Crop Production Services, Inc. v. Keeley et al
Filing
86
MEMORANDUM OPINION - DENYING 40 MOTION for Summary Judgment filed by John Keeley, Dawn Keeley, GRANTING IN PART AND DENYING IN PART 38 MOTION for Partial Summary Judgment filed by Crop Production Services, Inc. Signed by Judge Amos L. Mazzant, III on 8/14/2015. (baf, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
CROP PRODUCTION SERVICES, INC.
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V.
JOHN KEELEY, ET AL.
CASE NO. 4:14-CV-559
Judge Mazzant
MEMORANDUM OPINION
Pending before the Court are Plaintiff‟s Motion for Partial Summary Judgment (Dkt. #38)
and Defendants John Keeley and Dawn Keeley‟s Motion for Summary Judgment Pursuant to
Rule 56 of the Federal Rules of Civil Procedure (Dkt. #40). After reviewing the motions and the
relevant pleadings, the Court finds that Plaintiff‟s motion is granted in part and denied in part
and that John Keeley and Dawn Keeley‟s motion is denied.
BACKGROUND
From January 1, 2008, until September of 2009, Defendants Thomas Grabanski, John
Keeley, and Dawn Keeley were general partners of G&K Farms, a North Dakota General
Partnership (Dkt. #43, Ex. 3). Plaintiff Crop Production Services, Inc. (“CPS”) alleges that
during 2009 it delivered several shipments of product to G&K Farms and was not paid for the
goods (Dkt. #43, Ex. 1 at pp. 3-4). Plaintiff argues that G&K Farms‟ debt for goods received in
2009 amounts to $642,669.55 (Dkt. #43, Ex. 1 at p. 4).
In relation to these transactions, John Keeley and Thomas Grabanski signed a Credit
Application and Agreement (the “2008 Agreement”) in which G&K Farms assumed liability for
obligations and reasonable attorneys‟ fees and costs of collection and, according to Plaintiff,
John Keeley agreed to personally guarantee payment and performance of G&K Farms and
assumed personal liability for all obligations due and owing to Plaintiff (Dkt. #38, at p. 4; Ex. A-
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1). In February of 2009, John Keeley and Thomas Grabanski also submitted a credit application
(the “2009 Application”) to Plaintiff in which John Keeley allegedly made material
misrepresentations of fact (Dkt. #43, Ex. 7).
On September 15 and 16 of 2009, John Keeley and Dawn Keeley (the “Keeleys”)
assigned their interests in G&K Farms to Thomas Grabanski (Dkt. #43, Ex. 3 at p. 2). On July
29, 2013, Thomas Grabanski filed for bankruptcy (the “Bankruptcy Case”) in the United States
Bankruptcy Court for the Eastern District of Texas (the “Bankruptcy Court”) (Dkt. #43, Ex. 5 at
p.2). On July 31, 2013, CPS initiated an action against Thomas Grabanski and John Keeley for
claims arising from the alleged debt as a state court action, captioned Crop Production Services,
Inc. v. Thomas Grabanski and John Keeley, in the 76th/276th Judicial District Court of Camp
County, Texas (the “Debt Case”). On September 10, 2013, John Keeley filed a Notice of
Removal with the Bankruptcy Court. The case was automatically referred to the Court, and the
Court referred the Debt Case to the Bankruptcy Court based on its relation to the Bankruptcy
Case pursuant to 28 U.S.C. §§ 1334 and 1452(a). John Keeley filed a cross-claim against Tom
Grabanski in the Debt Case. On Thomas Grabanski‟s motion, the Bankruptcy Court dismissed
the claims and cross-claims asserted against him. On August 13, 2014, following a motion from
the Keeleys, the Court withdrew the reference of the Debt Case from the Bankruptcy Court so
that the Debt Case might proceed before the Court (Dkts. #2, 7).
While the Debt Case was pending as an adversary proceeding in the Bankruptcy Court,
CPS filed a Second Amended Complaint on April 22, 2014, adding G&K Farms and Dawn
Keeley as parties and making claims under six causes of action: (1) sworn account; (2) common
law action on account; (3) breach of contract; (4) quantum meruit; (5) suit on guaranty; and (6)
fraud, fraudulent inducement, and fraudulent concealment (Dkt. #43, Ex. 1).
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As the case
currently stands, claims 1-4 are asserted against G&K Farms, John Keeley, and Dawn Keeley
while claims 5 and 6 are asserted solely against John Keeley.
On November 6, 2014, Plaintiff moved for default judgment against G&K Farms (Dkt.
