Boodram v. Ronald Glenn Coomes, Philmo, Inc.
| Decision Date | 09 June 2016 |
| Docket Number | CIVIL ACTION NO. 1:12-cv-00057-JHM |
| Parties | BOODNARINE BOODRAM a/k/a MIKE BOOKDRAM, ET AL. PLAINTIFFS v. RONALD GLENN COOMES, PHILMO, INC., and W. SCOTT CRABTREE DEFENDANTS |
| Court | U.S. District Court — Western District of Kentucky |
This matter is before the Court on Defendants' Motion for Partial Judgment on the Pleadings [DN 148] and Plaintiffs' Motion for Leave to File Supplemental Authority [DN 157]. Fully briefed, this matter is ripe for decision.
In 2010, Defendant Ronald Coomes (hereinafter "Coomes") sought potential buyers to purchase his company, Philmo, Inc., which manufactured duct tape out of Franklin, Kentucky. (Second Am. Compl. [DN 77] ¶ 13.) Soon after, Plaintiff Mike Boodram1 (hereinafter "Boodram"), owner and operator of Apollo Manufacturing Group, Inc. of Suwanee, Georgia, contacted Coomes regarding his interest in acquiring Philmo. Coomes and Boodram discussed the transaction and entered into a Letter of Intent on December 9, 2010 that detailed Boodram's plan to purchase Philmo for $2,305,000.00 in a leveraged buyout. (Defs.' Mem. Supp. Mot. Partial J. Pleadings [DN 148-1] at 3.) The Letter of Intent described the acquisition of Philmo as involving two phases: Boodram would immediately supply $200,000 in exchange for 49% ofPhilmo's stock, and, starting in 2015, Boodram would begin to make scheduled payments for the remaining 51%, totaling $1,492,055.90. (Id.) Upon signing the Letter, Boodram soon transferred $200,000 in cash and assets to Coomes. (Id.)
In addition to the stock purchase, Boodram agreed to work at Philmo as the Director of Operations, intending on implementing significant changes at Philmo, including bringing in new customers, negotiating beneficial contracts with existing customers, and developing brands held by Philmo. (Second Am. Compl. [DN 77] ¶¶ 24, 26-30.) Boodram also renegotiated Philmo's contract with 3M, one of Philmo's largest customers, and improved "Patriot Tapes," an underdeveloped brand held by Philmo, all the while Coomes was taking certain actions that threatened the financial well-being of the company. (Id. ¶¶ 26-30.) Plaintiffs identify four distinct instances of this harmful conduct:
(Id. ¶ 31.)
In March of 2011, Coomes presented Plaintiffs with a Stock Purchase Agreement (hereinafter "SPA"), drafted by Defendant Scott Crabtree (hereinafter "Crabtree"), counsel for Philmo. (Id. ¶¶ 32-33.) Mike Boodram and Shelleza Boodram executed the SPA on March 8, 2011 and March 6, 2011, respectively. (Id. ¶¶ 35-36.) However, Plaintiffs allege, Coomes did not sign the SPA on either date. (Id. ¶¶ 35-37, 66-69.) After Plaintiffs had signed the SPA, Coomes informed them that because he had previously entered into a contract with a broker forthe sale of Philmo, he could not sign the SPA and convey stock to Plaintiffs until the end of that contractual period. (Id. ¶¶ 45-47.) Further, Coomes explained that he "needed to execute a Promissory Note in Plaintiffs' favor so as to avoid paying a commission to his broker," but that the note "was just a formality, and it did not affect or change their agreement." (Id. ¶¶ 39-40.) On March 31, 2011, Coomes executed the Promissory Note, drafted by Crabtree, which provided terms for the re-payment of $200,000 plus interest that Plaintiffs had previously paid to Coomes. (Id. ¶ 43.)
Despite issues with closing the sale of Philmo, Boodram continued to comply with the "parties' agreement" by winding down his tape conversion business and contributing $215,000 in equipment and inventory to Philmo to secure future financing. (Id. ¶ 48.) Philmo even "agreed to pay rent for Plaintiffs' equipment" as "compensation for Coomes' unilateral delay of the closing." (Id. ¶ 49.) These payments ended after only two months. (Id.) During the entire process of closing his business and transferring assets to Philmo, Boodram avers that he repeatedly attempted to complete the transaction with Coomes. (Id. ¶¶ 44, 50.) "[D]espite Plaintiff Mike Boodram's repeated requests," Plaintiffs allege that "Defendants refused to close on the agreement or convey the stock." (Id. ¶ 50.)
