Derby City Capital, LLC v. Trinity HR Servs.

Decision Date20 August 2013
Docket NumberCivil Action No. 3:12–CV–00850–TBR.
Citation949 F.Supp.2d 712
PartiesDERBY CITY CAPITAL, LLC, et al., Plaintiffs v. TRINITY HR SERVICES, et al., Defendants.
CourtU.S. District Court — Western District of Kentucky


J. Bruce Miller, Norma C. Miller, J. Bruce Miller Law Group, Louisville, KY, for Plaintiffs.

Judson B. Wagenseller, Louisville, KY, for Defendants.


THOMAS B. RUSSELL, Senior District Judge.

This matter is before the Court upon Defendants Judson Wagenseller, Tiffany Simmons, Brandon Simmons, Trinity HR Services, LLC, and Trinity HR, LLC's Motion to Dismiss (collectively the Wagenseller Defendants), (Docket No. 31), and Defendants LEED HR, LLC, and Michael K. Schroering's Motion to Dismiss (collectively “the Schroering Defendants), (Docket No. 28). Plaintiffs Derby City Capital, LLC, and Derby Capital JOB, LLC, have filed a combined Response to both Motions, (Docket No. 32), and the Wagenseller and Schroering Defendants have filed their respective Replies, (Docket Nos. 36 & 37, respectively). This matter is now ripe for adjudication. For the reasons that follow, the Wagenseller Defendants' Motion, (Docket No. 31), will be GRANTED IN PART and DENIED IN PART, and the Schroering Defendants' Motion, (Docket No. 28), will be GRANTED.


Plaintiffs initially filed his action on December 21, 2012, ( see Docket No. 1), and thereafter filed a “First Amended and Verified Complaint” (Amended Complaint) on February 12, 2012, ( see Docket No. 26). The remaining Defendants named in Plaintiffs' Amended Complaint are Trinity HR Services, LLC (Trinity/Delaware); Trinity HR, LLC (Trinity/Kentucky); Brandon Simmons (Mr. Simmons); Tiffany Simmons (Mrs. Simmons); Judson Wagenseller (Wagenseller); LEED HR, LLC (LEED); and Michael Schroering (Schroering).1 In their Amended Complaint,Plaintiffs allege nine counts against various combinations of these Defendants.

In Count I, Plaintiffs allege “breach of express contract or contract implied-in-fact” against all remaining Defendants. (Docket No. 26, at 46.) The contract alleged in Count I relates to an agreement between Plaintiffs and Trinity/Delaware “for the purchase of 70% interest in Trinity Delaware, whose only asset was 9,236,688 shares of GEE common stock.” (Docket No. 26, at 46–47.) The parties refer to this agreement as “the Old Contract,” as will the Court for purposes of this Opinion.

In Count II, Plaintiffs allege breach of contract against all remaining Defendants. (Docket No. 26, at 48.) The contract alleged in Count II relates to an agreement whereby Mr. Simmons, individually and in his capacity as a minority partner in Trinity/Delaware, and Schroering, individually and in his capacity as the organizer and manager of LEED, promised to purchase Plaintiffs' 70% interest in Trinity/Delaware for $750,000. The parties refer to this agreement as “the New Contract,” as will the Court for purposes of this Opinion.

In Count III, Plaintiffs allege “Punitive Damages for Fraud [sic] Inducement To Contract” against all remaining Defendants. (Docket No. 26, at 49.) Here, Plaintiffs allege that these Defendants “never had any intention of paying, in accordance with their contractual commitments, for the Plaintiffs ['] interests in Trinity/Delaware, which amounted to 70% of the sole asset of Trinity/Delaware, namely 9,326,688 shares of GEE common stock.” (Docket No. 26, at 50.) Plaintiffs further allege that “none of the Defendants had the financial capacity to write the checks in the amount of $750,000 that was required to pay the Plaintiffs in accordance with the contract they entered into with the Plaintiffs.” (Docket No. 26, at 50.)

In Count IV, Plaintiffs bring a promissory estoppel claim against Schroering, LEED, and Wagenseller. (Docket No. 26, at 51.) In this count, Plaintiffs claim that all Defendants “made repeated oral promises and assurances ... that Mr. Schroering either individually or through LEED would advance sufficient money to purchase the interests of the Plaintiff[s] in Trinity/Delaware.” (Docket No. 26, at 52 (emphasis in original).) Plaintiffs allege they have suffered damages [a]s a direct and proximate result of the Defendants Mr. Schroering's and Mr. Wagenseller's assurances and promises, and the Plaintiffs' reasonable reliance thereon, and the failure of the Defendants Mr. Schroering and Mr. Wagenseller to fulfill their promises and meet their obligations to the Plaintiffs.” (Docket No. 26, at 52.)