#26). The Court granted default judgment to Plaintiff against G&K Farms on January 8, 2015
(Dkt. #30).
On April 30, 2015, Plaintiff brought a motion for partial summary judgment based in part
on the default judgment (Dkt. #38). On May 8, 2015, Plaintiff filed a supplemental motion for
partial summary judgment (Dkt. #51). On May 14, 2015, the Keeleys filed a response (Dkt.
#52). On June 1, 2015, Plaintiff filed a reply (Dkt. #61).
On May 1, 2015, the Keeleys brought their motion for summary judgment (Dkt. #40).
On May 22, 2015, Plaintiff filed a response (Dkt. #56). On May 29, 2015, the Keeleys filed a
reply (Dkt. #58). On May 1, 2015, the Keeleys also brought a motion to vacate the default
judgment against G&K Farms (Dkt. #41). On July 24, 2015, the Court denied Defendants‟
motion to vacate (Dkt. #78).
LEGAL STANDARD
The purpose of summary judgment is to isolate and dispose of factually unsupported
claims or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (“The Federal Rules
of Civil Procedure have for almost 50 years authorized motions for summary judgment upon
proper showings of the lack of a genuine, triable issue of material fact.”). Summary judgment is
proper if the pleadings, the discovery and disclosure materials on file, and any affidavits “[show]
that there is no genuine dispute as to any material fact and that the movant is entitled to judgment
as a matter of law.” FED. R. CIV. P. 56(a). A dispute about a material fact is genuine “if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson
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v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all reasonable
doubts in favor of the party opposing the motion for summary judgment. Casey Enters. Inc. v.
Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981). The substantive law identifies
which facts are material. Anderson, 477 U.S. at 248.
The party moving for summary judgment has the burden to show that there is no genuine
issue of material fact and that it is entitled to judgment as a matter of law. Id. at 256. If the
movant bears the burden on a claim or defense on which it is moving for summary judgment, it
must come forward with evidence that establishes “beyond peradventure all of the essential
elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986).
Where the nonmovant bears the burden of proof, the movant may discharge its burden by
showing that there is an absence of evidence to support the nonmovant‟s case. Celotex, 477 U.S.
at 325; Byers v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the movant
has carried its burden, the nonmovant must “respond to the motion for summary judgment by
setting forth particular facts indicating there is a genuine issue for trial.” Byers, 209 F.3d at 424
(citing Anderson, 477 U.S. at 248-49). The nonmovant must adduce affirmative evidence.
Anderson, 477 U.S. at 256-57. No “mere denial of material facts nor…unsworn allegations [nor]
arguments and assertions in briefs or legal memoranda” will suffice to carry this burden.
Moayedi v. Compaq Computer Corp., 98 F. App‟x 335, 338 (5th Cir. 2004). Rather, the court
requires “significant probative evidence” from the nonmovant in order to dismiss a request for
summary judgment supported appropriately by the movant. See United States v. Lawrence, 276
F.3d 193, 197 (5th Cir. 2001). The court must consider all of the evidence, but must refrain from
making any credibility determinations or weighing the evidence. See Turner v. Baylor
Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
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ANALYSIS
Joint and Several Liability of the Keeleys and Claims on Sworn Account, Common Law Action
on Account, Breach of Contract, and Quantum Meruit
Plaintiff first moved for summary judgment as to claims against the Keeleys for breach of
contract and for common law action on account (Dkt. #38 at p. 1). However, in its supplemental
motion, Plaintiff withdrew its request for summary judgment as to claims for breach of contract
and suit on account (Dkt. #51 at p. 2). Instead of addressing the merits of these claims, Plaintiff
merely asks the Court to find that John Keeley and Dawn Keeley were both general partners at
the time G&K Farms incurred the debt that is at issue, that Plaintiff obtained a default judgment
against G&K Farms, and that, as such, the Keeleys are jointly and severally liable for the entire
judgment as general partners of G&K Farms (Dkt. #51 at p. 3). Plaintiff argues that Texas law
controls the enforcement of its remedy, but if the Court were to determine that North Dakota law
applied because G&K Farms is a North Dakota partnership, North Dakota law provides for the
same level of liability (Dkt. #51 at p. 6). Plaintiff notes that under Texas law, its claims against
the Keeleys do not require relitigation of claims already adjudicated.
