Global Fitness Holdings, LLC v. Federal Recovery Acceptance, Inc.

Filing 279

MEMORANDUM DECISION AND WRITTEN ORDER FOLLOWING 251 Sealed Minute Order on #121 Sealed Motion for Partial Summary Judgment on Global's Tortious Interference Claim for Lack of Causation (oral order of 5/11/15). Signed by Judge David Nuffer on 8/31/15 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
GLOBAL FITNESS HOLDINGS, LLC,
Plaintiff,
v.
FEDERAL RECOVERY ACCEPTANCE,
INC. and FEDERAL RECOVERY
SERVICES, INC.,

MEMORANDUM DECISION AND
ORDER GRANTING [121]
DEFENDANTS’ MOTION FOR PARTIAL
SUMMARY JUDGMENT ON
PLAINTIFF’S TORTIOUS
INTERFERENCE CLAIM FOR LACK OF
CAUSATION
Case No. 2:13-cv-00204-DN

Defendants.
District Judge David Nuffer

This case is a dispute between a former owner of physical fitness clubs and one of its
billing services providers regarding the parties’ obligations to each other at the termination of
their contractual relationship. Plaintiff Global Fitness Holdings, LLC (“Global”) filed this suit in
October 2012 against two related entities (collectively “Paramount”), Federal Recovery
Acceptance, Inc. (“FRAI”) and Federal Recovery Services, Inc. (“FRSI”). Paramount provided
the billing services for Global’s large membership base. Global brought claims for tortious
interference, 1 promissory estoppel, 2 conversion, 3 breach of contract, 4 and breach of the covenant
of good faith and fair dealing. 5 All the claims arise out of the alleged refusal of Paramount to
cooperate with Global when Global was acquired by Fitness & Sports Clubs, LLC (“L.A.

1

Global Fitness Holding, LLC’s Amended Complaint (“Amended Complaint”) ¶¶ 38–45, docket no. 71, filed
March 19, 2014.
2

Id. ¶¶ 46–52.

3

Id. ¶¶ 53–60.

4

Id. ¶¶ 61–66.

5

Id. ¶¶ 67–73.

Fitness”), 6 a non-party to this litigation. The tortious interference claim at the focus of this order
is based on alleged interference with this acquisition.
In the Global–L.A. Fitness Asset Purchase Agreement (“APA”), Global was to transfer
customer data to L.A. Fitness, but Global claims Federal Recovery wrongfully withheld the data
pending Global’s payment of termination fees to Federal Recovery. 7 Global also alleges Federal
Recovery withheld over $500,000 in funds owed to Global. 8 Federal Recovery denies
wrongdoing in withholding the data and funds, and has now filed several motions for summary
judgment on all of Global’s claims, 9 including the breach of contract claim related to data
transfer that Global voluntarily dismissed. 10
After discovery in this case concluded, Paramount filed several motions for summary
judgment. This order GRANTS Paramount’s motion 11 on Global’s tortious interference claim
based on a lack of causation. 12

6

See generally id.

7

Amended Complaint ¶¶ 64–65.

8

Id. ¶¶ 61–63, 65–66.

9

Defendants’ Motion for Partial Summary Judgment on Global’s Promissory Estoppel Claim, docket no. 106, filed
Aug. 4, 2014; Defendants’ Motion for Partial Summary Judgment RE Plaintiff’s Conversion Claim and Supporting
Memorandum, docket no. 108, filed Aug. 4, 2014; Defendants’ Motion for Partial Summary Judgment RE: Global’s
Breach of Contract and Breach of the Implied Covenant Claims and Memorandum in Support Thereof (“Breach
Motion”), docket no. 111, filed Aug. 4, 2014; Defendants’ Motion for Partial Summary Judgment on Global’s
Tortious Interference Claim, docket no. 120, filed under seal Aug. 4, 2014; and Defendants’ Motion for Partial
Summary Judgment RE: Global’s Tortious Interference Claim for Lack of Causation and Memorandum in Support
Thereof, docket no. 121,filed under seal Aug. 4, 2014.
10

Global Fitness, LLC’s Motion for Voluntary Dismissal of its Breach of Contract Claim Against Federal Recovery
Acceptance, Inc. as it Relates to the Transfer of Data, docket no. 132, filed Sept. 4, 2014 (“Motion for Voluntary
Dismissal”).
11

Defendants’ Motion for Partial Summary Judgment RE: Global’s Tortious Interference Claim for Lack of
Causation (“Paramount’s Motion on Causation”), docket no. 121, filed under seal Aug. 4, 2014; redacted version,
docket no. 127, filed Aug. 7, 2014.
12

Another motion sought dismissal of the same tortious interference claim on other grounds.

2

TABLE OF CONTENTS
FACTUAL AND PROCEDURAL BACKGROUND.................................................................... 4
STATEMENT OF UNDISPUTED MATERIAL FACTS ............................................................. 6
I.
Standing, Element 2: A Causal Connection Is Necessary for Standing ................. 7
II.
Tortious Interference: Proximate Causation Element ........................................... 17
SUMMARY JUDGMENT STANDARD..................................................................................... 17
APPLICABLE LAW .................................................................................................................... 18
ANALYSIS ................................................................................................................................... 19
I.
Global Lacks Article III Standing to Bring Its Tortious Interference Claim for
Want of a Causal Connection. .............................................................................. 20
A.
Paramount Provided All of the Member Account Data on October 11,
2012, But Global Unilaterally Failed to Close the APA on or Before
October 15, 2012. ...................................................................................... 21
B.
Global’s Failures to Perform Its Express Obligations under the APA are
the Cause of Global’s Alleged Injury. ...................................................... 22
II.
Global’s Tortious Interference Claim Also Fails on Proximate Cause................. 23
A.
Paramount is Not the Proximate Cause of Global’s Alleged Tort Injury, if
Any. ........................................................................................................... 25
1.
Paramount Provided All of the Member Account Data, Including
the Billing Information, on October 11, 2012, and Global’s Failure
to Close the APA within the Subsequent Four Days Cannot Be
Attributed to Paramount................................................................ 27
2.
The Variable APA Purchase and Global’s Financial Health Are the
Key Elements of the Cause of Global’s Harm. ............................. 28
3.
Global’s Failure to Comply with Many of Its Obligations under the
APA, Wholly Independent of Paramount’s Conduct, Ensured that
the Sale Would Not Close Before the Reduction in the Purchase
Price. ............................................................................................. 30
B.
Superseding Causes Cut Off Paramount’s Liability, if Any. .................... 35
1.
Any Liability of Paramount’s is Superseded by L.A. Fitness’s
Autonomous discretion, contractual authority, and Significant
Financial Incentive to Postpone Closing....................................... 35
2.
Paramount’s Contractual Right to Maintain the Member Account
Data During the 45-Day Termination Period Defeats Proximate
Cause. ............................................................................................ 36
3.
Global’s Steadily Declining Value, Which Predates the APA, is an
Intervening Cause of the Reduced Purchase Price. ...................... 38
4.
Global’s Own Conduct, in Addition to Precluding Proximate
Cause from the Outset, Would Also Be a Superseding Cause. .... 39
III.
Global’s Claim for Punitive Damages Premised on Tortious Interference Is Also
Dismissed. ............................................................................................................. 40
ORDER ......................................................................................................................................... 40

3

FACTUAL AND PROCEDURAL BACKGROUND
At all relevant times prior to October 2012, Global owned and operated multiple fitness
centers in multiple states. 13 Beginning in 2008, Global began contracting with FRAI for FRAI to
process billing and collections for customers of certain Global facilities (the data processed by
FRAI is the “Member Account Data”). 14 The Member Account Data included not only
information about the customers’ purchases and preferences, but also their personal credit card
(“CC”) and bank account transfer (“ACH”) information (collectively the “Billing Information”)
used to charge those customers for using Global’s fitness centers. 15
In 2008, Global and FRAI executed eight location-specific contracts (the “2008
Contracts”); 16 in 2009, Global and FRAI executed two additional contracts: one amending the
2008 Contracts (the “Existing Locations Agreement”) and another to govern all remaining
locations (the “New Location Agreement”); 17 and in 2011, Global and FRAI executed two more
location-specific contracts (the “2011 Contracts”) 18 (the 12 contracts collectively are the
“Contracts” or the “Paramount Contracts”). FRAI, in turn, contracted with FRSI to perform the
services necessary for FRAI to fulfill its obligations under the Contracts. 19
13

Amended Complaint ¶ 7.

14

Defendants’ Amended Answer to Plaintiff’s Amended Complaint and Counterclaim (“Counterclaim”) ¶ 19,
docket no. 85, filed April 22, 2014. See also Contracts, collectively attached as Exhibit A to Paramount’s Motion on
Causation, docket no. 121-2, filed Aug. 4, 2014; three 2008 Contracts are attached as Exhibit E, docket no. 153-5,
filed Sep. 5, 2014, to Unsealed Exhibits to Global Fitness Holding, LLC’s Memorandum in Opposition to Federal
Recovery Services Inc.’s Motion for Partial Summary Judgment RE: Global’s Tortious Interference Claim for Lack
of Causation (“Global’s Exhibits on Causation”), docket no. 153, filed Sep. 5, 2014; four other 2008 Contracts are
attached as Exhibit F to Global’s Exhibits on Causation, docket no. 153-6, filed Sep. 5, 2014; the 2009 contract
referred to herein as the “Existing Locations Agreement” is also attached as Exhibit H to Global’s Exhibits on
Causation, docket no. 153-8, filed Sep. 5, 2014; the 2009 contract referred to herein as the “New Locations
Agreement” is also attached as Exhibit I to Global’s Exhibits on Causation, docket no. 153-9, filed Sep. 5, 2014.
15

Amended Complaint ¶ 9.

16

Counterclaim ¶ 19; see also Contracts (dated 2008).

17

Amended Complaint ¶ 13; Counterclaim ¶ 23, at 20–21; see also Contracts (dated 2009).

18

Counterclaim ¶ 24, at p.21; see also Contracts (dated 2011).

19

Amended Complaint ¶¶ 14–16; see also Contracts.

