge's report and recommendation and are irrelevant.”
Zammit v. Internal Revenue Serv., No. 14-14155, 2015 WL 8003234, at *1 (E.D. Mich. Dec.
7, 2015), aff'd, No. 16-2703, 2017 WL 6276122 (6th Cir. June 30, 2017). These include
Magistrate Judge Claxton’s use of a “potentially prejudicial” “moniker” for a party associated
with the suit (ECF No. 720 at PageID 16055), her “characterization” of payments to LFG (Id.

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at PageID 16059), and a clarification that a contract was for the purchase and sale of debt and
was not a “loan.” (Id. at PageID 16058.)
ECIMOS contends that the motion hearing held on August 25, 2021 “merely served to
bring the Magistrate Judge more up-to-speed on the matter” and was not a sufficient
evidentiary hearing. (Id. at PageID 16057.) They also repeatedly argue that additional
testimony is needed, or that testimony that was not presented to Magistrate Judge Claxton
should nonetheless have been considered by her. For instance, ECIMOS argues that it signed
the 2018 Settlement Agreement “under duress” and that this “overall issue” requires an
additional hearing or “trial” “replete with testimony from [former counsel for ECIMOS, J.
O’Neal] Perryman [(“Perryman”)], Olita, White, and Emily Kenison [of LFG (“Kenison”)].”
(Id. at PageID 16068–69.) ECIMOS also takes issue with the fact that White and Kenison
were not “asked to appear by this Court.” (Id. at PageID 16057.) Later ECIMOS seems to
accuse Perryman of self-dealing and conflicts of interest and demands that he “provide
testimony on this matter.” (Id. at PageID 16069.) ECIMOS also accuses Perryman of
“[knowing] that the 2018 Settlement Agreement was not valid due to its timing,” and asserts
that “no UCC protection” was sought for the 2018 Settlement Agreement because that would
“expos[e] the likelihood” that Perryman failed to properly advise his client. (Id. at PageID
16066.)

However, immediately following the instant hearing before Magistrate Judge

Claxton, ECIMOS submitted supplemental documentation and assured the Court that “the
record [was] complete with the check, negotiation, and accompanying letter.” (ECF No. 704
at PageID 15527.) In fact, ECIMOS urged the Court to “resist the curious inclination to
examine attorney testimony in a second hearing.” (Id.) To the extent that ECIMOS believes
that the perspective of any of these actors should have been considered by the Magistrate

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Judge, its counsel was free to depose them or solicit their testimony at any time prior to or
during the Motion Hearing, and present that evidence at the appropriate time.
b. ECIMOS’s Arguments First Raised in Objections
ECIMOS argues in its Objections, for the first time, that it was forced to sign the 2018
Settlement Agreement by White “under duress.” (ECF No. 720 at PageID 16068.) ECIMOS
claims that White “threatened” Olita through counsel and that Perryman “refused to provide
any legal advice,” with the resulting “stressful situation” amounting to “mental duress.” (Id.
at 16060.) ECIMOS also frames White’s “demand[]” for money as a “threat[] to foreclose”
on “all ECIMOS property.” (Id. at 16069.)
ECIMOS argues in its Objections, for the first time, that it disputes the validity of the
2018 Settlement Agreement. (Id. at PageID 16068.)

It speculates that White’s actions

amount to “blackmail,” and again accuses Perryman of wrongdoing. (Id. at PageID 16062.)
ECIMOS previously acceded to the validity of the 2018 Settlement Agreement. (ECF No. 653
at PageID 15119.)
ECIMOS also argues that the Magistrate Judge should have “consider[ed],” apparently
sua sponte, “that there exists a document or other plausible reason that explains” why LFG
wrote a check for the sum of $400,000, as opposed to some other sum of money. (ECF No.
720 at PageID 16066–67.)
“Issues raised for the first time in objections to the magistrate judge's recommendation
are deemed waived.” Burley v. Miller, 241 F. Supp. 3d 828, 840 (E.D. Mich. 2017) (citing
Ward v. United States, 208 F.3d 216, *1 (6th Cir. 2000)). “[A]bsent compelling reasons, [the
Magistrate Judge Act, 28 U.S.C. § 631 et seq.,] does not allow parties to raise at the district