The Keeleys ask for summary judgment in their favor on Plaintiff‟s claims for sworn
account, common law action on account, breach of contract, and quantum meruit, asserting that
the claims are barred by the applicable statute of limitations (Dkt. #40 at p. 6).1 Additionally, the
Keeleys argue that Plaintiff‟s claims of breach of contract and quantum meruit are barred by the
statute of frauds and that Plaintiff‟s claim for action on account cannot be established because no
open account existed as a matter of law (Dkt. #40 at pp. 12, 17).
The Keeleys note, correctly, that the Court‟s ruling regarding the motion to vacate default
judgment is determinative upon the Keeley‟s assertion that that claims on sworn account,
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The Keeleys note an exception to their argument, however, for claims related to the most recently invoice in the
amount of $287.50 (Dkt. #40 at pp. 11-12).
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common law action on account, breach of contract, and quantum meruit are time barred (Dkt.
#40 at p. 12). The Court denied the motion to vacate default judgment, and the Court will not
consider claims decided by the Court‟s default judgment.
Accordingly, the Court denies
awarding the Keeleys summary judgment on Plaintiff‟s claims on sworn account, common law
action on account, breach of contract, and quantum meruit.
The Keeleys admit to being general partners of G&K Farms until September of 2009
(Dkt. #52 at p. 2). The Keeleys do not contest whether they were general partners at the time
G&K Farms incurred the alleged debt, but rather they dispute the notion that G&K Farms
incurred any debt at all, questioning the delivery of goods, invoices and bills of lading, and
signatures therein (Dkt. #52 at p. 6). However, a default judgment against G&K Farms stands
regarding debt incurred, according to Plaintiff‟s assertions and evidence, prior to the Keeleys‟
exit from G&K Farms in September (Dkts. #26, 30). Under the applicable general partnership
law, “all partners are jointly and severally liable for all obligations of the partnership unless
otherwise: (1) agreed by the claimant; or (2) provided by law,” excepting liability to partners in a
limited liability partnership and liability for persons admitted into an existing partnership for an
obligation to the partnership that “(1) arises before the partner‟s admission to the partnership; (2)
relates to an action taken or omission occurring before the partner‟s admission to the partnership;
or (3) arises before or after the partner‟s admission to the partnership under a contract or
commitment entered into before the partner‟s admission.” Tex. Bus. Code §152.304.2 Therefore,
a general partner is jointly and severally liable for an existing judgment debt against the
partnership if the general partner was in fact a general partner at the time of injury alleged. See,
American Star Energy and Minerals Corporation v. Stowers, 457 S.W. 3d 427, 434 (Tex. 2015).
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Though the Court believes Texas law applies, the Court need not conduct a conflict-of-laws analysis because,
though G&K Farms is a North Dakota partnership, North Dakota law also holds that general partners are jointly and
severally liable for all obligations of the partnership. See N.D. Cent. Code § 45-15-06(1) (2013).
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The Keeleys contend that Plaintiff fails to establish what substantive law applies in this
case, which is necessary for summary judgment, and instead make reference to North Dakota law
in regards to liability of a general partnership, Colorado law in regards to summary judgment on
breach of contract (withdrawn by Plaintiff), and Texas law regarding summary judgment
common law action on an account (withdrawn by Plaintiff) (Dkt. #52 at p. 14).
In its
supplemental motion and reply brief, Plaintiff clarifies its position, asserting that Texas law
regarding partnership liability applies and references to other forum‟s laws merely demonstrate
that the Court need not conduct a choice-of-law analysis because the outcome would not change
under North Dakota law with regards to liability for general partners or Colorado law with
regards to its claim on guaranty (Dkts. #51 at pp. 5-6; 61 at p. 5). The Keeleys, in fact, appear to
agree that Texas law applies to the application remedy of collecting on a default judgment, citing
Hill v. Perel for the proposition that “matters of remedy and procedure are governed by the laws
of the state where the action is sought to be maintained” (Dkt. #40 at p. 8). 923 S.W. 2d 636, 639
(Tex. App.— Houston [1st Dist.] 1995, no writ).
The Court concludes that John Keeley and Dawn Keeley were both general partners at
the time G&K Farms incurred the debt that is at issue, that Plaintiff obtained a default judgment
against G&K Farms relating to that debt, and that, as such, the Keeleys are jointly and severally
liable for the entire judgment as general partners of G&K Farms.