4

In its Amended Complaint, Global alleges “it had entered into an Asset Purchase
Agreement (the “APA”) with L.A. Fitness” under which “L.A. Fitness would purchase
substantially all of the assets of Global.” 20 Under the APA, Global “agreed to transfer all of [the]
Member[] Account Data[, including the Billing Information,] to L.A. Fitness.” 21 Global’s
Amended Complaint alleges that the Contracts between Global and FRAI mandated that FRAI
service the Member Account Data and the associated Billing Information. 22 Nevertheless, Global
contends that, having knowledge of Global’s contractual relationship with L.A. Fitness through
the APA, Paramount improperly withheld the Billing Information, thereby rendering Global
“unable to perform its obligations under the APA.” 23 To this end, Global’s Amended Complaint
asserts a claim for tortious interference because Paramount’s “actions knowingly harmed
Global[]’s APA with L.A. Fitness.” 24 Global also asserts a claim for punitive damages premised
on its tortious interference claim. 25
Paramount filed its motion on causation on August 4, 2014. Paramount’s Motion on
Causation argues that there is a lack of causation between Paramount’s alleged conduct and
Global’s alleged injury. Global filed an opposition 26 to Paramount’s Motion on Causation on

20

Amended Complaint ¶ 18.

21

Id. ¶ 20.

22

Id. ¶ 39, at Count I.

23

Id. ¶¶ 28, 30–31, 33–34, 40–44, at Count I.

24

Id. ¶¶ 38–45, at Count I.

25

Id. ¶¶ 79–80, at Count VII.

26

Global Fitness Holdings, LLC’s Memorandum in Opposition to Federal Recovery Acceptance, Inc. and Federal
Recovery Services Inc.’s Motion for Partial Summary Judgment RE: Global’s Tortious Interference Claim for Lack
of Causation (“Global’s Opposition on Causation”), docket no. 151, filed under seal Sep. 5, 2014; redacted version,
docket no. 158, filed Sep. 15, 2014.

5

September 4, 2014, and Paramount filed a reply memorandum 27 on September 22, 2014. Oral
argument on Paramount’s Motion on Causation was held on May 11, 2015. 28
STATEMENT OF UNDISPUTED MATERIAL FACTS
The below collection of undisputed material facts is distilled from the above listed filings.
Paramount’s Motion on Causation provided a statement of facts 29 and supporting exhibits.
Global’s Opposition on Compensation responded to Paramount’s statement of facts 30 and
provided a statement of additional facts 31 and its own set of exhibits. 32 Paramount’s Reply on
Causation replied to Global’s responses to Paramount’s statement of facts 33 and responded to
Global’s additional facts. 34
An email was sent to counsel with a summary set of undisputed facts on May 8, 2015. 35
That summary was reviewed at the start of the hearing on May 11, 2015. 36 The below collection
of undisputed facts was finalized following the April 27, 2015 hearing based on discussion at the
hearing. 37 The headings in the statement of facts are descriptive, not declaratory or substantive,
and they are taken from the elements as described in the parties’ motions.

27

Defendants’ Reply Memorandum in Support of Motion for Partial Summary Judgment RE: Global’s Tortious
Interference Claim for Lack of Causation (“Paramount’s Reply on Causation”), docket no. 171, filed under seal on
Sep. 22, 2014; redacted version, docket no. 176, filed Sep. 24, 2014.
28

See Docket no. 251, filed May 11, 2015 (Minute entry) and Transcript 5/11/15, docket no. 254, filed May 20,
2015.
29

Paramount’s Motion on Causation at 4–15.

30

Global’s Opposition on Causation at 10–18.

31

Id. at 18–24.

32

See Global’s Exhibits on Causation.

33

Paramount’s Reply on Causation at iv–xxvii.

34

Id. at xxviii–l.

35

E-mail from Judge Nuffer’s Chambers to counsel (May 8, 2015), lodged as docket no. 273 on Aug. 31, 2015.

36

Transcript 5/11/15 32:1–43:15, docket no. 254, filed May 20, 2015.

37

Id.

6

I.
1.

Standing, Element 2: A Causal Connection Is Necessary for Standing
Global and FRAI executed multiple contracts with each other regarding

Paramount’s management of certain member accounts data. 38
2.

Each of the Contracts between Global and FRAI contains the following

termination provision: “Contractor or Company may terminate this Agreement at any time for
any reason upon 45 day prior written notice.” 39
3.

On September 11, 2012, Keith Trawick, on behalf of Global, emailed Paramount

stating:
Pursuant to the terms of our agreement with you, dated September 11, 2009, 45
day notice is hereby given for the termination of the Agreement. As we discussed,
the clubs have been sold to L.A. Fitness and at this time, we are unsure of the
exact closing date. As specific information becomes available, we will let you
know. It is our understanding that you guys will continue to provide service until
the official closing date. 40
4.

Six days earlier, on September 5, 2012, Global and L.A. Fitness executed a

certain Asset Purchase Agreement (“APA”). 41
5.

In the APA Global and L.A. Fitness agreed to an “Outside Date” of October 31,

2012 for closing the transaction contemplated by the APA. 42 However, they did not agree to any
specific “Closing Date” in the APA or at any time in writing prior to October 16, 2012. 43

38

See Contracts.

39

See id. at section entitled “Term”; see also 30(b)(6) Deposition of Global, deponent Coby DeVary (“DeVary
Depo.”) at 12:24–13:24, relevant excerpts attached as Exhibit B to Paramount’s Motion on Causation, docket no.
121-3, filed Aug. 4, 2014; other excerpts also attached as Exhibit E to Paramount’s Motion on Causation, docket no.
121-6, filed Sep. 5, 2014; other excerpts also attached as Exhibit J to Global’s Exhibits on Causation, docket no.
153-10, filed Sep. 5, 2014.
40

See Sept. 11, 2012 email from K. Trawick to S. Nelson, et al. (“Sept. 11, 2012 Trawick Email”), attached as
Exhibit C to Paramount’s Motion on Causation, docket no. 121-5, filed Aug. 4, 2014; also attached as Exhibit N to
Global’s Exhibits on Causation, docket no. 153-14, filed Sep. 5, 2014.
41

See APA at 1, attached as Exhibit D to Paramount’s Motion on Causation, docket no. 121-5, filed Aug. 4, 2014;
also attached as Exhibit W to Global’s Opposition on Causation, docket no. 151-2, filed Sep. 5, 2014; see also
DeVary Depo. at 129:4–5.

7

6.

As of the September 5, 2012 execution of the APA, Global and L.A. Fitness

agreed that the formula for calculating the “Gross Purchase Price” under the APA was
dependent, in part, on whether or not closing of the transaction occurred prior to October 16,
2012. 44
7.

Specifically, “Gross Purchase Price” under the APA is defined as:

“Gross Purchase Price” means: (a) if the Closing occurs prior to October 16, 201
and August 2012 TTM Adjusted EBITDA is equal to or greater than the product
of (i) ninety percent (90%) multiplied by (ii) July 2012 TTM Adjusted EBITDA,
then “Gross Purchase Price” shall mean an amount equal to the July 2012 Gross
Purchase Price; (b) if the Closing occurs prior to October 16, 2012 and August
2012 TTM Adjusted EBITDA is less than the product of (i) ninety percent (90%)
multiplied by (ii) July 2012 TTM Adjusted EBITDA, then “Gross Purchase Price”
shall mean an amount equal to the August 2012 Gross Purchase Price, or (c) if the
Closing has not occurred prior to October 16, 2012, then “Gross Purchase Price”
shall mean an amount equal to the lesser of (i) the September 2012 Gross
Purchase Price, (ii) the August 2012 Gross Purchase Price or (iii) the July 2012
Gross Purchase Price. 45
8.

While the formula for calculating the purchase price had the potential to change

depending on whether the APA closed before October 16, 2012, the outside closing date under
the APA was October 31, 2012. 46

42

See APA § 10.1(e), at 95 (“in the event the Closing has not occurred prior to October 31, 2012 (the ‘Outside
Date’) . . . [t]his Agreement and the transaction contemplated hereby may be terminated . . . by written notice . . . for
any reason other than delay or nonperformance of or breach by the party to this Agreement seeking such
termination”); see also Deposition of Royce Pulliam dated Mar. 21, 2014 (“Pulliam Depo.”) at 92:3–93:2, 94:22–25,
relevant excerpts attached Exhibit F to Paramount’s Motion on Causation, docket no. 121-7, filed Aug. 4, 2014; see
also DeVary Depo at 71:13–72:7, 184:15–17, 283:10–285:3; Sep. 3, 2012 E-mail from Coby DeVary to Kathryn
Polson, attached as Exhibit G to Paramount’s Motion on Causation, docket no. 121-8, filed Sep. 5, 2014 (“The
outside closing date would be 10/31/2012”).
43

See APA § 4.1, at 36.

44

See id. § 1, at 10, under definition of “Gross Purchase Price;” see also DeVary Depo. at 267:12–268:24.

45

Id.

46

See id.; see also id. at 95, § 10.1(e); see also DeVary Depo. at 71:13–72:7 (acknowledging that the “deal can still
go through and would be approved based on the terms of the asset purchase agreement if the closing date had
occurred by October 31, 2012”), 267:12–268:24 (discussing that a different purchase price formula may be used
depending on whether closing occurred before or after October 16, 2012); Pulliam Depo. at 92:3–93:2 and 94:22–25
(stating that October 31, 2012 was the date by which the parties could back out of the deal if closing had not
occurred).

8

9.

Specifically, Section 4.2(a) of the APA enumerates twenty-four (24) closing items

that Global “shall deliver, or cause to be delivered” at or prior to closing. 47 Certain Subsections
of Section 7 of the APA require further covenants from Global re: closing deliverables. 48 Such
closing deliverables included, inter alia, tax clearance certificates; the Member Account Data
(aka “EFT Customer Information”); subordination, non-disturbance and attornment agreements
(“SNDAs”); lease assignments; zoning conformance reports; and payoff letters. 49 Section 8 of
the APA reiterates that such closing deliverables are “Conditions to Obligations of [L.A.
Fitness]”. 50
10.

