Felton v. Teel Plastics Inc.

• Decision Date: 26 August 2010
• Docket Number: No. 09-cv-180-bbc.,09-cv-180-bbc.
• Citation: 724 F.Supp.2d 941
• Parties: Colin Christopher FELTON, Plaintiff, v. TEEL PLASTICS, INC. and Jay L. Smith, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

724 F.Supp.2d 941

Colin Christopher FELTON, Plaintiff,

v.TEEL PLASTICS, INC. and Jay L. Smith, Defendants.

No. 09-cv-180-bbc.

United States District Court,W.D. Wisconsin.

July 12, 2010.

Order Denying Reconsideration Aug. 26, 2010.

COPYRIGHT MATERIAL OMITTED.

Lawrence Bensky, Law Office of Lawrence Bensky, LLC, Anne Maryse Bensky, Garvey McNeil & Associates, S.C., Madison, WI, for Plaintiff.

Michael B. Van Sicklen, Foley & Lardner LLP, Roberta Howell, Holly C. Pomraning, Melli Law, S.C., Lori Marie Lubinsky, Axley Brynelson, LLP, Madison, WI, for Defendants.

OPINION AND ORDER

BARBARA B. CRABB, District Judge.

From 2000 to 2008, plaintiffColin Christopher Felton and defendantTeel Plastics, Inc. jointly owned Teel Global Resources Tech, LLC.Defendant Teel Plastics owned 70% of the company, plaintiff owned 30% and defendantJay Smith was the manager.Plaintiff left the company in 2004 after a number of disagreements with defendant Smith, but he kept his 30% interest in the company.Plaintiff had no other contact with the company until early 2009, when he received notice that defendant Teel Plastics had exercised its right under § 9.01 of the operating agreement to dissolve the company.Relying on an accounting performed by Virchow Krause several months earlier, defendants determined that Teel Global had no assets to distribute because it was more than $5 million in debt to defendants Teel Plastics and Smith.

Plaintiff filed this lawsuit in March 2009.In his pro se complaint, he asserted two “counts”: one for “unauthorized disclosure of confidential information” and one for “negligent management” of a Teel Global project.Dkt. # 1.After obtaining counsel, he filed an amended complaint in which he abandoned his original claims and asserted new ones for breach of fiduciary duty, breach of contract and violations of Wis. Stat. Ch. 183.In addition, plaintiff requested an accounting.In an order dated October 5, 2009, 664 F.Supp.2d 937(W.D.Wis.2009), I granted defendants' motion to dismissplaintiff's breach of fiduciary claim because plaintiff alleged injuries to Teel Global rather than to himself.Dkt. # 46.

Now before the court are two motions for summary judgment filed by defendants on plaintiff's remaining claims.Dkts. 74 and 84.With the exception of the claim for an accounting under § 9.3 of the operating agreement, plaintiff has failed to develop a meaningful argument or set forth specific facts in support of his statutory claims and his claims for breach of contract.Summary judgment will be granted to defendants on these claims.

With respect to plaintiff's claim for an accounting under § 9.3, I agree with defendants that plaintiff has failed to make any showing that the accounting conducted by Virchow Krause in 2008 incorrectly calculated Teel Global's assets and liabilities by more than $5 million.However, the Virchow Krause accounting valued the company as of December 2007 and the company was not dissolved until December 2008.Although § 9.3 of the operating agreement required an accounting “from the date of the last previous accounting until the date of dissolution,” no accounting was conducted after dissolution.

Neither side addressed the questions whether defendants(rather than Teel Global) are the appropriate parties to be sued for enforcement of § 9.3 and whether specific performance is appropriate under the circumstances of this case.Accordingly, I am directing the parties to submit supplemental materials answering these questions.

From the parties' proposed findings of fact and the record, I find that the following facts are undisputed.

UNDISPUTED FACTS

A.Formation of Teel Global

In 1996, plaintiffColin Felton formed Global Resources, LLC in Madison, Wisconsin “to develop materials, products and processes utilizing natural fiber-thermoplastic composites.”The process involves combining fibers made out of natural materials such as wood with plastics to create products such as roof panels and hot tub siding.Global Resources sold the composite materials to third parties for injection molding.

In 1998plaintiff began looking for investors in his company.Between 1998 and 2000plaintiff met several times with defendantJay Smith, who was the owner of defendantTeel Plastics, Inc., a Wisconsin manufacturer of plastic tubing, fiberglass and other plastic products.