In Count V, Plaintiffs bring an equitable estoppel claim against all remaining Defendants. (Docket No. 26, at 52.) Here, Plaintiffs allege that each of these Defendants: “exhibited conduct, including acts, language and silence that amounted to a representation and/or concealment of material facts of which it was aware and of which the Plaintiffs were not aware. Among those facts were [sic] that were effectively concealed was the total and complete involvement of one Anthony Huff [ (Huff) ] in the activities of Mr. Simmons and Mr. Schroering.” (Docket No. 26, at 53.)

In Count VI, Plaintiffs allege “Common Law Fraud Under the Law of Kentucky against all remaining Defendants. (Docket No. 26, at 54.) In this count, Plaintiffs claim that Wagenseller made various misrepresentations that he knew were false and would deceive Plaintiffs, which Plaintiffsthen relied upon to their detriment. They further claim that these misrepresentations were made willfully, wantonly, and with malicious disregard of their rights such that they are entitled to recover both compensatory and punitive damages.

In Count VII, Plaintiffs claim that all remaining Defendants engaged in a civil conspiracy against them. (Docket No. 26, at 56.) Here, they “assert that the elements of a civil conspiracy under Kentucky law ... have occurred and were perpetrated by the deliberate and intentional acts and failure to act by [the remaining Defendants.” (Docket No. 26, at 56–57.)

In Count VIII, Plaintiffs allege “Multiple Violations of Racketer [sic] Influeced [sic] and Corrupt Organization Act against all remaining Defendants and against nondefendant W. Anthony Huff a/k/a ‘The Huff Enterprise,’ whom Plaintiffs collectively refer to as “the RICO Defendants.” (Docket No. 26, at 57.) Plaintiffs allege that Huff “for decades has operated ‘The Huff Enterprise in the form of a subterranean conspiracy to defraud individuals and entities all over America.” (Docket No. 26, at 57.) According to Plaintiffs, the RICO Defendants have “on repeated occasions ... conspired to and did engage in mail and wire fraud in violation of 18 U.S.C. §§ 1341 or 1343.” (Docket No. 26, at 58.) Plaintiffs further allege that the RICO Defendants and Mr. Huff's very life itself (a/k/a ‘The Huff Enterprises') as operated by the non-Defendant Mr. Huff were an ‘enterprise’ [and] [e]ach was created and existed as an entity engaging in or affecting interstate commerce.” (Docket No. 26, at 58.) (The remaining allegations in Count VIII will be discussed more fully infra Part VIII.)

Finally, in Count IX, Plaintiffs allege “Multiple Violations of 17 C.F.R. § 240.10(B)(5) against Schroering and Wagenseller. (Docket No. 26, at 61.) In essence, here Plaintiffs claim that Wagenseller and Schroering filed “fraudulent and deliberately incorrect” Schedule 13Ds with knowledge that those statements “were not truthful because [they] knew that Mr. Schroering and LEED did not own the shares of stock that they asserted in the filings, because Mr. Schroering had not paid for them.” (Docket No. 26, at 62.)


The Federal Rules of Civil Procedure require that pleadings, including complaints, contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A complaint may be attacked for failure “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, the court will presume that all the factual allegations in the complaint are true and will draw all reasonable inferences in favor of the nonmoving party. Total Benefits Planning Agency v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir.2008) (citing Great Lakes Steel v. Deggendorf, 716 F.2d 1101, 1105 (6th Cir.1983)). “The court need not, however, accept unwarranted factual inferences.” Id. (citing Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987)).

Even though a “complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted). Instead, the plaintiff's [f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. (citations omitted). That is, a complaint must contain enough facts “to state a claim to relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955. A claim becomes plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). If, from the well-pleaded facts, the court cannot “infer more than the mere possibility of misconduct, the complaint has alleged—but has not ‘show[n]‘that the pleader is entitled to relief.’ Id. at 679, 129 S.Ct. 1937 (quoting Fed.R.Civ.P. 8(a)(2)). [O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id.

Additionally, the Rules require a plaintiff alleging fraud...

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