Issues also arose concerning Boodram's role as Director of Operations at Philmo. According to Boodram, in June of 2011, Coomes started taking steps to prevent him from performing his work for Philmo by denying him access to Philmo's business records and excluding him from important business meetings. (Id. ¶¶ 57-60.) Specifically, Coomes stopped Boodram from attending a significant meeting with one of Philmo's largest customers, 3M, even though Boodram had helped Coomes prepare for it. (Id. ¶¶ 54-56.) From this soured relationship, Philmo issued Boodram his final check in June of 2011. (Id. ¶ 60.)
After being completely excluded from Philmo, Boodram contacted Coomes in order to resolve problems with the initial purchasing deal. (Id. ¶ 62.) Boodram claims that Coomes avoided his phone calls, texts, and emails. (Id.) Finally, in October of 2011, Boodram received a copy of the SPA, which, at that time, had been executed by Coomes. (Id. ¶ 65.) Plaintiffs describe the SPA that they received in October as having particularly unfavorable terms. (Id. ¶ 68.) For example, although the Letter of Intent originally called for an amortized payment for the remaining 51% of stock to start in 2015, the SPA required a balloon payment of $1.1 million by August 31, 2012. (Id. ¶ 70.) In addition to an altered payment schedule, the SPA provided a stock buy-back provision which allowed Coomes to "unilaterally" determine that Boodram failed to actively participate in Philmo and to repurchase the stock from Boodram at half the price it was sold to him. (Id. ¶ 71.)
Plaintiffs surmise that Coomes signed and notarized the SPA at some point after April 13, 2011, not on March 31, 2011 as indicated on the document sent to them in October of 2011. (Id. ¶¶ 73-75.) Further, Plaintiffs contend that Coomes was aware that Boodram had closed his company in June of 2011 and that his creditors were pressuring him to close on the Philmo deal. (Id. ¶ 63.) As a result, "Coomes and Crabtree conspired to sign and notarize this SPA to limit Coomes' liability and/or extract a more favorable settlement from Mike Boodram." (Id. ¶ 67.)
Plaintiffs filed suit on April 27, 2012 against Defendants Coomes and Philmo. (Compl. [DN 1].) On November 20, 2014, Plaintiffs filed their Second Amended Complaint joining Crabtree as a defendant. (Second Am. Compl. [DN 77] ¶ 6.) Since the filing of their suit, Plaintiffs note that Defendants have continued to misrepresent the date that Coomes signed the SPA in their pleadings. (Id. ¶¶ 82-86.) Before the Court now is Defendant's Motion for Partial Judgment on the Pleadings in regards to Count II for fraud (against Coomes), Count VI fornotary fraud (against Crabtree), Count VII for civil liability for criminal acts (against both), Count IX for conversion (against both), and Count XVII for conspiracy (against both).
Federal Rule of Civil Procedure 12(h)(2) allows Defendants to raise the defense of failure to state a claim for which relief can be granted after the pleadings have closed through a motion for judgment on the pleadings pursuant to Rule 12(c). "The standard of review for a 12(c) motion is the same as for a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted." Fritz v. Charter Tp. Of Comstock, 592 F.3d 718, 722 (6th Cir. 2010). Pursuant to Fed. R. Civ. P. 12(b)(6), a court "must construe the complaint in the light most favorable to plaintiffs," League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), "accept all well-pled factual allegations as true," id., and determine whether the "complaint . . . states a plausible claim for relief," Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the plaintiff must provide the grounds for its entitlement to relief, which "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when it "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. A complaint falls short if it pleads facts "merely consistent with a defendant's liability" or if the alleged facts do not "permit the court to infer more than the mere possibility of misconduct." Id. at 679. Instead, "a complaint must contain a 'short and plain statement of the claim showing that the pleader is entitled to relief.'" Id. at 663 (quoting Fed. R. Civ. P. 8(a)(2)). "But where the well-pleaded facts do not permit the court to infer more than themere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
Defendant Coomes has moved for judgment on the pleadings on Count II for fraud against him. The elements of fraud in Kentucky are as follows: a) material representation b) which is false c) known to be false or made recklessly d) made with inducement to be acted upon e) acted in reliance thereon and f) causing injury. UPS v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999). Under Rule 8 of the Federal Rules of Civil...
To continue reading
Request your trial