Subsection 4.1 of the APA further provides that closing of the transaction

contemplated by the APA
shall take place no later than on the fifth (5th) Business Day following the day on
which the last to be satisfied or waived of the conditions set forth in Section[] 8
… shall be satisfied or waived in accordance with this Agreement (other than
those conditions that by their terms are to be satisfied at the Closing, it being
understood that the occurrence of the Closing shall remain subject to the
satisfaction or waiver of such conditions at the Closing) or such other date as[L.A.
Fitness] and Global may agree to in writing (such date being referred to herein as
the “Closing Date”)…. 51
11.

As of Friday, October 5, 2012, L.A. Fitness complained in writing to Global that

certain closing deliverables remained open that were “time intensive and ha[d] the potential for
delaying closing,” including:

47

See APA § 4.2(a), at 36–39.

48

See id. § 7 et seq., at 74–90.

49

See, e.g., id. §§ 4.2(a), 7 and 8 et seq., at 36–39 and 74–93; see also E-mail from Robert Wilson of L.A. Fitness
(“Oct. 5, 2012 Wilson Email”), attached as Exhibit J to Paramount’s Motion on Causation, docket no. 121-11, filed
Aug. 4, 2014.
50

APA § 8, at 90.

51

Id. § 4.1, at 36.

9

a.

Tax clearance certificates from Ohio, North Carolina, Pennsylvania, or

Tennessee as required by APA § 4.2(a)(xxiii); 52
b.

Any affidavits stating the amount of all taxes, penalty, and interest due as

required by APA § 4.2(a)(xxii); 53
c.

EFT customer information due 14 days prior to closing date as required by

APA §§ 7.11(d) and 8.17 (a closing condition requiring compliance with the 14-day
deadline in § 7.11) (L.A. Fitness notes that even delivery of the Motionsoft EFT
Customer information on Oct. 5, 2012 is “clearly inconsistent with Seller [sic] stated
desire to close this transaction by October 15, 2012”); 54
d.

Subordination and non-disclosure agreements as required by APA §

4.2(a)(xix) (“important to [L.A. Fitness] and were included as a closing condition for that
reason”); 55
e.

Lease assignments as required by APA §§ 4.2(a)(v), (xx) and 7.9 (noting

that the delay “is reflective of the fact that Sellers have not used their best efforts in
obtaining such Lease Agreements”); 56
f.

Zoning conformance reports due 5 days prior to closing as required by

APA § 4.2(a)(vi); 57 and
g.

Payoff letters due 5 business days prior to closing as required by APA §

7.22. 58

52

See Oct. 5, 2012 Wilson Email at numeral I.

53

Id.

54

See id. at numeral II.

55

See id. at numeral III.

56

See id. at numeral IV.

57

See id. at numeral V.

10

12.

Moreover, regarding the Member Account Data managed by Paramount and the

Contracts between Global and Paramount, Subsection 7.11(d) of the APA states:
At least fourteen (14) days prior to the Closing Date, [Global] shall be responsible
for the transfer of all customer account (other than each customer’s name,
address, telephone number, facsimile number and email address) and EFT
Payment data (including, without limitation, all Present Member status and billing
and customer service history) from [Global’s] electronic fund transfer system to
[L.A. Fitness’s] electronic fund transfer system (collectively, “EFT Customer
Information”) and shall continue to assist Buyer until such data transfer is
complete. At least three (3) Business Days prior to the Closing Date, [Global]
shall transfer customer account data that includes each customer’s name, address,
telephone number, facsimile number and email address. In addition, Sellers shall
terminate Sellers' EFT Provider Service Agreements as they pertain to the Present
Membership Agreements or and other EFT Payments received on account of or
related to the Business, and Sellers shall, and shall direct Sellers' EFT Providers
to, cease servicing the Present Membership Agreements, on the later to occur of
(i) the Closing Date or (ii) the date on which the transfer to Buyer's electronic
fund transfer system of all EFT Payments made with respect to Present
Membership Agreements has been completed (provided such date shall occur no
later than ninety (90) days after the Closing Date). Sellers shall, and shall direct
Sellers' EFT Providers to, assist Buyer in transferring all customer account
(which, from the date that is at least three (3) Business Days prior to the Closing
Date, shall include, without limitation, name, address, telephone number,
facsimile number and email address) and EFT Payment data (including, without
limitation, all Present Member status and billing and customer service history) to
Buyers' electronic fund transfer system. Sellers shall be responsible for all costs
and expenses associated with transferring and terminating Sellers' electronic fund
transfer system and Sellers' EFT Provider Service Agreements as provided in this
Section 7.11 (including, without limitation, (i) any and all cancellation fees,
accumulated late fees, banking fees and any and all other fees, charges or
expenses which may arise or be charged or assessed in connection with such
transfer and/or termination, and (ii) all costs, fees and expenses listed in the
Sellers' EFT Provider Service Agreements). . . . 59
13.

Subsection 8.17 of the APA further provides that a condition of L.A. Fitness to

buy Global’s assets was that Global “shall have provided all of the EFT Customer Information

58

See id. at numeral VI.

59

Id. § 7.11(d), at 83–84; see also Oct. 5, 2012 Wilson Email.

11

… to [L.A. Fitness] in accordance with, and within the time periods specified in, Section
7.11(d).” 60
14.

Section 8 of the APA states that, while L.A. Fitness, in its sole discretion, could

“waive any or all of these conditions in writing[,]” “[t]he obligation of [L.A. Fitness] to
consummate the transactions contemplated by this Agreement is subject to the satisfaction, [at
or] before the Closing … of all conditions set forth in this Article 8.” 61
15.

Section 2.5 of the APA states that if the consent to assign third party contracts

cannot be obtained prior to the Closing, the Sellers shall, unless and until Buyer
expressly requests otherwise in writing, hold such [contract], and as of and from
the [closing], for Buyer in order for Buyer to obtain the benefits thereunder and
cooperate with Buyer in any other reasonable arrangement designed to provide
such benefits to Buyer.62
16.

Section 7.7 requires that

each party use its reasonable, good faith efforts to perform its obligations
hereunder and . . . cause the transaction contemplated herein to be effected as
soon as practicable. . . and shall cooperate fully with each other party and its
representatives in connection with any step required to be taken as a part of its
obligations hereunder. . . .63
17.

Before October 3, 2012, Paramount provided Global with all requested Member

Account Data including weekly productions during the final months of the contracts and

60

Id. § 8.17, at 93; see also Oct. 5, 2012 Wilson Email.

61

See id. § 8, at 90; see also, e.g., id. §§ 8.2, at 91–93 (“Each of the covenants and obligations set forth herein that
[Global is] required to comply with or perform at or prior to the Closing shall have been complied with or performed
in all material respects.”) and § 8.14 (“At the Closing, [L.A. Fitness] shall have received each of the documents,
certificates, instruments, and agreements … and other items required to be delivered to [L.A. Fitness] pursuant to
Section 4.2(a)…’)); Oct. 5, 2012 Wilson Email (outlining “certain open closing deliverables … that are time
intensive and have the potential for delaying closing” but where “are important to [L.A. Fitness] and were included
as a closing condition for that reason”).

62

APA § 2.5, at 31.

63

Id. at § 7.7, at 80.

12

productions after Global provided notice to terminate the Contracts; CC and ACH information
was not included. 64
18.

The first date that Global made a written request to Paramount to transfer all of

the Member Account Data that it was processing for Global was October 3, 2012, via email. 65
19.

L.A. Fitness’s receipt of the Motionsoft full cut on October 5, 2012 provided L.A.

Fitness with enough time to incorporate the data for a close on October 15, 2012. 66
20.

When Global made a demand on October 3, 2012 for the return of its Member

Account Data, including the billing information, internal correspondence from Paramount,
spanning from October 3, 2012 to October 11, 2012, establishes that they were concerned that if
they provided the requested data they would be unable to collect their termination fees. 67
21.

Specifically Defendants stated in e-mail correspondence:
a.

“If we give them a full cut we’ll never get any money from them . . . .” 68

b.

“Please check and recheck all files we are sending to [Global Fitness] to

make sure we DO NOT include the banking information!” 69

64

See Sep. 10, 2012 Email chain from Glen Bendixen to Todd Rasmussen, et al., attached as Exhibit DD to Global’s
Exhibits on Causation, docket no. 153-25, filed Sep. 5, 2014 (“The export is already getting posted every
Wednesday for [Global] on the FTP site.”); see also Counterclaim ¶¶ 46–47, at 25–26.
65

See Oct. 3, 2012 email from Keith Trawick to Sid Nelson, et al., attached as Exhibit K to Paramount’s Motion on
Causation, docket no. 121-12, filed Aug. 4, 2014; also attached as Exhibit P to Global’s Exhibits on Causation,
docket no. 153-16, filed Sep. 5, 2014, (“We are asking for a full cut of the data on Friday. . . . Please confirm. Also,
we will need an additional (updated) cut of the same data on the date of the actual close, which we anticipate will be
next week.”); see also Amended Complaint ¶ 28 (“On October 3, 2012, Global[] requested that Paramount transfer
the Billing Data or final cut back to Global. . . .”).
66

30(b)(6) Deposition of L.A. Fitness, deponent Kathryn Polson (“Polson Depo.”) at 248:23–249:3, relevant
excerpts attached as Exhibit M to Paramount’s Motion on Causation, docket no. 121-14, filed Aug. 4, 2014; other
portions also attached as Exhibit FF to Global’s Exhibits on Causation, docket no. 153-27, filed Sep. 5, 2014.
67

See infra nn.68–71.

68

Oct. 3, 2012 E-mail chain from Glen Bendixen to Sid Nelson et al., attached as Exhibit II to Global’s Exhibits on
Causation, docket no. 153-30, filed Sep. 5, 2014.

69

Oct. 5, 2012 E-mail chain from Todd Rasmussen to Glen Bendixen, attached as Exhibit JJ to Global’s Exhibits on
Causation, docket no. 153-31, filed Sep. 5, 2014.

13

c.

“Prior to shutting of [Defendants] system, the required payments to

[Defendants] and reserves for contingencies must be agreed upon and paid.” 70
d.

