Kanawha Institute for Social Research & Action, Inc. v. Green Spirit Farms, LLC

Filing 39

MEMORANDUM OPINION AND ORDER granting the plaintiff's 34 MOTION for Summary Judgment; directing that Kanawha Institute for Social Research & Action is awarded damages, including prejudgment interest, in the total sum of $248,083.99. Signed by Judge John T. Copenhaver, Jr. on 1/7/2019. (cc: counsel of record; any unrepresented parties) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
KANAWHA INSTITUTE FOR
SOCIAL RESEARCH & ACTION,
INC.
Plaintiff,
v.

Civil Action No. 2:17-CV-1963

GREEN SPIRIT FARMS, LLC,
Defendant.
MEMORANDUM OPINION AND ORDER

Pending is the plaintiff’s motion for summary
judgment, filed October 8, 2018.
I. Background

In December 2014, the plaintiff, Kanawha Institute for
Social Research and Action (“KISRA”) and defendant, Green Spirit
Farms, LLC (“GSF”), entered into a contract to develop a
Vertical Farm using a Vertical Growing System at a KISRA
facility in Charleston, West Virginia.

Compl. ¶ 14.

Plaintiff

now brings an action for damages resulting from an alleged
breach of this contract and conversion of KISRA’s funds.
KISRA is a faith-based organization which works to
strengthen families through a community health center, health

support services, and a variety of programs in connection with
employment, financial counseling, and child education.
Mot. Summ. J. at Ex. 1 ¶ 3.

Pl.’s

In 2014, KISRA’s Chief Executive

Officer was Michelle Foster (“Foster”).

Id. ¶ 2.

GSF is a for-

profit limited liability company organized under the laws of
Illinois.

Compl. ¶ 2; Def.’s Ans. and Aff. Defenses. ¶ 2.

GSF

is a “manager-managed” company under the Illinois Limited
Liability Act, and from January 1, 2014 until July 15, 2017,
Milan Kluko (“Kluko”) was the Manager of GSF.

Ans. to Pl.’s 1st

Interrog. 3, 5.
In 2014, Foster became aware of GSF’s Vertical Growing
System (“VGS”).

Pl.’s Mot. Summ. J. at Ex. 1 ¶ 6.

The VGS is

an indoor, hydroponic system where produce is grown in vertical
racks under lights.

Id. ¶ 6.

In early October 2014, Foster

toured a GSF facility in Michigan.

Id. ¶ 7.

After discussions

between Foster, Kluko, and other representatives of KISRA and
GSF, KISRA and GSF orally agreed to develop a vertical farm
using GSF’s VGS in a building owned by KISRA in Charleston, West
Virginia.

Id. ¶ 7.
On or around December 19, 2014, KISRA received a

Purchase Order from GSF (“P.O. No. 5504 Kisra”) requesting that
KISRA pay 50% of the total cost of lighting for the VGS -

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$130,680.

Id. ¶ 9; Id. at Ex. A.

paid GSF the $130,680.00.

On December 19, 2014, KISRA

Id. ¶ 10; Id. at Ex. A.

On December 22, 2014, Kluko emailed a “revised scope
of work agreement” to Foster regarding the development of the
VGS.

Id. ¶¶ 11-12; Id. at Ex. B.

Foster acknowledged receipt

of the “revised scope of work agreement” by email and stated
that she would sign the agreement by the next day.
12; Id. at Ex. B.

Id. ¶¶ 11-

The “revised scope of work agreement” was in

the form of a Memorandum from Kluko and another GSF
representative to Foster, dated December 22, 2014, titled:
“Scope, Schedule and Budget for 1039 Central Avenue Charleston,
WV – the ‘Central Avenue Vertical Farm’ Project” (“VGS
Memorandum Agreement”).

Id. ¶¶ 11-12; Id. at Ex. B.

Foster

executed the VGS Memorandum Agreement and returned the signed
form to Kluko.

Id. ¶ 13.

The VGS Memorandum Agreement provided that “[b]ased on
our most recent discussions last week including our visit to
KISRA as well as inspection of the Central Avenue structure in
Charleston, WV, Green Spirit Farms (GSF) and KISRA have agreed
to develop an initial Vertical Farm using our Vertical Growing
Systems.”

The VGS Memorandum Agreement noted that “KISRA has

provided an initial payment of $130,680.00 representing 50% of
the cost of the lighting for the []VGS units.”
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Finally, the VGS

Memorandum Agreement stated “[i]f you agree with this Scope of
Services and budget please sign where indicated and this will
serve as our agreement between KISA [sic] and GSF.”

Id. ¶ 12;

Id. at Ex. C.
Throughout 2015, KISRA made efforts to prepare the
Charleston building for the installation of the VGS.

Id. ¶ 14.

As of January 2016, no lighting for the VGS units had been
delivered to KISRA despite the payment by KISRA for lighting in
December 2014.