Suit on Guarantee
Plaintiff argues that it is entitled to summary judgment on its guaranty claim against John
Keeley in accordance with the terms of the 2008 Agreement, and request a judgment against
John Keeley for the full amount due and owing Plaintiff (Dkt. #43, Ex. 1 at p.7). The Keeleys
argue that there is a genuine issue of material fact regarding the enforceability of the 2008
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Agreement, and also, that they are entitled to summary judgment on the issue, asserting that a
statute of limitations applies. Though the Court finds it likely that there is a genuine issue of
material fact regarding the enforceability of the 2008 Agreement, John Keeley is jointly and
severally liable for this same amount asserted by Plaintiff through the enforcement of the default
judgment.
Therefore the Court need not determine either request for summary judgment
regarding the suit on guarantee at this time.3
Attorneys’ Fees and Costs
Plaintiff argues that it is entitled to judgment regarding attorneys‟ fees and costs of court
according to the 2008 Agreement which reads: “Applicant agrees to pay reasonable attorney fees
and costs of collection” (Dkt. #38 at p. 10; Ex. A-1). In accordance with the Court‟s ruling that
the Keeleys are jointly and severally liable for the default judgment against G&K Farms (which
included attorneys‟ fees), it is unnecessary for the Court to address summary judgment on
attorneys‟ fees relating to the debt against G&K Farms. However, Plaintiff specifically argues
that John Keeley personally guaranteed all connection expenses and reasonable attorneys‟ fees in
endeavoring to collect on John Keeley‟s obligations in the 2008 Agreement and generally
requests attorneys‟ fees and expenses in the amount of $21,137.22, which, according to the
Plaintiff, represents the amount increased since the entry of default judgment against G&K
Farms, as to both John Keeley and Dawn Keeley (Dkts. #38 at p.10; 51 at p.7).
The Keeleys assert that there is a genuine issue of material fact as to whether John Keeley
actually guarantied G&K Farms‟ debt, and any attorneys‟ fees and costs to collect, because he
denies signing the 2008 Agreement, stating that he merely admits to printing “by John Keeley”
and dating this statement in the area next to the signature block (Dkt. #52 at p. 9). Plaintiff
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In as far as Plaintiff‟s suit on guarantee relates to post-default judgment attorneys‟ fees and costs, the Court will
address this issue separately in the following section.
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claims that John Keeley‟s assertion and testimony that he did not sign the Agreement does not
create a genuine issue of material fact, and argues that when John Keeley printed “by John
Keeley,” he did so knowing that he was agreeing to guaranty G&K Farms‟ debt (Dkt. #61 at p.
3).
The Keeleys also argue that the amount of fees is unreasonable under the circumstances,
citing, in particular, fees related to Thomas Grabanski, a former defendant, and activities related
to his bankruptcy case (Dkt. #52 at p. 12). Defendants further contest the reasonableness of
attorneys‟ fees, referencing a specific example of the billing of 19.2 hours in connection with
researching or analyzing the statute of limitations issue (Dkt. #52 at p. 13). The Keeleys argue
that these issues are not exhaustive, but rather indicative of genuine issues of material fact that
should preclude summary judgment on attorneys‟ fees (Dkt. #52 at p. 13). Plaintiff directly
contradicts the Keeleys‟ arguments that it is seeking fees related to the bankruptcy proceeding,
stating that the only fees and costs incurred after the default judgment on January 8, 2015.
The Court finds that summary judgment is not warranted on attorneys‟ fees and costs
incurred after the default judgment. Initially, Plaintiff argued that it is entitled to recovery
according to the language of the 2008 Agreement and according to John Keeley‟s personal
guarantee, referencing the overall amount of attorneys‟ fees and costs incurred in prosecuting the
entire litigation (Dkt. #38 at p. 6). While Plaintiff makes clear in its supplemental motion that it
withdraws its request for summary judgment on claims for breach of contract and common law
action on account, it does not as clearly explain its shift from requesting judgment on all
attorneys‟ fees and costs to a new request. Rather, Plaintiff merely states in its supplemental
motion that the Court consider “CPS‟s claim for attorney‟s fees accruing after the date of entry
of the Default Judgment against G&K Farms” without new argument, offering only as an
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“undisputed fact” that “[s]ince the entry of the Default Judgment, CPS has incurred additional
attorney‟s fees in the amount of $20,752.50” and “additional costs in the amount of $384.72”
(Dkt. #51 at p. 4). As support for these statements, Plaintiff cites to exhibits disclosing not
merely attorneys‟ fees and costs following the entry of default judgment, but the range of
attorneys‟ fees and costs extending back to May of 2013 (Dkt. #51 at p. 2).
