Clavet v. Dean
| Decision Date | 08 January 2020 |
| Docket Number | BUSINESS AND CONSUMER COURT BCD-CV-18-04 |
| Parties | EMILE CLAVET Plaintiff v. KEVIN DEAN, et al Defendants |
| Court | Maine Superior Court |
CUMBERLAND, ss
This matter came before the Court for a bench trial on September 10-12, and 16, 2019. Plaintiff Emile Clavet is represented by Attorney Clifford Ruprecht, and Defendants Kevin Dean and Cecile Dean are represented by Attorneys George Marcus, David Johnson and Daniel Rosenthal. The parties elected to make their closing arguments in writing. The Court has reviewed the evidence from trial, has considered the parties' written submissions (the last of which was received on November 18, 2019) and issues the following findings and order for entry of Judgment.
The Plaintiff's Complaint brought seven counts but the Court in a prior Order dismissed Count VII for aiding and abetting breach of fiduciary duty against Cecile Dean. Count V for constructive trust was withdrawn by Plaintiff in his Post-Trial Brief, pg. 2. Counts remaining for decision are: Count I for fraud; Count II for breach of fiduciary duty; Count IV for unjust enrichment; Count VI for fraudulent transfer, and a claim for punitive damages. Little argument was presented in either brief filed by Plaintiff on his Count III claim for negligent misrepresentation. The Court interprets this as Plaintiff having brought Count III as an alternative claim to Count I.
The case centers around the September 2016 purchase by the Defendants of the Plaintiff's membership interests in two entities they jointly owned, Blue Water, LLC and Covered Marina, LLC (hereinafter the "Marinas"). The parties have a long history of running multiple businesses in Maine and later in Texas. These businesses have included real estate development, hotels, a storage facility, a car wash, two small insurance entities, and the utility Electricity Maine. They began their business ventures with almost no money, but after reinvesting proceeds of sales of businesses into other businesses, they became very successful. Over the years they have been friends as well as business partners, and their families and children were friends as well. While they had the ability to run businesses without the other person, and were legally permitted to compete with each other, it is clear to the Court that they were most successful when they worked jointly. Although they have different strengths and qualities, Mr. Clavet and Mr. Dean are both very intelligent and savvy businessmen. As counsel for Mr. Dean put it, "In every way Emile was Kevin's equal and peer in business matters." [Defendants' Post-Trial Brief, pg. 3]. The parties disagree as to whether before this dispute arose they had already stopped being good friends and had begun to "unwind" their businesses as a result, or whether it is the dispute at the center of this lawsuit that irrevocably changed their friendship and made it impossible for them to continue working together as business partners.1
For over 10 years the parties owned the Marina properties which were located on the gulf coast of Texas. They agree that the properties never provided reliable cash flow, and were very difficult to insure. Periodically they would discuss selling the Marinas for these reasons. Mr. Dean, who has roots in Texas, was the party who managed the Marinas, and he employed his sister and her husband to run the properties day to day. The parties seem to agree that the Marinas would only be valuable if they could sell to "the right kind of buyer", namely someone interested in developing the properties. When brokers would call Mr. Dean with a prospective buyer, he would ask whether the buyer wanted cash flow or a development project, as only a development made economic sense. They paid $2.5 million dollars to purchase the properties, and under the two LLC agreements they each had 50 percent membership interests.
In September of 2016 a broker for a company called TCRG called Mr. Dean to discuss buying the Marinas. The Court has reviewed the chronology and summary of testimony in Exhibit A attached to Plaintiff's Post-Trial Brief, and finds that it accurately sets out documented communications between the parties along with proper citations to the trial record.2 The Court finds, based in part on the evidence summarized in that exhibit, that Mr. Dean breached a number of legal duties which he owed to Mr. Clavet. Because of the interrelation between fraudulent misrepresentation and breach of fiduciary duty under Maine law, and because the factual findings that the Court must make on both claims significantly overlap, the Court will analyze Counts I and II together.
In order to prevail on Count I, the Plaintiff must prove by clear and convincing evidence each of the following: 1) that Mr. Dean made a false representation of a material fact; 2) that he did so with knowledge of its falsity or in reckless disregard of whether it is true or false: 3) that he did so for the purpose of inducing another to act or refrain from acting in reliance on it; and 4) Mr. Clavet justifiably relied upon the representation as true and acted upon it; and 5) that Mr. Clavet was damaged by it. Cianchette v. Cianchette, 2019 ME 87, ¶ 20, 209 A.3d 745.
