Denil v. Deboer Inc.

• Decision Date: 22 September 2010
• Docket Number: No. 09–cv–470–bbc.,09–cv–470–bbc.
• Citation: 748 F.Supp.2d 967
• Parties: Peter DENIL and Gerald Nardella, Plaintiffs,v.deBOER, INC., deBoer Transportation Inc., deBoer Capital Associates Inc. and Ronald DeBoer, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

748 F.Supp.2d 967

Peter DENIL and Gerald Nardella, Plaintiffs,

v.deBOER, INC., deBoer Transportation Inc., deBoer Capital Associates Inc. and Ronald DeBoer, Defendants.

No. 09–cv–470–bbc.

United States District Court, W.D. Wisconsin.

Sept. 22, 2010.

Ralph George Burnett, Kurt A. Goehre, Liebmann, Conway, Olejniczak & Jerry, S.C., Green Bay, WI, Matthew J. Duchemin, Quarles & Brady, Madison, WI, for Plaintiffs.Donald Karl Schott, Matthew J. Duchemin, Matthew J. Splitek, Quarles & Brady LLP, Madison, WI, for Defendants.

OPINION and ORDER

BARBARA B. CRABB, District Judge.

In this civil action for monetary relief, plaintiffsPeter Denil and Gerald Nardella contend that defendants deBoer, Inc., deBoer Transportation Inc. and deBoer Capital Associates Inc. breached stock purchase agreements between the parties and breached the covenant of good faith and fair dealing.In addition, plaintiffs contend that defendantRonald DeBoer intentionally interfered with the performance of their employment agreements and that defendant deBoer, Inc. breached plaintiff's employment agreements.The corporate defendants have filed two counterclaims against plaintiffs for breach of the stock purchase agreement and breach of the covenant of good faith and fair dealing.

Now before the court are the parties' cross motions for summary judgment, dkt. 32, 28.Defendants have moved for summary judgment on all of plaintiffs' claims against them and plaintiffs have moved for partial summary judgment on three of their claims, as well as both of defendants' counterclaims.Also before the court is defendants' motion to exclude plaintiffs' expert witness from testifying at trial, dkt. # 82.This court has jurisdiction under 28 U.S.C. § 1332 because there is more than $75,000 in controversy and diversity of citizenship exists between plaintiffs and defendants.

With respect to plaintiffs' claims against defendants, the undisputed facts show that defendants did not breach the stock purchase agreement, violate the duty of good faith and fair dealing or breach the employment agreements.Also, the evidence establishes that defendantRonald DeBoer did not tortiously interfere with plaintiffs' employment contracts.Because there are no genuine factual disputes and defendants are entitled to judgment as a matter of law on these claims, I will grant defendants' motion for summary judgment in full and will deny plaintiffs' motion with respect to those claims.With respect to defendants' counterclaims, the undisputed facts show that plaintiffs did not breach the stock purchase agreement or violate the duty of good faith and fair dealing.Therefore, I will grant plaintiffs' motion for summary judgment with respect to defendants' counterclaims.Finally, because this order disposes of all of the claims in this case, I will deny as unnecessary defendants' motion to exclude expert witness testimony.

From the parties' proposed findings of fact, I find the following facts to be material and undisputed.

UNDISPUTED FACTS

A.The Parties

PlaintiffsPeter Denil and Gerald Nardella are citizens and residents of Illinois.Defendants deBoer Inc., deBoer Transportation Inc. and deBoer Capital are Wisconsin corporations involved in the trucking business, with their principal places of business in Wisconsin.DefendantRonald DeBoer is a citizen and resident of Wisconsin.He is the founder of deBoer, Inc. and deBoer Capital Associates, Inc., and has been the chairman of the board of directors for both companies since their incorporation.

B.Plaintiffs' September 5, 2008 Proposal to the deBoer Companies

Plaintiffs Denil and Nardella first met defendantRonald DeBoer sometime in 2007 or 2008 during a negotiation to sell deBoer, Inc. to an outside corporate buyer.The deal with the outside buyer failed, but plaintiffs remained interested in investing in the deBoer companies.During the summer of 2008, after several communications and discussions with Ronald DeBoer, plaintiffs proposed that they acquire an ownership interest in deBoer, Inc. and become managers of the deBoer companies.Ronald DeBoer solicited a formal proposal from plaintiffs for the purchase of a minority interest in the deBoer companies.

On September 5, 2008, plaintiffs emailed Ronald DeBoer a document titled “Proposal for Management Change and Investment in: De Bore [sic]Transportation Inc., DeBoer Inc., DeBoer Capital Inc., By Pete Denil, Jerry Nardella.”Under the proposal, plaintiffs would invest a total of $750,000 in the deBoer corporations, become part of the management team, transform the corporations into asset-light organizations, increase profitability and sell the companies in approximately five years.