Id. ¶ 14.

On January 5, 2016, Foster emailed

Kluko and stated: “We would like to get a check out to you for
the balance of the lights.

Since our system is smaller than

originally planned, I figure the balance will be less than the
original invoice.

Please provide an invoice for the balance.”

Id. ¶¶ 15-16; Id. at Ex. D.

Foster’s January 5th email to Kluko

was followed by a series of emails between Foster and Kluko
regarding the cost of the remaining lighting.
Id. at Ex. D.

Id. ¶¶ 15, 17;

Finally, on January 13, 2016, Kluko informed

Foster that the remaining cost of lighting was $92,150.00.

Id.

¶ 17; Id. at Ex. D.
On January 14, 2016, GSF issued a Purchase Order to
KISRA in the amount of $92,150.00 for the remaining VGS
lighting.

Id. ¶ 18; Id. at Ex. E.

furnished $92,150.00 to GSF.

On January 21, 2016, KISRA

Id. ¶ 19; Id. at Ex. E.
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Despite

having paid GSF a total of $222,830.00, KISRA has never received
any VGS lighting from GSF.

Id. ¶ 19; Pl.’s Mot. Summ. J. at Ex.

5 ¶ 4.
Foster resigned as the Chief Executive Officer of
KISRA effective February 5, 2016.
20.

Pl.’s Mot. Summ. J at Ex. 1 ¶

After the final payment of $92,150.00 for the lighting on

January 14, 2016, KISRA asked GSF several times when KISRA would
receive the lighting, but KISRA never received an explanation
for GSF’s failure to deliver it.

See Pl.’s Mot. Summ. J. at Ex.

6 ¶ 4.
On February 19, 2016, KISRA’s Chief Operating Officer,
Carl Chadband (“Chadband”), emailed Kluko informing him that
KISRA was cancelling the VGS project and that it requested a
return of the $222,830.00.

Pl.’s Mot. Summ. J. at Ex. 6 ¶¶ 4-6;

Pl.’s Mot. Summ. J., Ex. 1 at Ex. A.

On February 22, 2016,

Kluko responded to Chadband’s February 19th email by stating,
inter alia, that GSF “cancelled work orders for your lighting
and will refund the cost of the lighting,” and that it “[s]hould
have this accomplished in approximately 2 weeks from today.”
Id. at Ex. 6 ¶ 7; Id. at Ex. A.

However, GSF did not return the

refund as promised.
Consequently, on March 11, 2016, Chadband emailed
Kluko and stated: “Can you provide me with a status update for
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our refund. It has been two weeks. Thanks!”
Id. at Ex. A.

Id. at Ex. 6 ¶ 8;

Kluko responded to Chadband the same day and

stated: “We hope to have this wrapped next week the process has
taken a little longer than we had hoped and my apologies . . .
we have all the items together and RMA to get the funds[.] I
will get back with you COB Tuesday.”
Ex. A.

Id. at Ex. 6 ¶ 9; Id. at

Nonetheless, KISRA has yet to receive the lighting or

any of the $222,830 refund.

Id. at Ex. 6 ¶ 10; Pl.’s Mot. Summ.

J. at Ex. 5 ¶ 4.
The plaintiff filed its two-count complaint on March
31, 2017,1 alleging breach of contract and conversion, to which
the defendant filed its answer on June 21, 2017.
stayed on March 20, 2018.

The case was

On June 27, 2018, the court granted

the defendant’s motion for leave to withdraw as counsel and
lifted stay of the case.

Therein, the court directed the

defendant to promptly obtain counsel if it wished to proceed
with representation; however, the defendant remains
unrepresented.

After two extensions of time, the plaintiff

filed its motion for summary judgment on October 8, 2018, to
which no response has been filed.

1

This case invokes the court’s diversity of citizenship
jurisdiction.
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II. Legal Standard

A party is entitled to summary judgment “if the
pleadings, the discovery and disclosure materials on file, and
any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a
matter of law.”

Fed. R. Civ. P. 56(c).

Material facts are

those necessary to establish the elements of a party’s cause of
action.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986).
A genuine issue of material fact exists if, in viewing
the record and all reasonable inferences drawn therefrom in a
light most favorable to the non-moving party, a reasonable factfinder could return a verdict for the non-movant.

Id.

The

moving party has the burden of showing - “that is, pointing out
to the district court - that there is an absence of evidence to
support the nonmoving party’s case.”
477 U.S. 317, 325 (1986).

Celotex Corp. v. Catrett,

If the movant satisfies this burden,

then the non-movant must set forth specific facts as would be
admissible in evidence that demonstrate the existence of a
genuine issue of fact for trial.
322-23.

Fed. R. Civ. P. 56(c); id. at

A party is entitled to summary judgment if the record

as a whole could not lead a rational trier of fact to find in

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favor of the non-movant.