It is only in Plaintiff‟s reply brief that it sufficiently delineates its request and cites to the
limited range of exhibit pages relating to the time period following the entry of default judgment
(Dkt. #61 at p. 3). It is therefore unsurprising that the Keeleys‟ response addresses the full range
of asserted attorneys‟ fees rather than simply those related to the time following the default
judgment in their response. Additionally, though Plaintiff argues that “Defendants did not
submit any evidence to rebut the reasonableness and necessity of these attorney‟s fees,” the
Keeleys do in fact argue the unreasonableness of fees incurred after the default judgment, citing
invoice entries on January 30, 2015, and February 11, 2015 (Dkts. #52 at p. 12; 61 at p. 3).
Considering the limited arguments and support presented by Plaintiff in this matter, the
Court finds that summary judgment on attorneys‟ fees and costs of court for the time period
following the default judgment is not appropriate at this time. Further, though the Court denies
summary judgment for attorneys‟ fees and costs on an independent basis, the Court notes the
likelihood of a genuine issue of material fact regarding the validity and enforceability of the
guarantee in the 2008 Agreement.
Fraud Claims
In its Second Amended Complaint, Plaintiff asserts claims of fraud, fraudulent
inducement, and fraudulent concealment against John Keeley relating to material
misrepresentations made in the 2009 Application (Dkt. 43, Ex. 1 at p. 9). The Keeleys argue that
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Plaintiff cannot establish these claims and requests summary judgment. They argue that Plaintiff
cannot demonstrate that it relied on the 2009 Application in extending credit to G&K Farms
(Dkt. #40 at p. 13). The Keeleys note that, in general, a party must show reliance on the accused
party‟s false representation of a material fact to its detriment in order to establish a fraud claim
(Dkt. #40 at p. 13). The Keeleys suggest that any credit extended to G&K Farms was done on
reliance on the 2008 Agreement only, pointing out that, in the Bankruptcy proceeding, Vance
Stroebel, regional credit manager for Plaintiff, submitted a report that cites only the 2008
Agreement in support of Plaintiff‟s claim that it is owed a principal balance (Dkt. #40 at p. 15).
In addition, the Keeleys note that Stroebel has testified in his individual capacity that he did not
know of any material misrepresentations by John Keeley that induced Plaintiff to extend credit to
G&K Farms in 2009 (Dkt. #40 at p. 16).
Plaintiff argues that, but for John Keeley‟s false representations in the 2009 Application,
Plaintiff would not have continued to be extended to G&K Farms (Dkt. #56 at p. 5). For support,
Plaintiff also points to Vance Stroebel, in particular citing a declaration in which Stroebel states
that “[i]f I would have known that the financial representations made in the 2009 Credit
Application were false, I would not have allowed G&K Farms to continue to purchase crop
inputs from CPS beginning February 23, 2015.” (Dkt. #56, Ex. 13 at p. 2). Further, Plaintiff
concedes that the main purpose of the 2009 Application was to obtain third-party financing, but
holding that the other purpose was to enable Plaintiff to determine whether it would keep doing
business with G&K Farms (Dkt. #56 at p. 12). In Stroebel‟s deposition he stated, in reference to
the extension of credit after February 2009, that the “[2009 Application] was a part of it. All
information was brought forward . . . „Cause we‟ve had these customers, so it‟s accumulative
information gathering.” (Dkt. #56, Ex. 10 at App. 081-082 (28:17-29:2)).
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The Court finds that there is a genuine issue of material fact regarding whether Plaintiff
relied upon the 2009 Application in extending credit to G&K Farms, and denies summary
judgment regarding claims of fraud, fraudulent inducement, and fraudulent concealment against
John Keeley.
CONCLUSION
It is therefore ORDERED that Plaintiff‟s Motion for Partial Summary Judgment and
Brief in Support (Dkt. #38) is hereby GRANTED IN PART and DENIED IN PART and
Defendants John Keeley and Dawn Keeley‟s Motion for Summary Judgment Pursuant to Rule 56
of the Federal Rules of Civil Procedure (Dkt. #40) is hereby DENIED.
The Court finds that John Keeley and Dawn Keeley are jointly and severally liable for the
entire default judgment against G&K Farms.
The Court denies summary judgment to Plaintiff on Plaintiff‟s suit on guaranty and on
attorneys‟ fees and costs accruing after the date of entry of the default judgment against G&K
Farms.
.
The only issues remaining before the Court are attorneys‟ fees and costs accruing after
the date of entry of the default judgment against G&K Farms and Plaintiff‟s suit on guarantee
and claims of fraud, fraudulent inducement, and fraudulent concealment.
IT IS SO ORDERED.
SIGNED this 14th day of August, 2015.
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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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