“I think [Global Fitness and L.A. Fitness] are trying to sign tomorrow or

Friday leaving us no ability to build up a reserve. The billing info is the only card we
have left.” 71
22.

Paramount transferred the complete set, or “full cut,” of membership accounts

data to Global on October 11, 2012. 72
23.

On the morning of October 11, 2012, Kathy Polson of L.A. Fitness informed

Coby DeVary of Global Fitness that because Global did not have the Paramount data, Global
would not be in a position to close on October 15. 73 Ms. Polson testified that the APA did not
close on October 15, 2012 because L.A. Fitness did not have all of the items it needed for
closing, including, in addition to the Paramount Member Account Data, lease assignments,
schedules, payoff letters, SNDAs, and documentation regarding subtenants. 74 Ms. Polson
specifically testified that even if L.A. Fitness had the Paramount data, closing still would not
have occurred on October 15, 2012 because of all of the other items Global had failed to
provide. 75

70

Oct. 9, 2012 E-mail from Thomas Klc, attached as Exhibit S to Global’s Exhibits on Causation, docket no. 15319, filed Sep. 5, 2014.
71

Oct. 3, 2012 E-mail from Todd Rasmussen to Glen Bendixen, attached as Exhibit Q to Global’s Exhibits on
Causation, docket no. 153-17, filed Sep. 5, 2014.
72

See Oct. 11, 2012 Email from K. Trawick to S. Horton-Salcedo, et al., attached as Exhibit L to Paramount’s
Motion on Causation, docket no. 121-13, filed Aug. 4, 2014 (“The PAC data is available on your FTP site.”); see
also Polson Depo. at 189:9–190:14 (acknowledging that Paramount transferred the Member Account Data on
October 11, 2012); Deposition of Keith Trawick (“Trawick Depo.”) at 262:19–23, attached as Exhibit n to
Paramount’s Motion on Causation, docket no. 121-15, filed Aug. 4, 2014; other portions also attached as Exhibit Y
to Global’s Exhibits on Causation, docket no. 153-23, filed Sep. 5, 2014.
73

Polson Depo. at 249:8–12; DeVary Depo. at 98:5–8.

74

See Polson Depo. at 132:14–136:9.

75

See id. at 135:24–136:9.

14

24.

Irrespective of the membership account data, as of October 15, 2012, Global had

not satisfied all of the closing conditions set forth in the APA. Waivers of some conditions had
been negotiated. L.A. Fitness had not executed a written waiver of any of these items:
a.

Global had not provided to L.A. Fitness at least some lease assignments. 76

b.

Global had not provided to L.A. Fitness at least some SNDAs or

recognition agreements. 77
c.

Global had not provided to L.A. Fitness at least some tax clearance

certificates. 78
d.

Global had not provided to L.A. Fitness at least some payoff letters. 79

e.

Global had not provided to L.A. Fitness the final purchase price

calculation. 80
f.
25.

Global had not completed other un-waived closing conditions. 81

L.A. Fitness’s Rule 30(b)(6) designee testified as follows:

Q.
So even if Global [] had received all the Paramount [Membership
Account Data] that it needed prior to October 15, 2012, it could not close on that
date because it didn’t have lease assignments, including SNDAs, payoff letters,
and the final purchase price calculation that it needed from Global [] under the
APA?
A.

Yes. 82

76

Id.; see also 132:7–136:9.

77

Id.

78

Id.

79

Id.

80

Id.

81

Polson Depo at 132:11–23 (identifying other “lease-related documents . . . that Global Fitness needed to provide
to LA Fitness” but had not); see also id. at 133:1–17 (identifying missing “schedules required” for “payoff notices,”
as well as reiterating that “the final calculation of the purchase price” had yet to be provided as of October 15,
2012); id. at 134:8–12 (identifying “documentation regarding some of the subtenants that [L.A. Fitness still] needed
to receive,” as well as “certificates of occupancies” and other associated “reports allowing [L.A. Fitness] to do
business in those sites”) and id. at 135:12–15 (“certificate[s] of occupancy . . . would be one of the items that we
would need to close” and “[w]e did not have those as of [October 15, 2012]”).

15

26.

As of at least September 3, 2012—prior to signing the APA—L.A. Fitness knew

that Global’s earnings were declining:
Q.
Do you know why LA Fitness and Global [] agreed to this terms – to these
terms per your email here?
A.
As we progressed through the negotiations and we were getting financial
statements from [Global] and we saw what was happening to the earnings, the
EBITDA, we saw how that was declining and we wanted – we, LA Fitness,
wanted to make sure that since our price is based on a multiple of EBITDA, that
we would not be getting substantially lower EBITDA in the for – in the time
period that we were – we were owning and operating the company. So we built in
these terms to help protect us should the EBITDA drop significantly.83
27.

Ultimately, the transaction contemplated by the APA closed on October 25, 2012,

six days prior to the Outside Date for closing. 84
28.

As of October 25, 2012, Global had still not satisfied all of the closing conditions

under the APA. However, at that time, L.A. Fitness executed a formal amendment of the APA in
order to defer, resolve, or waive, in writing, Global’s obligation to complete those items prior to
closing, 85 as required by the APA. 86
29.

By closing after October 15, 2012, L.A. Fitness was able to acquire Global’s

assets at a savings of nearly $10 million dollars. 87
30.

In its Amended Complaint, Global alleges that:
a.

Paramount’s “actions deprived Global Fitness of . . . its ability to comply

with its obligations under the APA with L.A. Fitness.” 88
82

Id. at 135:24–136; see also 132:7–136:9.

83

Id. at 72:20–73:7.

84

See DeVary Depo. at 98:9–11 (“Q. Do you know the date that Global and LA Fitness actually closed? A. October
25th.”); see also Polson Depo. at 90:9–18 (stating that as of October 26, 2012 L.A. Fitness was operating Global’s
clubs); Amended Complaint ¶ 35.

85

Second Amendment to the APA, attached as Exhibit SS to Global’s Exhibits on Causation, docket no. 153-39,
filed Sep. 5, 2014; see also Polson Depo. at 249:13–250:2.
86

See APA § 8, at 90 (L.A. Fitness “may waive any or all of these conditions in writing . . . .”).

87

See DeVary Depo. at 95:9–10.

16

b.

“Instead of closing on October 15, 2012, Global Fitness was unable to

close the APA with L.A. Fitness until October 25, 2012 because of the actions of
Paramount.” 89
c.

“As a result of the delay caused by Paramount . . . the purchase price of

the APA decreased dramatically.” 90
d.

“As the direct and proximate cause of the acts and omissions of Paramount

. . . Global Fitness was unable to perform its obligations under the APA.” 91
e.

“Paramount . . . interfered and threatened Global Fitness’s business

relationship with L.A. Fitness.” 92
II.
31.

Tortious Interference: Proximate Causation Element

The preceding paragraphs 1–30 are incorporated by reference as if fully set forth

herein anew as all such undisputed material facts pertain to proximate causation in relation to
Global’s tortious interference claim.
SUMMARY JUDGMENT STANDARD
Summary judgment is proper “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” 93 “An issue of
material fact is ‘genuine’ if a reasonable jury could return a verdict for the nonmoving party.” 94
In moving for summary judgment, Paramount “bears the burden of showing the absence of a

88

Amended Complaint ¶ 34, at 7.

89

Id. ¶ 35, at 7.

90

Id. ¶ 36, at 7.

91

Id. ¶ 41, at 8.

92

Id. ¶ 42, at 8.

93

FED. R. CIV. P. 56(a).

94

Universal Money Ctrs., Inc. v. Am. Tel. & Tel. Co., 22 F.3d 1527, 1529 (10th Cir. 1994) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)) (internal quotation marks omitted).

17

genuine issue of material fact . . . .” 95 However, Paramount “need not negate [Global’s] claim[s],
but need only point out to the district court ‘that there is an absence of evidence to support
[Global’s] case.’” 96 Upon such a showing, Global “must set forth specific facts showing that
there is a genuine issue for trial as to those dispositive matters for which [Global] carries the
burden of proof.” 97 “The mere existence of a scintilla of evidence in support of the plaintiff’s
position will be insufficient to defeat a properly supported motion for summary judgment.” 98
And “mere supposition and speculation are insufficient for a case to survive the summary
judgment stage.” 99 When applying the forgoing standards, the Court must “examine the factual
record and reasonable inferences therefrom in the light most favorable to the party opposing
summary judgment.” 100
APPLICABLE LAW
Global originally filed this case in the United States District Court for the Eastern District
of Kentucky. 101 Federal jurisdiction in this case is premised on diversity. 102 Venue was
subsequently transferred to the District of Utah . 103 The parties have stipulated and agreed that
Kentucky substantive law applies to Global’s claim for tortious interference. 104 Nevertheless,
95

Universal, 22 F.3d at 1529.

96

Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)).

97

Id. (quoting Anderson, 477 U.S. at 256 (internal quotation marks omitted)) (both emphases in original).

98

Id. (quoting Anderson, 477 U.S. at 252 (internal quotation marks omitted)).

99

Snow Pallet, Inc. v. Monticello Banking Co., 367 S.W.3d 1, 6 (Ky. Ct. App. 2012).

100

Id. (quoting Applied Genetics Int’l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990))
(internal quotation marks omitted).
101

See e.g., Paramount’s Motion on Causation at 14; Global’s Opposition on Causation at 27.

102

See 28 U.S.C. § 1332(a); see also Complaint ¶ 3, docket no. 1, filed Oct. 10, 2012 (“This Court has jurisdiction
over this action pursuant to 28 U.S.C. § 1332(a) as it involves citizens of different states and the amount in
controversy exceeds the sum or value of $75,000, exclusive of interest and costs.”).
103

Memorandum Opinion & Order, docket no. 34, filed Mar. 20, 2013.

104

See e.g., Global’s Motion for Partial Summary Judgment on Paramount’s Fraud and Negligent Misrepresentation
Counterclaims at 13–15, docket no. 66, filed Mar. 4, 2014; Paramount’s Motion on Causation at 15.

