Crestwood Farm Bloodstock, LLC v. Everest Stables, Inc., Civil Action Nos. 5:09–CV–317–KKC, 5:10–CV–00072–KKC.
| Decision Date | 30 March 2012 |
| Docket Number | Civil Action Nos. 5:09–CV–317–KKC, 5:10–CV–00072–KKC. |
| Citation | 864 F.Supp.2d 629 |
| Parties | CRESTWOOD FARM BLOODSTOCK, LLC, Plaintiff v. EVEREST STABLES, INC., and Jeffrey L. Nielsen, Defendants. |
| Court | U.S. District Court — Eastern District of Kentucky |
OPINION TEXT STARTS HERE
Adrian M. Mendiondo, D. Barry Stilz, Frank T. Becker, Kinkead & Stilz, PLLC, Lexington, KY, for Plaintiff.
Christopher Blake Rambicure, William C. Rambicure, Rambicure Law Group, PSC, Lexington, KY, Thomas William Pahl, Aaron M. Ninnemann, Kaarin Steen Nelson, Foley & Mansfield, PLLP, Minneapolis, MN, for Defendants.
This matter is before the Court on Crestwood's Motion for Summary Judgment [DE 152] and Everest's Motion for Partial Summary Judgment. [DE 154]. Crestwood moves for summary judgment on its breach of contract claim relating to the Island Fashion filly and on all of Everest's claims against it. Everest moves for partial summary judgment on its claims for breach of contract and breach of fiduciary and agency duties regarding the Island Fashion filly. The matter has been fully briefed and argued. For the following reasons, the Court GRANTS Crestwood's motion and DENIES Everest's motion.
Pope McLean Sr. owns and operates Crestwood Farm Bloodstock LLC (“Crestwood”), a Kentucky limited liability company that operates a thoroughbred horse farm in Central Kentucky. Jeffrey Nielsen owns and operates Everest Stables (“Everest”), a Minnesota corporation that breeds and races thoroughbreds.
Everest began boarding broodmares at Crestwood in 1993. Later, in 1997, Everest sent the stallion Petionville to Crestwood to stand stud. Everest and Crestwood did not sign a formal stallion management contract, but, on October 2, 1996, Jeffrey Nielsen wrote a letter to Pope McLean that established a “protocol” for breeding Petionville. The protocol required Crestwood to supply Nielsen with information regarding each prospective broodmare and to obtain Nielsen's approval before entering a contract to breed the stallion. [DE 152–6].
In this case, Everest contends that Crestwood was Everest's agent and fiduciary regarding Petionville by virtue of a management contract formed through “thousands and thousands of faxes, correspondence, and telephone calls, consistent with their arrangement for the management of Petionville.” [DE 160 at 3]. Crestwood maintains that Everest retained full ownership, management and control over Petionville and that Crestwood's responsibility was limited to boarding the horse and breeding him at Everest's direction. [DE 152–1 at 3].
Everest claims that in 2005, an oral contract was formed when Everest rejected an offer to purchase Petionville for $6.5 million based upon Pope McLean's advice and promise to take the stallion to the next level. [DE 160 at 16–17]. Everest claims that Crestwood breached this oral agreement and destroyed the value of Petionville to prevent Everest from either selling the stallion or moving him to another farm. Everest further alleges that Crestwood breached its fiduciary obligations by not passing along volume discounts on veterinary services and by engaging in other secret deals. Crestwood denies that it owed any fiduciary duty to pass along veterinary discounts to Everest. Further, Crestwood denies the existence of any kind of oral contract regarding Petionville and asserts that Petionville's value decreased simply because his stud fee was not justified by the performance of his offspring.
At some point before November 2008, Nielsen decided to liquidate his equine holdings by selling all of his horses boarded at Crestwood. Toward that end, in November 2008, the parties entered into a Purchase and Sale Agreement (“the November 4 Agreement” or “Agreement”). [DE 152–4]. Crestwood agreed to board and manage the sale and disposition of more than 100 Subject Horses identified in the November 4 Agreement. The Agreement stated that Crestwood “shall consign for sale and shall offer for sale and shall sell” the Subject Horses. ]. To facilitate the sale of the Subject Horses, Everest transferred title, ownership and the risk of loss to Crestwood for all but two of the Subject Horses—Island Fashion and the 2008 Storm Cat/Island Fashion filly (“Island Fashion filly”). Crestwood assumed the costs associated with boarding and prepping all of the horses for sale, including Island Fashion and the Island Fashion filly, the two horses still owned by Everest. ].