In this Court's Combined Order on Cross Motions for Summary Judgment, the Court held that an omission by silence can constitute the supplying of false information as proof of intentional misrepresentation, but only in circumstances when there exists a special relationship such as a fiduciary relationship, which imposes on the defendant an "affirmative duty to disclose." Glyn v. Atl. Seaboard Corp., 1999 ME 53, ¶ 12, 728 A.2d 17. In that case the Law Court stated, "Where a fiduciary relationship exists between the parties, 'omission by silence may constitute the supplying of false information,'" Id. (quoting Binette v. Dyer Library Assoc., 688 A.2d 898, 903). See also Brown v. Oral Surgery Associates, 2003 ME 11, ¶ 22, 819 A.2d 1014.
As the parties know, the Combined Order was issued just hours before the Law Court announced its decision in Cianchette. The Court in light of that decision granted Mr. Clavet's Motion for Revision in part and found as follows: "Pursuant to statute, as a manager, Mr. Dean was a fiduciary to Blue Water and its other member - Mr. Clavet - during all times relevant to this lawsuit." Order on Motion for Reconsideration and Revision, Aug. 2, 2019 pg. 7.
The Court finds after considering all the trial evidence that Mr. Dean intentionally omitted material information which he had a duty under Maine law3 to provide to the other member of Blue Water, LLC, Mr. Clavet. That information consisted of the inquiries and communications from TCRG that began on August 30, 2019 and which soon turned into an offer from Mr. Donley for TCRG to purchase the Marinas for the sum of 8.0 million dollars. That offer changed to 7.5 million dollars no later than September 13, 2019, just two days before Mr. Dean emailed Mr. Clavet to tell him that their wives needed to provide personal guarantees in order to have a line of credit, "and if you don't want to do that, then give me a price you want for your portion of the marina or figure a swap of other stuff." Joint Exh. 4.
The purchase and sale agreement between Mr. Dean and TCRG was completed on September 30, 2019. Mr. Clavet, on that same day, and completely in the dark about the agreement between Mr. Dean and TCRG, signed over his membership interests in the Marina properties to Mr. Dean. Joint Exh. 6, Trial II/26.
The sale of the Marina properties to TCRG was not completed until February of 2017. Tr., V.IV at 165-176. However, Mr. Clavet still was not told about the sale of the properties to TCRG until months went by. It was not until Mr. Dean had to disclose to Mr. Clavet that theyboth had been named in a lawsuit brought by TCRG regarding the closing process on Marinas purchase by TCRG, that Mr. Dean let Mr. Clavet know that he had to go to Texas to be deposed as he had been sued as well. The Court finds that this conduct, together with evidence that Mr. Dean directed office staff to send mail addressed to Mr. Clavet about the lawsuit to Mr. Dean's sister instead of Mr. Clavet, supports Mr. Clavet's position that Mr. Dean had no intention of disclosing the sale until facts and circumstances compelled him to do so. Prior disclosure would have revealed to Mr. Clavet that Mr. Dean had timed and manipulated his buyout of the Marina interests from Mr. Clavet in order to keep the proceeds of the sale to TCRG for himself. At the time Mr. Dean made the contract with TCRG to sell the Marinas for 7.5 million dollars, he was simultaneously persuading Mr. Clavet to sell him his membership interests in those properties for a significantly lower price. Obviously, in order to legally sell the Marinas by himself, he had to own them by himself.
Mr. Dean's secret negotiations with TCRG, together with the timing of the communications, all add up to clear and convincing evidence of the supplying of false information in the form of "omission by silence" and also constitutes a violation of Mr. Dean's fiduciary duty to Mr Clavet. They also add up to clear and convincing evidence that the information was intentionally withheld "for the purpose of inducing" Mr. Clavet to refrain from acting in reliance upon it. Any co-owner in Mr. Clavet's position would have wanted to know about the offer that TCRG made to Mr. Dean. The Court further finds by clear and convincing evidence that these omissions were material, if for no other reason but that there is such a substantial difference between the sales price of 7.5 million dollars to TCRG, and the purchase price of Mr. Clavet's interest for 2.5 million dollars by Mr. Dean. As stated by Mr. Clavet's counsel, after years of failing to find the right buyer for the marinas, "It was highly material toknow that there was in...
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