18

while Kentucky substantive law applies to the claim at issue, federal law governs procedural
questions and the applicable standard of review. 105 Moreover, federal law also governs
determinations of standing. The plaintiff must satisfy the Article III standing requirements of
injury-in-fact, causation, and redressability irrespective of substantive state law applicable in
diversity. 106
ANALYSIS
Standing is a constitutional, threshold requirement grounded in the provision of Article
III of the United States Constitution. Article III limits the jurisdiction of federal courts to cases
and controversies. 107 To demonstrate standing, Global bears the burden of establishing that it
“suffered and injury-in-fact – an invasion of a legally protected interest,” that there is a “causal
connection between [Global’s] injury and the conduct [of Paramount] complained of,” and that it
is “likely, as opposed to merely speculative, that [Global’s] injury will be redressed by a
favorable decision.” 108 In response to Paramount’s Motion on Causation, Global cannot rely on
mere allegations, but must set forth, by affidavit or other evidence, specific facts establishing
standing. 109 “[E]ach element of standing must be supported in the same way as any other matter
on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence
required at the successive stages of the litigation.” 110 Federal courts have an independent

105

E.g., Flood v. ClearOne Commc’ns, Inc., 618 F.3d 1110, 1117 (10th Cir. 2010).

106

Hollingsworth v. Perry, 133 S. Ct. 2652, 2667–68 (2013).

107

See Allen v. Wright, 468 U.S. 737, 750 (1984); Asarco Inc. v. Kadish, 490 U.S. 605, 613 (1989); Steel Co. v.
Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998); and Warth v. Seldin, 422 U.S. 490, 498 (1975).
108

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–62 (1992); see also Steel Co., 523 U.S. at 102–103.

109

See FED. R. CIV. P. 56; FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990).

110

Lujan, 504 U.S. at 561.

19

obligation to examine their own jurisdiction, and standing is as important as any jurisdictional
doctrine. 111
In its Amended Complaint, Global contends that Paramount, having knowledge of
Global’s contractual relationship with L.A. Fitness, improperly withheld the Billing Information,
thereby rendering Global “unable to perform its obligations under the APA.” 112 Global’s claim
for tortious interference alleges that Paramount’s “actions knowingly harmed Global[]’s APA
with L.A. Fitness.” 113 Global also asserts a claim for punitive damages premised on this tortious
interference claim. 114 As discussed below, Global’s claim for tortious interference fails and
Paramount is entitled to judgment as a matter of law because Global has failed to show (I) a
causal connection between its alleged injury and Paramount’s conduct and (II) that Paramount’s
conduct proximately caused Global’s alleged injury.
I.

Global Lacks Article III Standing to Bring Its Tortious Interference Claim
for Want of a Causal Connection.

As stated above, the second element of standing under Article III’s case-or-controversy
requirement constitutes traceability or “causation.” 115 Global must satisfy the “causation” prong
of Article III as a threshold matter by showing that its alleged injury “fairly can be traced” to
Paramount’s conduct. 116 Simply put, standing requires that there be a causal connection between
Global’s asserted injury and Paramount’s allegedly tortious conduct. 117 To the extent that

111

See id. (although neither side raised issue, courts are required to address standing even if courts below have not
passed on it).
112

Amended Complaint ¶¶ 28, 30–31, 33–34, 40–44, at Count I.

113

Id. ¶¶ 38–45, at Count I; id. ¶¶ 34–36, at 7, ¶¶ 41–42, at 8.

114

Id. ¶¶ 79–80, at Count VII.

115

See Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464,
472 (1982).
116

Whitmore v. Arkansas, 495 U.S. 149, 155 (1990).

117

See, e.g., Florida Audubon Soc’y v. Bentsen, 94 F.3d 658, 670 (D.C. Cir. 1996) (“The greater number of
uncertain links in a causal chain, the less likely it is that the entire chain will hold true.”); see also D.L. v. Unified

20

Global’s injury is self-inflicted or is due to Global’s own conduct, the causal chain is broken. 118
In Global’s Opposition on Causation, Global argued limits associated with prudential
standing; 119 however, the doctrine of prudential standing is not at issue.
Applying these standards, Global’s tortious interference claim fails, as a matter of law,
where Global’s alleged tort-based harms cannot fairly be traced to Paramount’s alleged
actions. 120 Based on the undisputed facts, Global cannot sustain its burden to demonstrate
standing for two reasons: (A) Paramount provided all of the Member Account Data on October
11, 2012 but Global still failed to close the APA on or before October 15, 2012 and (B) Global’s
failures to perform its express obligations under the APA are the cause of Global’s alleged
injury. Therefore, Paramount is entitled to summary judgment as a matter of law on Global’s
tortious interference claim.
A. Paramount Provided All of the Member Account Data on October 11, 2012, But
Global Unilaterally Failed to Close the APA on or Before October 15, 2012.
It is undisputed that Paramount transferred, under injunctive order, the complete set, or
“full cut,” of Member Account Data to Global on October 11, 2012. 121 Nevertheless, Global was
still unable to close on the transfer of its assets under the APA on or before October 15, 2012. 122
Because Paramount transferred the Member Account Data four days prior to the trigger date of
October 15, Global’s failure to close by that date cannot be attributed to Paramount. Likewise,

Sch. Dist. No. 497, 596 F.3d 768, 774–75 (10th Cir. 2010) (plaintiffs lacked standing because they were unable to
show that children’s absence from school was caused by defendant’s allegedly discriminatory conduct).
118

See McConnell v. FEC, 540 U.S. 93, 228 (2003), overruled on the grounds, Citizens United v. FEC, 558 U.S. 310
(2010) (plaintiffs lacked standing to challenge election reform law because injury stemmed from plaintiffs’ personal
choice rather than from statute).
119

See Global’s Opposition on Causation at 24–27.

120

See Whitmore, 495 U.S. at 155.

121

See Statement of Undisputed Material Facts, supra ¶ 22.

122

Id. ¶¶ 23–28.

21

the consequences of Global’s failure to close the APA on or before October 15, 2012,
consequences specifically negotiated and bargained for in the APA, 123 cannot be attributed to
Paramount.
Accordingly, Paramount is entitled to summary judgment as a matter of law on Global’s
tortious interference claim because Global’s failure to close the APA on or before October 15,
2012 cannot be fairly traced to Paramount’s transfer of the Member Account Data where Global
had the Member Account Data on October 11, 2012, four days prior to the October 15, 2012
variable purchase price deadline.
B. Global’s Failures to Perform Its Express Obligations under the APA are the Cause
of Global’s Alleged Injury.
Independent of Paramount’s transfer of the Member Account Data prior to October 15,
2012, Global’s own failure to meet the requirements of the APA, a binding contract, prevent
Global from meeting the standing doctrine’s requirement of showing a causal connection
between Global’s injury and Paramount because self-inflicted injuries break the causal chain. 124
The APA imposed a number of closing conditions upon Global, many of which remained
outstanding as of October 15, 2012, and even as late as October 25, 2012. 125 These incomplete
closing obligations were wholly independent of Parmaount’s transfer of the Member Account
Data on October 11, 2012. 126 Global’s incomplete APA obligations included various lease
assignments, SNDAs or recognition agreements, zoning conformance reports, tax clearance
certificates, payoff letters, purchase price calculations, and so forth, all of which Global was

123

Id. ¶¶ 4–8, 23–29.

124

See McConnell, 540 U.S. at 228.

125

See Statement of Undisputed Material Facts, supra ¶¶ 9–14, 16, 18, 23–25, 27–29.

126

Id. ¶ 22.

22

independently responsible for completing under the APA. 127 It is undisputed that Global failed to
complete or obtain a written waiver of these items, as required by the APA, before October 15,
2012. 128 This undisputed fact breaks any causal connection between Paramount’s conduct and
Global’s alleged injury and, therefore, destroys Article III standing.
Not only did Global fail to satisfy numerous APA obligations irrespective of the Member
Account Data, Global failed to even request the Membership Account Data from Paramount “[a]t
least fourteen (14) days prior” to October 15, 2012 as required by the APA. 129 Global’s failure to
timely request the Member Account Data is not traceable, fairly or otherwise, to Paramount’s
conduct. Thus, Global’s own failure to satisfactorily comply with the APA is a self-inflicted
injury that breaks the causal chain. 130
Accordingly, regardless of Paramount’s transfer of the Member Account Data in advance
of the October 15, 2012 adjustable purchase price deadline, Paramount’s conduct also cannot be
fairly traced or causally connected to Global’s alleged harm, and therefore, Paramount is entitled
to judgment as a matter of law.
II.

Global’s Tortious Interference Claim Also Fails on Proximate Cause.

Similar to the standing doctrine’s causation requirement, “[i]n Kentucky, intentional torts
require proving proximate cause.” 131 Kentucky law recognizes two separate claims for tortious
interference: interference with a contract, 132 and interference with a prospective business

127

Id. ¶¶ 9–14, 16, 18, 23–25, 27–29.

128

Id. ¶¶ 24, 28; see also id. ¶¶ 23, 25.

129

See id. ¶¶ 11(c), 12–13, 18.

130

See McConnell, 540 U.S. at 228.