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court stage new arguments or issues that were not presented to the magistrate.” Murr v.
United States, 200 F.3d 895, 902 n. 1 (6th Cir. 2000). “[A]llowing parties to litigate fully
their case before the magistrate and, if unsuccessful, to change their strategy and present a
different theory to the district court would frustrate the purpose of the Magistrates Act.”
Greenhow v. Secretary of Health & Human Servs., 863 F.2d 633, 638–39 (9th Cir. 1988),
overruled on other grounds by United States v. Hardesty, 977 F.2d 1347 (9th Cir. 1992), cert.
denied, 507 U.S. 978 (1993). The Court will not consider arguments raised for the first time
in ECIMOS’s objections.
c. ECIMOS’s Objections Regarding the Contractual Dispute at Issue
ECIMOS argues that the “immediate acceptance of the settlement check” by White is
a “true manifestation” of a meeting of the minds. (ECF No. 720 at PageID 16063.) ECIMOS
also argues that the Magistrate Judge was in error in stating that the check settled the 2017
Agreement because LFG “provided the instrument payment.” (Id. at PageID 16071.) The
Magistrate Judge later found that the same check did not amount to a meeting of the minds
regarding the accord and satisfaction of the 2018 Settlement Agreement, in part because it was
issued by LFG. (Id.) ECIMOS asserts that “[t]he Court cannot have it both ways;” that is, the
check cannot both have satisfied the 2017 Agreement and failed to operate as accord and
satisfaction for the 2018 Settlement Agreement. (Id.)
It is uncontested that the 2018 Settlement Agreement created an obligation for Olita
and ECIMOS to pay White $750,000 from a judgment against Carrier. (See ECF No. 653 at
PageID 15119.) The question before the Court is whether a third agreement was made, in
which White agreed that Olita and ECIMOS would give him $400,000 immediately in lieu of
providing him with $750,000 at the conclusion of litigation.
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Upon de novo review, this Court finds that there was no valid contract that would
extinguish the Parties’ 2018 Settlement Agreement. Such a contract would have required a
meeting of the minds, in which both sides agreed that the $400,000 check would suffice as
accord and satisfaction for ECIMOS’s debt. There is no evidence of such a meeting of the
minds, and there was no clear intent between the parties to extinguish the original 2018
Settlement Agreement.
ECMIOS argues that two documents support its case. One is an email that was sent
from Don Hearn, counsel for White, to then-counsel for Olita and ECIMOS Perryman on
January 31, 2019. (ECF No. 701-2.) The other is a check dated for that same day, in the
amount of $400,000, sent from LFG to White. (ECF No. 701-1.)
Under Tennessee law, the delivery of an instrument amounts to the accord and
satisfaction of a debt if “the person against whom the claim is asserted proves that the
instrument or an accompanying written communication contained a conspicuous statement to
the effect that the instrument was tendered as full satisfaction of the claim.” Tenn. Code
Ann. § 47-3-311(b). The instrument must also be tendered to the claimant by the party against
whom the claim is asserted. Tenn. Code Ann. § 47-3-311(a). In this case, the instrument was
tendered by LFG, not Olita or ECIMOS. (ECF No. 701-2 at PageID 14492.) This, in and of
itself, is sufficient to defeat ECIMOS’s claim. “Mutuality of assent” to extinguish the original
contract between ECIMOS and White cannot be established by an instrument exchanged
between LFG and White. Moody Realty Co., Inc. v. Huestis, 237 S.W.3d 666, 674 (Tenn. Ct.
App. 2007). For that reason, no “reasonable onlooker, based upon the parties' outward
manifestations” could possibly have considered the $400,000 check to have been understood
to be a full accord and satisfaction of ECIMOS’s debt to White. Id.

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The documents also do not conspicuously state that they are in accord and satisfaction
of the full debt owed to White. The memo line of the check simply reads “Pat White
Settlement.” (ECF No. 701-1.) The cover letter states that the check is meant to “fulfill . . .
ECIMOS, LLC’s Pat White Settlement Obligations.” (ECF No. 701-2 at PageID 15492.)
However, Hearn clarified with ECIMOS’s counsel that the understanding and intent between
the parties was that the $400,000 was only meant to be a partial payment on February 7, 2019.
(ECF No. 657-5.)1 The intention of the parties, “which is of course controlling, must be
determined from all the circumstances attending the transaction.” R.J. Betterton Management
Services, Inc. v. Whittemore, 733 S.W.2d 880, 882 (Tenn. Ct. App. 1987).

Here, the

clarification email of February 7, 2019 makes the intent of the parties not to extinguish their
original agreement clear. (ECF No. 657-5.)
ECIMOS’s argument that White’s “immediate acceptance of the settlement check”
constitutes a meeting of the minds is without merit. (ECF No. 720 at PageID 16063.)
White’s attorney Hearn clarified the purpose of the check in an email to Perryman on
February 7, 2019. (ECF No. 657-5.) In that email, Perryman confirmed that the $400,000
was only meant to be a partial payment. (Id. at PageID 15216.) Hearn testified that he
solicited this clarification “upon receiving the check,” that is, before cashing it. (ECF No. 723
at PageID 16175.) There is no evidence that there was any “immediate acceptance” of the
check, and in fact the evidence is to the contrary. (ECF No. 720 at PageID 16063.)
ECIMOS’s argument that the check cannot both have satisfied the 2017 Settlement
Agreement and failed to constitute a meeting of the minds regarding a modification of the

In this email, Hearn clarifies that the statement in the cover letter that payment is to “fulfill . . . settlement
obligations owed to Pat White” “is not correct”. (ECF No. 657-5 at PageID 15217.) Counsel for ECIMOS
replied “received and understood completely” on that same day. (Id. at PageID 15216.)
1

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2018 Settlement Agreement is also without merit. The 2017 Settlement Agreement was, in
relevant part, an agreement regarding a UCC lien filing. (ECF No. 653-2 at PageID 15142.)
The 2017 Settlement Agreement was a separate agreement. The $400,000 check can, in fact,
both have satisfied the 2017 Settlement Agreement fully, with the agreement of the parties,
and therefore resulted in the lifting of the 2017 UCC lien, and failed to fully satisfy the 2018
Settlement Agreement by falling short of the full payment amount.
IV.

CONCLUSION
Upon de novo review, the Court ADOPTS the Report and Recommendation of the

Magistrate Judge. Accordingly, White’s Motion to Enforce Partial Assignment of Judgment
is GRANTED.
SO ORDERED, this 9th day of November, 2022.
/s/ Jon P. McCalla
JON P. McCALLA
UNITED STATES DISTRICT JUDGE

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