Williams v. Griffin, 952 F.2d 820, 823

(4th Cir. 1991).
Conversely, summary judgment is inappropriate if the
evidence is sufficient for a reasonable fact-finder to return a
verdict in favor of the non-moving party.
248.

Anderson, 477 U.S. at

Even if there is no dispute as to the evidentiary facts,

summary judgment is also not appropriate where the ultimate
factual conclusions to be drawn are in dispute.

Overstreet v.

Ky. Cent. Life Ins. Co., 950 F.2d 931, 937 (4th Cir. 1991).
A court must neither resolve disputed facts nor weigh
the evidence, Russell v. Microdyne Corp., 65 F.3d 1229, 1239
(4th Cir. 1995), nor make determinations of credibility.
Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir. 1986).

Rather,

the party opposing the motion is entitled to have his or her
version of the facts accepted as true and, moreover, to have all
internal conflicts resolved in his or her favor.

Charbonnages

de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979).
Inferences that are “drawn from the underlying facts . . . must
be viewed in the light most favorable to the party opposing the
motion.”

United States v. Diebold, Inc., 369 U.S. 654, 655

(1962).

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III. Discussion

A. Count I
The plaintiff contends that defendant breached the
parties’ contract for development of the VGS by failing to
deliver the lighting for the system.

It claims damages in the

amount of $222,830 with interest as a result of GSF’s alleged
breach and subsequent failure to refund the monies KISRA
furnished for the lighting.

To prevail on a claim for breach of

contract under West Virginia law, the plaintiff must prove three
elements: (1) formation of a contract; (2) breach of the terms
of the contract; and (3) damages as a result of the breach.
Sneberger v. Morrision, 776 S.E.2d 156, 171 (W. Va. 2015).
Plaintiff and defendant entered into a written
contract - the VGS Memorandum Agreement - in which GSF agreed to
develop and install a VSG at KISRA’s facility by obtaining and
installing lighting, and KISRA agreed to pay GSF $222,830 for
those goods and services.

KISRA paid the entire balance due

while GSF failed to deliver the lighting, yet kept KISRA’s
funds.

Therefore, GSF breached the agreement by not performing

the services contracted for, and KISRA has been damaged in the
amount of $222,830 as a result.

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Whereas here, the parties are not shown to have agreed
to an applicable interest rate, the award of prejudgment
interest in a diversity case is governed by state law.

Hitachi

Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 633 (4th Cir.
1999).

Section 56-6-31 of the West Virginia Code is the

applicable statute for determining the amount of prejudgment
interest to which the plaintiff is entitled.

Secure US, Inc. v.

Security Alarm Financing Enterprises, Inc., 2010 WL 4641624, at
*1, *19 (S.D. W. Va. 2010).

Subsection (b)(1) provides, in

part:
[P]rejudgment interest is two percentage points above
the Fifth Federal Reserve District secondary discount
rate in effect on January 2, of the year in which the
right to bring the action has accrued, as determined
by the court and that established rate shall remain
constant from that date until the date of the judgment
or decree, notwithstanding changes in the federal
reserve district discount rate in effect in subsequent
years prior to the date of the judgment or decree:
Provided, That the rate of the prejudgment interest
may not exceed nine percent per annum or be less than
four percent per annum.
W. Va. Code § 56-6-31 (emphasis in original).

KISRA canceled

the contract by email notification and sought return of the
monies paid, on February 19, 2016.

Inasmuch as the defendant

promised on February 22, 2016, that it would furnish the funds
within two weeks, the refund was due on or before March 7, 2016.
Accordingly, interest shall run from March 7, 2016 at
the legal rate.

This equates to two percentage points above the
10

secondary discount rate in effect for the Fifth District Federal
Reserve Bank on June 2, 2016, which was 1.75%.

Added to this

1.75% rate are the two percentage points specified in subsection
(b)(1), which aggregates to an applicable rate of 3.75%.
Subsection (b)(1) further specifies, however, that the rate of
prejudgment interest shall not be less than 4% per year per
year.

The court thus uses the minimum rate of 4% for the entire

period from March 7, 2016 to the date of the judgment.

Using

the damage award of $222,830, the prejudgment interest amount is
$25,253.99 to this date.

The plaintiff, accordingly, is

entitled to damages in the total sum of $248,083.99.
B. Count II
The plaintiff claims defendant unlawfully converted
$222,830 at KISRA’s expense.

Inasmuch as plaintiff is plainly

entitled to recover this same sum under its Count I breach of
contract claim, the court does not further address Count II.

III. Conclusion

For the reasons discussed herein, it is ORDERED that
the plaintiff’s motion for summary judgment be, and it hereby
is, granted as set forth above.

It is further ORDERED that

Kanawha Institute for Social Research & Action be, and it hereby
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is, awarded damages, including prejudgment interest, in the
total sum of $248,083.99.
The Clerk is requested to transmit copies of this
order to all counsel of record and any unrepresented parties.
Dated: January 7, 2019

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