131

Ventas, Inc. v. Health Care Prop. Investors, Inc., 635 F. Supp. 2d 612, 624 (W.D. Ky. 2009) (citing Ky. Laborers
Dist. Council Health & Welfare Trust Fund v. Hill & Knowlton, Inc., 24 F. Supp. 2d 755, 762 n.1 (W.D. Ky. 1998)).
132

To sustain a claim for tortious interference with contract, Global bears the burden of proving the following
elements: (1) the existence of a contract; (2) [Paramount’s] knowledge of the contract; (3) that [Paramount] intended
to cause a breach of that contract; (4) that [Paramount]’s actions did indeed cause a breach; (5) that damages resulted

23

advantage. 133 Whether its claim is one for interference with a contract or interference with a
prospective business advantage, Global bears the burden of proving that Paramount’s conduct
was the proximate cause, i.e., a “substantial factor,” in bringing about Global’s alleged injury in
tort. 134
Not only must Global prove that it “actually suffered damages as a result of
[Paramount’s] actions,” 135 “[p]roximate cause can be interrupted by a superseding, or
intervening, cause.” 136 Put differently, proximate cause can be destroyed by “an act of a third
person or other force which by its intervention prevents the actor from being liable for harm to
another.” 137
Under these standards, Global’s tortious interference claim fails, as a matter of law
because Paramount did not proximately cause Global’s alleged tort-based harms. 138 In its
tortious interference claim, Global alleges that Paramount is the lone proximate cause of harms
caused by Global’s failure to close the APA on October 15, 2012. 139 However, for the reasons
stated more fully below, (A) Paramount did not proximately cause Global’s harms, if any, and

to [Global]; and (6) that [Paramount] had no privilege or justification to excuse its conduct. See E.g., CMI, Inc. v.
Intoximeters, Inc., 918 F. Supp. 1068, 1079-80 (W.D. Ky. 1995).
133

To sustain a claim for tortious interference with a prospective business advantage, Global bears the burden of
proving the following similar or related elements: (1) the existence of a valid business relationship or expectancy;
(2) that [Paramount] was aware of this relationship or expectancy; (3) that [Paramount] intentionally interfered; (4)
that the motive behind the interference was improper; (5) causation; and (6) special damages. See E.g., Monumental
Life Ins. Co. v. Nationwide Ret. Solutions, Inc., 242 F. Supp. 2d 438, 450 (W.D. Ky. 2003).
134

See e.g., Ventas, 635 F. Supp. 2d at 624.

135

In re Davis, 334 B.R. 874, 886 (Bkrtcy. W.D. Ky. 2005), reversed in part on other grounds, 347 B.R. 607 (W.D.
Ky. 2006) (“Under Kentucky [tort] law, … plaintiff bears the burden of proving, among other things, that the
plaintiff actually suffered damages as a result of the defendant’s actions.”).
136

Ventas, 635 F. Supp. 2d at 624 (citing Briscoe v. Amazing Prods., Inc., 23 S.W.3d 228, 229 (Kt. Ct. App. 2000)).

137

Id. (quoting Briscoe, 23 S.W.3d at 229 (internal quotation marks omitted) and citing Restatement (Second) of
Torts § 440 (1965) and Donegan v. Denney, 457 S.W.2d 953, 958 (Ky. 1970)).
138

See e.g., Ventas, 635 F. Supp. 2d at 624.

139

See Statement of Undisputed Material Facts, supra ¶ 30(b); see also id. ¶ 30(a) –(e).

24

(B) other superseding or intervening causes prevent Paramount from being liable for any such
harm, or otherwise destroy proximate causation even if it existed.
Global’s claim is articulated in the Amended Complaint as one for tortious interference
with a contract. 140 Nevertheless, Global has disclaimed, expressly during oral argument at the
May 11, 2015 hearing 141 and implicitly in its briefing, 142 any claim for tortious interference with
contract. While Global’s pleadings are at odds with Global’s disclaimer, this order, construing all
well-pleaded facts and inferences in Global’s favor, grants summary judgment in favor of
Paramount on any claim for tortious interference with a prospective business advantage for lack
of causation.
A. Paramount is Not the Proximate Cause of Global’s Alleged Tort Injury, if Any.
As set forth above, in order to prevail on its tortious interference claim, Global must
prove that its harms, if any, were the result of Paramount’s actions. 143 Based on the undisputed
facts, Global cannot sustain this burden and Paramount is therefore entitled to summary
judgment on Global’s interference claim as a matter of law. An initial examination of relevant
case law is instructive.
In Ventas, the United States District Court for the Western District of Kentucky rejected
two separately alleged interference injuries, as a matter of law, owing to a lack of causation. 144

140

See id. ¶ 30(a) –(e).

141

See Transcript 5/11/15 65:10–18, docket no. 254, filed May 20, 2015 (MR. OWEN: Again, we don't have a
contract claim as it relates to this. The COURT: You don't have a tortious interference with contract claim? MR.
OWEN: Right. It's prospective contract. THE COURT: And what is the prospective contract that is to be made?
MR. OWEN: It is to close and have the bill of sale to transfer these -- these gyms by the October 15th date.”); see
also id. at 71:2–4 (“THE COURT: Okay. So you're disclaiming entirely an interference with contract claim? MR.
OWEN: Yes, Your Honor.”).
142

See Global’s Opposition at 15–20 (arguing that Paramount wrongly bases its argument on tortious interference
with a contract, an analysis inapplicable to tortious interference with a prospective business relationship).

143

Ventas, 635 F. Supp. 2d at 624.

144

Id. at 625–26.

25

The court first rejected a claim for damages on the order of $155 to $180 million resulting from a
delay in issuing shares of common stock allegedly caused by the defendant. 145 In so holding, the
court found that the defendant’s actions, even if they had caused the alleged delay, were “not
necessarily a factor in driving down the value of Ventas’s shares” where “Ventas received the
full market value for the shares when issued.” 146 Put differently, the defendant’s “actions [could
not] reasonably be considered the substantial factor in determining the market price of Ventas’s
shares.” 147 The court further noted that, while the issuance of shares was always a possibility,
Ventas had no evidence of “an actual date for issuing shares” and the “evidence does not suggest
that [defendant] knew of any actual plan by Ventas’s [sic] to issue [shares] … [or] the timing on
that issuance.” 148 The court similarly rejected a second claim for tort-based damages stemming
from legal fees Ventas allegedly incurred in responding to the defendant’s actions because “the
chain of causation is too attenuated.” 149
Similarly, in CMI, the court rejected CMI’s interference claim as a matter of law on the
basis of causation. The claim was premised on the actions of the defendant that allegedly
prevented CMI from obtaining state contracts for breath alcohol testing equipment. 150 Among
other things, the court rejected CMI’s claim because “CMI’s bid failed to conform to the bid
specifications.” 151 The court further found that the state was within its prerogative to “lawfully
reject” CMI’s bid due to such failures, and “it cannot be said that [d]efendants unlawfully caused

145

Id. at 625.

146

Id.

147

Id.

148

Id.

149

Id. at 625-26.

150

CMI, 918 F. Supp. at 1081–83.

151

Id. at 1081.

26

the state to so act.” 152 In addition, while the court noted certain negative comments that the
defendant made to state officials about CMI, the court found “no evidence . . . that these
comments caused Missouri to reject CMI’s otherwise satisfactory bids.” The court stated that
“[s]uch speculation cannot support the conclusion that Missouri’s decisions were legally
flawed.” 153
Notably, Global attempts to distinguish Ventas and CMI as cases involving a “total
absence” of causation evidence. 154 Global’s reading of Ventas and CMI is too narrow. Neither
case involved a total absence of evidence. Instead, they involved circumstances like those at
issue here: the undisputed factual evidence was insufficient to sustain causation for some of the
claims at issue. 155
1. Paramount Provided All of the Member Account Data, Including
the Billing Information, on October 11, 2012, and Global’s Failure
to Close the APA within the Subsequent Four Days Cannot Be
Attributed to Paramount.
Independent of the above causal deficiencies, as discussed above, 156 Paramount cannot be
the proximate cause of Global’s failure to close by October 15, 2012 because Paramount
transferred the Member Account Data on October 11, 2012.
Perhaps the most significant barrier to causation is history, and as discussed above, it is
undisputed that Paramount transferred the complete set, or “full cut,” of Membership Account

152

Id.

153

Id. at 1082; see also Snow Pallet, 367 S.W.3d at 6 (“there is no evidence, other than mere speculation, that
[defendant] interfered with” plaintiff’s business expectancy—“mere supposition and speculation are insufficient for
a case to survive the summary judgment stage.”).
154

See Global’s Opposition on Causation at 34–35 (emphasis omitted).

155

See e.g., Ventas, 635 F. Supp. 2d at 624–26 (evidence of delay caused by defendants insufficient to show a
decrease in market value); CMI, 918 F. Supp. at 1081–83 (evidence of negative comments insufficient to show
interference).
156

See supra, Part I(A).

27

Data to Global on October 11, 2012. 157 Nevertheless, notwithstanding Global’s (and L.A.
Fitness’s) possession of the full cut on October 11, 2012, Global was still unable to close four
days later on October 15, 2012. 158 Moreover, closing did not occur until 14 days later. This
length of this delay is wholly unrelated to Paramount, showing that the delay of the Member
Account from Global’s demand deadline of October 5 to the actual transfer date of October 11
was not the cause of the failure to close the APA on or before October 15, 2012.
Global’s failure to close the APA on or before October 15, 2012 while having all of the
Membership Account Data in hand cannot be attributed to Paramount. Likewise, the
consequences of Global’s failure to close the APA on or before October 15, 2012, consequences
specifically negotiated and bargained for in the APA, 159 cannot be attributed to Paramount.
Accordingly, regardless of the standing deficiencies, Paramount is also entitled to summary
judgment as a matter of law because Global’s, and consequently L.A Fitness’s, possession of the
Member Account Data insulate Paramount from being the proximate cause of the failure to close
with the higher purchase price.
2. The Variable APA Purchase and Global’s Financial Health Are the
Key Elements of the Cause of Global’s Harm.
Independent of the other reasons for granting summary judgment, Paramount cannot be
the proximate cause of Global’s failure to close by October 15, 2012 because the negotiation and
execution of the APA controlled the amount of harm suffered by Global, unrelated to
Paramount’s Actions.
Under the rationales advanced in Ventas and CMI, Global’s alleged harms are, as a matter
of law, simply too attenuated from Paramount’s actions to sustain a claim for tortious
157

See Statement of Undisputed Material Facts, supra ¶ 22.

158

Id. ¶¶ 23–28.

159

Id. ¶¶ 4–8, 23–29.