The Agreement stated that “[f]or all horses to be sold at public auction, Crestwood agrees and covenants that each horse shall be sold with no reserve, RNA, or buyback price.” 1 ]. Although the Agreement expressly prevented Crestwood from placing reserves on the Subject Horses, the Agreement is silent regarding Everest's ability to place reserves on the horses it owned. As compensation for selling the Subject Horses, the November 4 Agreement provided that Crestwood would receive a percentage 2 of the “net sale proceeds” from each horse. The Agreement defined “net sale proceeds” as the “ ‘fall of the hammer’ sales price for each such horse, after deduction of the ... auction company's standard sales commission, without any credits or offsets whatsoever.' ” ].
After entering into the Agreement, Everest asked Crestwood to set reserves on many of the Subject Horses to protect their value at auction. Crestwood responded that under the terms of the November 4 Agreement, it was prohibited from setting reserves on the Subject Horses.
Consistent with the November 4 Agreement, Crestwood entered the Island Fashion filly in the 2009 September Keeneland Sale. Without Crestwood's knowledge or agreement, Everest sent an agent to the sale. When the bidding reached $875,000, Everest's agent bid $900,000. There were no other bids, and the hammer fell at $900,000. The agent then signed the ticket “RNA” (Reserve Not Attained), which under Keeneland rules nullified the sale.
Crestwood contends that by “RNAing” and nullifying the sale of the Island Fashion filly, Everest breached the November 4 Agreement and deprived Crestwood of the 25% commission it would have earned on the net sale proceeds from the sale of the filly. To offset its lost commission, Crestwood retained $219,513.89 of proceeds owed to Everest from the sale of other Subject Horses.
In seeking to recover the disputed $219,513.89 plus other damages from Crestwood, Everest asserts six causes of action: (I) Intentional Breach of the Implied Covenant of Good Faith and Fair Dealing; (II) Breach of Expressed and Implied Contract; (III) Intentional Breach of Fiduciary and Agency Duties; (IV) Civil Conspiracy; (V) Fraud; and (VI) Unjust Enrichment. [DE 105]. Crestwood asks this Court to declare that it did not violate various expressed and implied contracts with Everest. It also asserts that Everest breached the implied covenant of honesty, good faith and fair dealing, and breached its contract regarding sale of the Island Fashion filly so it should retain the disputed $219,513.89. [DE 113].
Under Federal Rule of Civil Procedure 56, summary judgment is appropriate if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In order to show that a particular fact is disputed, a party must cite to “particular parts of materials in the record.” Fed.R.Civ.P. 56(c). A party opposing a motion for summary judgment cannot “simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A scintilla of evidence in support of the plaintiff's position is not enough because there must be enough evidence to allow a jury to reasonably find for the plaintiff. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
When considering a motion for summary judgment, the court must view the facts contained in the record and draw all inferences from the record in the light most favorable to the non-moving party. Matsushita, 475 U.S. at 587, 106 S.Ct. 1348. What the court must ultimately determine is whether there is a sufficient dispute about the evidence to require submission to the jury, or whether the evidence favors one side so strongly that it is entitled to judgment as a matter of law. Anderson, 477 U.S. at 251–52, 106 S.Ct. 2505.
Everest seeks partial summary judgment on the disputed funds relating to the sale of the Island Fashion filly. [DE 154]. Crestwood seeks summary judgment on all of Everest's claims, and on its claim for breach of contract relating to the sale of the Island Fashion filly. [DE 152]. For the following reasons, Crestwood's motion is GRANTED and Everest's motion is DENIED.
Everest's claim for Intentional Breach of the Implied Covenant of Good Faith and Fair Dealing fails as a matter of law. Kentucky law does not recognize an independent tort for breach of good faith and fair dealing outside of insurance contracts. Ennes v. H & R Block E. Tax Servs., Inc., No. 3:01 CV–447–H, 2002 WL 226345, at *4 (W.D.Ky. Jan. 11, 2002); see also Francis v. Nami Res. Co., No. 04–510, 2008 WL 852047, at *12 (E.D.Ky. Mar. 28, 2008). Kentucky law “does impose an obligation of good faith in the performance of any contract [but] it does not create an independent cause of action.” Peacock v. Damon Corp., 458 F.Supp.2d 411, 419–20 (W.D.Ky.2006).
Other than the discussion of the Island Fashion filly in its motion for partial summary judgment, Everest does precisely identify all of the contracts on which it seeks to recover in this case. However, based on...
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