In the proposal, plaintiffs discussed how proceeds from a future sale of the deBoer companies would be distributed, stating that in the event of a sale, all shareholders would receive the value of their shares plus an increase at a compounded rate of eight percent.If there was any residual, 75% of the residual would be prorated among all shareholders, while the remaining 25% would be distributed “between select members of the management team.”The proposal contained a chart relating to the distribution of proceeds from a sale of the deBoer companies, which stated that 25% of the residual net proceeds from a sale of the deBoer companies would be distributed to the “Management Team.”A footnote appearing at the bottom of the chart stated in another section that the “[m]anagement team would be Pete [Denil], Jerry [Nardella] and other key managers yet to be defined.”The proposal did not identify how those members of the management team would be chosen, but stated that plaintiffs“[c]urrently ... would anticipate that the management team would consist of Pete [Denil], Jerry [Nardella], Dale [DeBoer], Doug [Vogel], Dave [Anderson], Roger [Placzek], Kay [DeBoer] and possibly the director of Safety.”Besides plaintiffs, these individuals were all managers of deBoer, Inc., deBoer Transportation, Inc. or deBoer Capital Associates, Inc. as of September 5, 2008.

Plaintiffs also discussed valuation of the deBoer companies, providing as follows:

We can discuss the best way to value an organization but the industry has been paying more for companies with an asset-light or non-asset foot print than a pure-asset based transportation provider....When we are ready to sell the company we hope to find a strategic buyer from the trucking industry who will place specific values on equipment, customers, drivers, non asset business etc.But for example purposes, because it is simple and easy to calculate I will use the financial industries tool which is a multiple of EBITDA....

“EBITDA” is an acronym for the valuation method that calculates “earnings before income, taxes, depreciation and amortization.”

With respect to the management of the company, plaintiffs stated that “operating parameters would be established identifying the magnitude of decisions that must be brought before the Board of Directors and the daily decisions and management of the organization which would be the exclusive domain of the CEO provided the company is reaching minimal key operating results.”Plaintiffs also stated that shareholders would “get a minimum return on their investment before anything is shared with the new management.”

After defendantRonald DeBoer reviewed the proposal, he and his lawyer, Francis Podvin, met with plaintiffs at Podvin's office to inform plaintiffs that they accepted it.The parties decided that they would need three separate agreements to effectuate the proposal, namely, a stock purchase agreement, a buy-sell agreement and employment agreements.Representing defendants and negotiating on their behalf, Podvin provided a first draft of the “buy-sell” agreement.After attempting to negotiate outstanding issues, the parties decided that they would execute the employment agreements and stock purchase agreement, but would postpone signing a buy-sell agreement.On October 27, 2008, the parties signed plaintiffs' employment agreements and a stock purchase agreement.

C.Employment Agreements

Plaintiff Denil's agreement stated that he was the chief executive officer and president of deBoer, Inc. and that deBoer, Inc. would pay him $200,000 a year, among other benefits.Plaintiff Nardella's agreement made him the executive vice president of operations of deBoer, Inc. with a salary of $150,000 per year.Both employment agreements provided that plaintiffs would receive certain benefits if they were terminated “without cause” by defendant deBoer, Inc., as well as payments to which they would be entitled if their employment was terminated for “cause,” death, disability or if plaintiffs terminated their own employment.deBoer, Inc. had the right to terminate plaintiffs“with cause” if they“fail[ed] to purchase stock pursuant to [the] Stock Purchase Agreement.”

D.Stock Purchase Agreement

On October 27, 2008, plaintiffs and the deBoer companies executed a stock purchase agreement, which provided that, subject to certain conditions, plaintiffs would pay up to $750,000 to purchase a maximum of 6% of the deBoer companies' capital stock, equal to a maximum of 6% of each company's voting ownership interest.Plaintiff Denil was to pay $500,000 and plaintiff Nardella would pay $250,000.The stock purchase agreement set the closing date for plaintiffs' stock purchase as April 15, 2009, or an earlier date if the parties had complied with the conditions set forth in the agreement.

Article VI of the stock purchase agreement addressed the conditions precedent to the accrual of plaintiffs' obligations under the agreement.Among other things, Article VI required that plaintiffs had received a “stock buy-sell agreement and redemption” before their obligations attached.The agreement was to contain

a mutually agreeable formula to determine a fair market price for stock purchases and distributes proceeds from [defendant] Corporat...