28

interference. There is no dispute that Global freely and specifically bargained with L.A. Fitness
for an Outside Date of October 31, 2012 for closing the transaction and a flexible Closing Date
under which the formula for calculating the Gross Purchase Price under the APA was dependent,
in part, on whether or not closing occurred by October 15, 2012. 160 Paramount had nothing to do
with the above provisions of the APA. Accordingly, Paramount cannot be the cause of Global’s
choice to negotiate a variable Gross Purchase Price formula which ultimately caused the
decreased purchase price under the APA.
Similarly, as in Ventas, even if Paramount’s actions caused Global to miss the October
15, 2012 variable purchase price deadline (which they did not), 161 Paramount was “not
necessarily a factor in driving down the value” of Global’s assets where, pursuant to the terms of
the APA, Global “received the full market value,” or the at least freely bargained-for market
value, for its assets. 162 Paramount’s actions are independent of, and cannot reasonably be
considered “the substantial factor in determining[,] the market price” of Global’s assets. 163
Indeed, the purchase price was wholly independent of Paramount’s actions: the purchase price
could just as easily have increased had Global’s financial health improved during the period
considered under the Gross Purchase Price formula. L.A. Fitness specifically negotiated the
variable Gross Purchase Price because it knew that Global’s earnings were declining. 164
Paramount was neither the cause of Global’s ailing financial health, nor did it author the
provision of the APA resulting in a reduced purchase price.

160

Id. ¶¶ 4–8.

161

See supra Part II(A)(1).

162

See Ventas, 635 F. Supp. 2d at 625.

163

See id.

164

See Statement of Undisputed Material Facts, supra ¶ 26.

29

Accordingly, Paramount is entitled to summary judgment as a matter of law because
Paramount cannot be the proximate cause of the reduction in purchase price where that number
fluctuated, either up or down, wholly independent of Paramount’s actions, and directly resulting
from Global’s own negotiated pricing structure and financial condition.
3. Global’s Failure to Comply with Many of Its Obligations under the
APA, Wholly Independent of Paramount’s Conduct, Ensured that
the Sale Would Not Close Before the Reduction in the Purchase
Price.
Independent of the above causal deficiencies, Paramount cannot be the proximate cause
of Global’s failure to close by October 15, 2012 because Global’s failure to properly perform its
obligations under the ABA is the true proximate cause of the failure to close with the higher
purchase price.
As in CMI, Global’s own failures to conform to the requirements of the APA frustrate
causation. 165 As set forth at length above, the APA, a binding contract obligating Global to
perform certain obligations, imposed a number of closing conditions upon Global, many of
which remained outstanding as of October 15, 2012, and even as late as October 25, 2012. 166
These incomplete closing obligations were wholly independent of any Member Account Data
that Paramount contractually managed, particularly since all such Member Account Data had
already been transferred to Global on October 11, 2012. 167
Global’s incomplete APA obligations included various lease assignments, SNDAs or
recognition agreements, zoning conformance reports, tax clearance certificates, payoff letters,
purchase price calculations, and so forth, all of which Global was independently responsible for

165

See CMI, 918 F. Supp. at 1081–83.

166

See Statement of Undisputed Material Facts, supra ¶¶ 9–14, 16, 18, 23–25, 27–29.

167

Id. ¶ 22.

30

completing under the APA. 168 Moreover, not only were many such closing conditions unsatisfied
as of October 15, 2012, but Global further did not complete such items, or otherwise secure a
written waiver of any such obligations as required by the APA, until October 25, 2012. 169
For example, under the APA, Global was required to terminate the Contracts with
Paramount. 170 Although the APA does not clearly specify a deadline, as stated in the ruling
granting Paramount’s motion for summary judgment on Global’s breach of contract claim, 171
Global could not terminate its contract with Paramount prior to October 26, 2012. This would
not be fatal to the APA, but it would be fatal to an October 15, 2012 closing date. Similarly, the
APA also prohibits Global, and therefore Paramount, from collecting payments from gym
members after the closing, 172 so this provision would directly conflict with Paramount’s
contractual rights and duties under an October 15 closing. The provisions of Global’s contracts
with L.A. Fitness and Paramount operated to bar a closing date prior to the reduction of the
purchase price on October 16, 2012. When Global entered into the APA, it was already
impossible to close with the higher purchase price unless either L.A. Fitness or Paramount
relinquished some contractual rights.
Global argues that, if Paramount had transferred the Member Account Data prior to
October 11, 2012, Global might have timely completed the remaining open closing deliverables
in advance of October 15, 2012, or L.A. Fitness might have waived any uncompleted

168

Id. ¶¶ 9–14, 16, 18, 23–25, 27–29.

169

Id. ¶ 24, 28; see also id. ¶¶ 23, 25.

170

APA § 7.11(d).

171

Memorandum Decision and Order Granting In Part and Denying In Part [111] Defendants’ Motion for Partial
Summary Judgment on Plaintiff’s Breach of Contract and Breach of the Implied Covenant Claims, docket no. 274,
filed Aug. 31, 2015.
172

APA § 7.11(e).

31

deliverables in writing (contrary to the position stated by L.A. Fitness on October 5, 2012), 173
and the closing might have not otherwise been delayed, and the ultimate purchase price might
have been higher. This string of possibilities introduces “[a] highly speculative chain of
causation [that] will not suffice.” 174 Irrespective of the transfer of Member Account Data, Global
had not completed its other obligations to close on October 15, 2012 under the express terms of
the APA. This undisputed fact defeats causation.
“The obligation of [L.A. Fitness] to consummate the transactions contemplated by [the
APA was] subject to the satisfaction, [at or] before the Closing . . . of all conditions set forth
[therein].” 175 L.A. Fitness had the option to waive, in writing, any of Global’s failures to fully
perform, 176 but L.A. Fitness’s option to waive does not mean that Global was any less obligated
to perform every obligation fully. The only way Global could ensure that L.A. Fitness would be
required to close would be to fully perform or have written waivers in place, but as of October
15, 2012, many waivers used in the eventual closing were not yet complete. There is no
construction of the APA that renders Global’s obligations optional.
L.A. Fitness—the Buyer—was the sole arbiter of whether certain closing conditions
and/or deliverables required from Global would be waived or modified, if ever, in order to
facilitate closing outside of Global’s strict compliance with the express terms of the APA. And,
L.A. Fitness was well within its contractual rights to demand strict compliance with the APA
173

See Oct. 5, 2012 Wilson Email.

174

Hill & Knowlton, 24 F. Supp. 2d at 762 n.1.

175

See APA § 8, at 90; see also, e.g., id. §§ 8.2, at 91–93 (“Each of the covenants and obligations set forth herein
that [Global is] required to comply with or perform at or prior to the Closing shall have been complied with or
performed in all material respects.”) and § 8.14 (“At the Closing, [L.A. Fitness] shall have received each of the
documents, certificates, instruments, and agreements … and other items required to be delivered to [L.A. Fitness]
pursuant to Section 4.2(a)…’)); Oct. 5, 2012 Wilson Email (outlining “certain open closing deliverables … that are
time intensive and have the potential for delaying closing” but where “are important to [L.A. Fitness] and were
included as a closing condition for that reason”).

176

See id. ¶ 8.2.

32

until at least October 16, 2012, particularly where Global had failed to timely meet so many of
its closing obligations. As in CMI, where L.A. Fitness was within its prerogative to “lawfully
reject” closing prior to October 16, 2012, “it cannot be said that [Paramount] unlawfully caused
[L.A. Fitness] to so act.” 177 In other words, irrespective of the Member Account Data managed
by Paramount, it cannot be said that L.A. Fitness rejected Global’s otherwise satisfactory
compliance with the APA. 178
Beyond Global’s failure to timely meet its closing deliverable obligations discussed
above, it is undisputed that Global was obligated to provide the Member Account Data “[a]t least
fourteen (14) days prior to the Closing Date” with the exception of customer names, addresses,
telephone and fax numbers, and email addresses. 179 As such, in order to close on October 15,
2012, Global was required to provide L.A. Fitness with the Member Account Data at least as
early as October 1, 2012. 180 But, Global failed to even request the Member Account Data
managed by Paramount until October 3, 2012—two days after Global’s deadline under the APA
to provide such data to L.A. Fitness in order to close by October 15, 2012. 181 Even if Paramount
had immediately transferred the relevant Member Account Data on October 3, 2012 when it was
first requested (contrary to the Contractual 45-day termination period), Global still would have
been outside of the requirements of the APA, and L.A. Fitness would have had contractual
authority to delay closing until after October 15, 2012. Again, Global’s own failure to
satisfactorily comply with the APA is the proximate cause of its alleged harms, not Paramount.

177

See CMI, 918 F. Supp. at 1081.

178

See id. at 1082.

179

See Statement of Undisputed Material Facts, supra ¶¶ 11(c), 12–13.

180

Id.

181

Id. ¶ 18.

33

Furthermore, § 4.1 of the APA states that Closing “shall take place no later than on the
fifth (5th) Business Day following the day on which the last to be satisfied or waived of the
conditions set forth in Section[] 8 . . . shall be satisfied or waived. . . .” 182 Therefore, in order to
ensure closing on Monday, October 15, 2012, Global would have had to have completed (or
secured a waiver for) all closing deliverables on or before the previous Monday, October 8,
2012. 183 This in turn would have required all of the Member Account Data to have been
transferred to L.A. Fitness two weeks earlier, on September 24, 2012—long before Global even
requested such a transfer. 184 Regardless, as of October 8, 2012, it is undisputed that numerous
closing deliverables remained incomplete, and therefore, L.A. Fitness could have properly
delayed closing until October 16 in order to benefit from the reduction in the Gross Purchase
Price. 185 L.A. Fitness stated that several of Global’s obligations remained unfulfilled as of
October 11, 2012 that prevented closing on October 15, 2012. 186 In short, irrespective of the
Member Account Data, Global was not ready to close on October 8, 2012, and therefore,
pursuant to the APA, L.A. Fitness was within its rights to delay closing until five business days
later. 187
Global, by its own actions, did not qualify for an October 15, 2012 closing under the
express terms of the APA. 188 Global had not properly performed or obtained a waiver of its
obligations on October 8, 2012, the last possible day that would have obligated L. A. Fitness to
close on October 15, 2012 with the higher purchase price. Accordingly, independent of the other
182

Id. ¶ 10.

183

Id.

184

Id. ¶¶ 11(c), 12–13, 18.

185

Id. ¶¶ 9–14, 16, 18, 23–25, 27–29.

186

See Polson Depo. at 132:14–136:9.

187

Statement of Undisputed Material Facts, supra ¶ 10.

188

Id. ¶¶ 9–14, 16, 18, 23–25, 27–29.