In February 2000, plaintiff and defendants formed Teel Global Resources Tech, LLC.Defendants drafted the operating agreement, which included the following provisions:

4.12 Liability for Certain Acts.The Manager(s) shall perform their managerial duties in good faith, in a manner they reasonably believe to be in the best interests of the Company, and with such care as an ordinarily prudent person in a like position would use under similar circumstances.A Manager who so performs the duties of Manager shall not have any liability by reason of being or having been a Manager of the Company.Except as provided in the Wisconsin Act or this Agreement, a Manager shall not be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member, unless the loss or damage is the result of fraud, willful misconduct, material breach of fiduciary duty or a wrongful taking by the Manager.

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7.3 Books and Records.The Company shall establish such books, records and accounts for the Company as are customary for businesses similarly situated and as accurately reflect the financial condition and position of the Company in accordance with generally accepted accounting principles consistently applied.

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8.6 Notice of Fundamental Company Transactions.The Manager shall provide Felton with written notice of (a) merger, consolidation or reorganization of the Company; (b) sale, lease, exchange or other disposition of all or substantially all of the Company's property or assets; or adoption of any plan or agreement to do any of the foregoing.

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9.1 Dissolution, The Company shall not be dissolved upon the dissociation of any Member.Rather, the Company shall only be dissolved upon the occurrence of any of the following events: (a) By the written agreement of Members owning or holding at least a majority of the outstanding Units; or (b) Upon the judicial dissolution of the Company pursuant to the Wisconsin Act.

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9.3 Liquidation.Upon dissolution, an accounting shall be made of the accounts of the Company and of the Company's assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution.

Under the agreement, defendant Teel Plastics owned 70% of the membership interests and plaintiff owned 30%.Defendant Smith was the manager of Teel Global.Under a separate agreement, plaintiff became an employee of Teel Global.

B.Management of Teel Global

In 2001defendant Teel Plastics constructed a building for Teel Global's operations.Teel Plastics' monthly mortgage payment for the building was $16,427; Teel Global paid Teel Plastics $16,500 a month in rent.

In April 2002, plaintiff wrote defendant Smith, expressing “concerns regarding the viability and path” of Teel Global.Plaintiff believed that Teel Global was “quickly l[o]sing [its] advantage as THE natural fiber composites company” because it did “not have a definitive corporate strategy for rapidly capturing market share” and it had “not committed to a single ‘first’ product that will establish [it] in the marketplace and generate needed income for continued product development.”Plaintiff set forth a number of proposals for Smith's consideration.Plaintiff and defendant Smith met to discuss plaintiff's concerns.(The parties dispute Smith's response to the letter.)

In 2003 and 2004 representatives of defendant Teel Plastics and Teel Global met with Elk Corporation, a roofing manufacturer, regarding the potential manufacture of a roofing product.In February 2004 Teel Plastics formed TGRT Roofing, LLC, which entered into a “Product Development, Purchase and Sale Agreement” with Elk to “design, develop, test and produce a prototype composite polymer roofing product.”(Plaintiff refers to the product as “Panelshake,” but the evidence he cites does not use that name.)Neither plaintiff nor Teel Global held any interest in the new company.

On February 12, 2004, plaintiff sent a memo to defendant Smith about the Elk contract and various other issues.He wrote that he did not “see any real problems with” the contract, but wanted “to get an understanding of [his] role in the new company.”He listed a number of concerns and stated that he“would like to reduce [his] time commitment to keep [his] stress level under control.”Finally, he stated that he“would like to get a copy of [Teel Global's] tax returns (including all K-1s) for the past years, amend [Teel Global's] Operating Agreement, enter into an employment or consulting agreement and organize and sign an operating agreement for Teel-GRT Roofing LLC.”Smith spoke to plaintiff about the matters in the memo.(Neither side proposed any fact about the content of that discussion or discussions.)Plaintiff's lawyer sent Smith a followup memo dated February 26, 2004, but Smith did not respond to it.In March 2004, plaintiff resigned as an employee, but retained his 30% interest in Teel Global.

A patent was “developed and obtained ... for the composite roofing panel that was to be manufactured for the Elk project.”(It is not clear from the parties' proposed findings of fact who owned the patent.Oddly, neither side submitted a copy of the patent or even identified the patent number.)In April 2006 Elk terminated its contract with TGRT Roofing after “the product” failed a “fire test.”“[T]he product was never commercially launched and ... no sales were ever recorded.”Dft. Teel Plastics'PFOF ¶ 26, dkt. # 77; Plt.'s Resp. to Dft.Teel Plastics'PFOF ¶ 26, dkt. # 123.

Plaintiff's expert values the “Panelshake” product at between $2.2 million and $7.3...