34

reasons for granting summary judgment, Paramount is entitled to summary judgment as a matter
of law because its conduct cannot even be a proximate cause of Global’s alleged harm, let alone
the substantial proximate cause of such harms where Global’s execution and performance of the
APA, pre-dated Paramount’s alleged interference and ensured that L.A. Fitness could postpone
closing until after October 15, 2012.
B. Superseding Causes Cut Off Paramount’s Liability, if Any.
Even if Paramount otherwise proximately caused Global’s harm, which it did not, at least
four superseding or intervening causes prevent Paramount from liability for any such harm: 189
(1) L.A. Fitness had the legal option and the financial incentive to delay closing beyond October
15, 2012; (2) Paramount had a contractual right and obligation to possess the Member Account
Data during the 45-day termination period; (3) Global’s steadily declining value predates the
APA; and (4) Global failed to perform timely under the APA.
1. Any Liability of Paramount’s is Superseded by L.A. Fitness’s
Autonomous discretion, contractual authority, and Significant
Financial Incentive to Postpone Closing.
First, given Global’s ailing financial health, it is undisputed that L.A. Fitness had a
significant financial incentive to delay closing until sometime between October 16, 2012 and
October 31, 2012. 190 Indeed, by closing after October 15, 2012 but before October 31, 2012,
L.A. Fitness was able to acquire Global’s assets and close the transaction contemplated by the
APA at a savings of nearly $ 10 million. 191 This business reality, when taken into account
alongside L.A. Fitness’s independent and unassailable right to demand strict compliance with the
APA (even pretextually, as described above) until after October 15, 2012 and Global’s failure to

189

See Ventas, 635 F. Supp. 2d at 624.

190

See Statement of Undisputed Material Facts, supra ¶¶ 5–8, 26–29.

191

Id.

35

satisfactorily complete numerous closing conditions on or before the relevant deadlines, 192
collectively comprises “an act of a third person or other force which by its intervention prevents
[Paramount] from being liable for harm to [Global].” 193
Accordingly, independent of the other reasons for granting summary judgment, and even
though Paramount was not the proximate cause of the reduction in the Gross Purchase Price,
Paramount would still be entitled to summary judgment as a matter of law because L.A. Fitness’s
unilateral discretion, contractual authority, and financial incentive to postpone closing until after
October 15, 2012, which it did, constitutes a superseding cause that removes liability from
Paramount.
2. Paramount’s Contractual Right to Maintain the Member Account
Data During the 45-Day Termination Period Defeats Proximate
Cause.
Second, it is undisputed that the Contracts between Global and FRAI imposed a 45-day
termination period following written notice of termination and Global terminated the Contracts
on September 11, 2012. 194 Therefore, as stated in the ruling granting Paramount’s motion for
summary judgment on Global’s breach of contract claim, 195 Paramount was contractually
obligated and permitted to continue processing and managing the Member Account Data at issue,
including the Billing Information, until at least October 26, 2012—after the APA was ultimately
closed, and long after October 15, 2012. Paramount was not required to terminate its
maintenance of the Member Account Data prior to the end of the 45-day termination period.

192

Id.; see also id. ¶¶ 9–14, 16, 18, 23–25.

193

See, e.g., Ventas, 635 F. Supp. 2d at 624.

194

See Statement of Undisputed Material Facts, supra ¶¶ 1–3.

195

Memorandum Decision and Order Granting In Part and [111] Denying In Part Defendants’ Motion for Partial
Summary Judgment on Plaintiff’s Breach of Contract and Breach of the Implied Covenant Claims, docket no. 274,
filed Aug. 31, 2015.

36

Even if a Paramount’s actions were otherwise tortious, which they are not, Paramount
would still “not be liable, if [it] acted in good faith in asserting a legally protected interest.” 196
Section 773 of the Restatement (Second) of Torts explains:
One who, by asserting in good faith a legally protected interest of his own or
threatening in good faith to protect the interest by appropriate means, intentionally
causes a third person not to perform an existing contract … does not interfere
improperly with the other’s relation if the actor believes that his interest may
otherwise be impaired or destroyed…. 197
This general limitation on causation is well established under Kentucky law. 198 Paramount’s
contractual right to continue to hold and process the Member Account Data for 45 days
supersedes any liability for Global’s alleged tort harms, if any.
Crucially, when Global executed the APA on September 5, 2012, Global knew that it was
obligated to provide a 45-day notice of termination to Paramount. 199 Global also knew that even
if it issued a termination notice September 5, 2012, the 45-day termination period in the
Paramount Contracts would not expire until October 20. 200 Thus, when Global agreed in the
APA to potentially close the transaction by October 15, it created expectations inconsistent with
its obligations to Paramount. When Global issued its termination notice on September 11, 2012,
Global could not close the APA prior to October 26, 2012 without breaching the Paramount
Contracts, absent some written modification of the Contracts by Paramount or some waiver of
the APA by L.A. Fitness. When Global executed the APA, containing provisions that
contradicted the Contracts with Paramount, closing could not take place by October 15, 2012,
196

See CMI, 918 F. Supp. at 1080 (emphases in original omitted).

197

Id. at n.4 (quoting Section 773 of the Restatement (Second) of Torts).

198

Cf., e.g., Gulf Coast Farms, LLC v. Fifth Third Bank, Nos. 2011-CA-000965-MR, 2011-CA-001575-MR, 2012CA-000491-MR, 2013 WL 1688458 at *6 (Ky. Ct. App. April 19, 2013) (“It has been held that a claim for tortious
interference cannot be sustained where a defendant is sued for exercising a right found in the parties’ contract.”).
199

See Statement of Undisputed Material Facts, supra ¶¶ 1–4.

200

Id.

37

and therefore, as of the execution of the APA, the higher APA purchase price was impossible to
obtain without Paramount or L.A. Fitness waiving some of their contractual rights.
Accordingly, independent of the other reasons for granting summary judgment,
Paramount would still be entitled to summary judgment as a matter of law because the provisions
of the Contracts with Paramount and the APA operate as superseding causes of the reduced
purchase price, even from the very execution of the APA.
3. Global’s Steadily Declining Value, Which Predates the APA, is an
Intervening Cause of the Reduced Purchase Price.
Third, it is undisputed that Global’s value was steadily declining even before the APA
was signed. 201 Specifically, L.A. Fitness testified that, “[a]s we progressed through the
negotiations [leading up to the APA] and we were getting financial statements from [Global,] . . .
we saw what was happening to the earnings, the EBITDA, we saw how that was declining.” 202
Consequently, even before the APA was signed, L.A. Fitness specifically negotiated a variable
formula for determining the Gross Purchase Price to insulate L.A. Fitness from Global’s
declining value. 203 Global’s depressed value caused Global’s harm, i.e., a reduced purchase
price. Six days’ delay in providing the Member Account Data did not reduce the Gross Purchase
Price. That data was only one of many past-due deliverables needed for closing the APA. Had
Global’s financial situation improved, the Gross Purchase Price would have been higher,
showing that the formula, and certainly Global’s overall financial health, constitute intervening
causes that were the controlling factors in whether Global was harmed or received a windfall
under the variable purchase price formula.

201

Id. ¶¶ 7, 26.

202

Id.

203

Id.

38

Accordingly, independent of the other reasons for granting summary judgment, and even
though Paramount was not the proximate cause of the reduction in the Gross Purchase Price,
Paramount would still be entitled to summary judgment as a matter of law because even if
Paramount caused a delay in closing the APA, which it did not, Global’s declining value, an
economic reality wholly independent from Paramount’s conduct, comprises a “force which by its
intervention prevents [Paramount] from being liable for harm to [Global].” 204
4. Global’s Own Conduct, in Addition to Precluding Proximate
Cause from the Outset, Would Also Be a Superseding Cause.
Finally, it is undisputed that Global specifically bargained for a flexible Closing Date
limited only by the Outside Date of October 31, 2012 and a variable formula for determining the
Gross Purchase Price, which was dependent on Global’s steadily declining value. 205 It is also
undisputed that Global failed to request the Member Account Data being managed by Paramount
in order to provide the same to L.A. Fitness 14 days prior to October 15, 2012, as required under
the APA, and otherwise had not satisfied all of the closing conditions set forth in the APA as of
October 15, 2012. 206 It is also undisputed that for these deficiencies and failures of Global, as of
October 15, 2012, L.A. Fitness was not obligated to close the APA transaction. 207 To the extent
that such undisputed facts do not prevent proximate cause altogether for the reasons discussed
above, and more fully in Part II(A)(3), they are at a minimum intervening causes that prevent
Paramount from being liable for Global’s tort-based harms, if any. 208

204

See, e.g., Ventas, 635 F. Supp. 2d at 624.

205

See Statement of Undisputed Material Facts, supra ¶¶ 4–8, 26.

206

Id. ¶¶ 9–14, 16, 18, 23–25, 27–29.

207

Id.

208

Ventas, 635 F. Supp. 2d at 624.

39

Accordingly, independent of the other reasons for granting summary judgment,
Paramount would still be entitled to summary judgment as a matter of law because Global’s
actions and failures to perform under the APA constitute superseding causes.
III.

Global’s Claim for Punitive Damages Premised on Tortious Interference Is Also
Dismissed.
In addition to seeking compensatory damages, Global further seeks to “recover punitive

damages” in connection with its tort claim. 209 Where Paramount is entitled to summary judgment
as a matter of law on Global’s underlying tort claim for want of causation, Paramount is likewise
entitled to summary judgment as a matter of law on Global’s request for related punitive
damages.
ORDER
IT IS HEREBY ORDERED that Defendants’ Motion for Partial Summary Judgment RE:
Global’s Tortious Interference Claim for Lack of Causation 210 is GRANTED. Global’s claims
for tortious interference and punitive damages based on tortious interference are hereby
DISMISSED with prejudice.

Dated August 31, 2015.
BY THE COURT:
____________________________
David Nuffer
United States District Judge

209

Amended Complaint ¶¶ 45, 80, at Count VII.

210

Docket no. 121, filed under seal Aug. 4, 2014; redacted version, docket no. 127, filed Aug. 7, 2014.

40