Friedman v. Farmer, 5:13CV00027 JLH

• Court: U.S. District Court — Eastern District of Arkansas
• Writing for the Court: J. LEON HOLMES
• Decision Date: 19 May 2014
• Docket Number: NO. 5:13CV00027 JLH,5:13CV00027 JLH
• Citation: Friedman v. Farmer, NO. 5:13CV00027 JLH (E.D. Ark. May 19, 2014)
• Parties: JERRY FRIEDMAN; and FM SERVICE EQUIPMENT GROUP, INC. PLAINTIFFS v. KELLY FARMER, individually and in his capacity as an officer of Arkat Nutrition, Inc.; JOHN FARMER, individually and in his capacity as an officer of Arkat Nutrition, Inc.; ARKAT NUTRITION, INC.; AINSWORTH PET NUTRITION, INC.; and JOHN DOE(S) DEFENDANTS AINSWORTH PET NUTRITION, INC. CROSS-CLAIMANT v. KELLY FARMER; JOHN FARMER; and ARKAT NUTRITION, INC. CROSS-DEFENDANTS

JERRY FRIEDMAN; and FM SERVICE EQUIPMENT GROUP, INC. PLAINTIFFS v. KELLY FARMER, individually and in his capacity as an officer of Arkat Nutrition, Inc.;

JOHN FARMER, individually and in his capacity as an officer of Arkat Nutrition, Inc.;

ARKAT NUTRITION, INC.; AINSWORTH PET NUTRITION, INC.;and JOHN DOE(S) DEFENDANTSAINSWORTH PET NUTRITION, INC. CROSS-CLAIMANT v. KELLY FARMER; JOHN FARMER; andARKAT NUTRITION, INC. CROSS-DEFENDANTS

NO. 5:13CV00027 JLH

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF ARKANSAS PINE BLUFF DIVISION

Dated: May 19, 2014

OPINION AND ORDER

Jerry Friedman and FM Service Equipment Group, Inc., brought this action claiming breach of contract, promissory estoppel, tortious interference with a contract, unjust enrichment, and conversion. Ainsworth Pet Nutrition, Inc., has filed a crossclaim against Kelly Farmer, John Farmer, and Arkat Nutrition, Inc., for indemnity and contribution, and Kelly Farmer, John Farmer, and Arkat Nutrition have filed a crossclaim against Ainsworth for indemnity and contribution. The parties have filed numerous motions for summary judgment, all of which this opinion will address.

I.

In December of 2007, Friedman and Arkat Nutrition - through Kelly Farmer, Arkat's Chairman of the Board - entered into an agreement or arrangement. Friedman contends the following regarding the agreement or arrangement. The agreement gave him the exclusive right to sell Arkat Nutrition's equipment that was then located in Plant One of Arkat's facility in Dumas,Arkansas. Document #80-1 at 1. Kelly Farmer told him that the equipment's market value was three million dollars. Id. Friedman's commission was any amount of a sale price in excess of $1.9 million, which was later amended to any amount of a sale price in excess of $1.5 million. Id. at 1-2. John Farmer, Kelly Farmer's son and an Arkat Nutrition employee, was aware of the agreement and knew to refer all calls about the Plant One equipment¹ to Friedman. Id. at 1. Friedman formed FM Service Equipment Group, Inc., for the sole purpose of marketing the Plant One equipment. Id. at 2. He rented office space and contacted potential buyers, spending at least $82,220 of his own money. Id. John and Kelly Farmer were aware of the expenses he was incurring to market the Plant One equipment. Id.

In January of 2010, Ainsworth, formerly known as Dad's Pet Products, Inc.,² entered into a purchase agreement with Arkat Nutrition and Arkat Land Company, LLC, for Ainsworth's purchase of targeted assets and assumption of targeted liabilities. Arkat Nutrition and Arkat Land formed and organized Arkat Animal Nutrition, LLC, and transferred the assets that Ainsworth would buy - including Plant One and any remaining equipment in it - to Arkat Animal Nutrition in exchange for stock ownership in Arkat Animal Nutrition. Ainsworth then purchased Arkat Nutrition's and Arkat Land's equity interests in Arkat Animal Nutrition. The purchase agreement lists the liabilities Ainsworth assumed, none of which are to Friedman or FM Service. Section 3.2.2 of the purchase agreement states that Ainsworth "will not be responsible for any liabilities of [ArkatNutrition or Arkat Land Company] including, but not limited to . . . Investor or third party claims." In 2012, Ainsworth and Arkat Nutrition were parties to a settlement agreement with Sales Marketing Services, LLC.

In 2008 or 2009, Friedman bought a palletizer for $1,000 from Arkat Nutrition. He disassembled the palletizer and left the parts at Arkat Nutrition's facility until he could arrange for a truck to transport them to California. See Document #80-1 at 2. The palletizer remained in Plant One through at least December of 2011, after Ainsworth had purchased Arkat Nutrition's assets in Plant One. See Document #55-3 at 13. The palletizer is no longer at Plant One and is not in the plaintiffs' possession.

After Ainsworth acquired Arkat Nutrition's assets, a company removed the remaining equipment in Plant One and paid Ainsworth $10,000 for the equipment. Document #68-5 at 4.

II.

A court should grant summary judgment if the evidence demonstrates that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. The moving party bears the initial burden of demonstrating the absence of a genuine dispute for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). If the moving party meets that burden, the nonmoving party must come forward with specific facts that establish a genuine dispute of material fact. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986); Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). A genuine dispute of material fact is presented only if the evidence is sufficient to allow a reasonable jury to return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505,2510, 91 L. Ed. 2d 202 (1986). The court must view the evidence in the light most favorable to the nonmoving party and must give that party the benefit of all reasonable inferences that can be drawn from the record. Spencer v. Jackson Cnty. Mo., 738 F.3d 907, 911 (8th Cir. 2013). If the nonmoving party fails to present evidence sufficient to establish an essential element of a claim on which that party bears the burden of proof, then the moving party is entitled to judgment as a matter of law. Celotex Corp., 477 U.S. at 322-23, 106 S. Ct. at 2552.

III.

A. Breach of Contract

Arkat Nutrition has moved for summary judgment on the plaintiffs' breach-of-contract claim against it. Arkat Nutrition argues that under the plaintiffs' theory of Friedman's agreement with Arkat Nutrition, Friedman only received a commission if a sale of the Plant One equipment occurred, and Arkat Nutrition contends that a sale did not occur. A genuine dispute exists regarding this matter. First, Arkat Nutrition is unclear about what occurred when Arkat Nutrition and Arkat Land Company transferred assets to Arkat Animal Nutrition. Kelly Farmer states that Arkat Nutrition and Arkat Land "transferred most of their assets to Arkat Animal Nutrition, LLC[,] in exchange for stock ownership in Arkat Animal Nutrition." Document #55-1 at 3. Such a transaction would indicate a sale of assets. But in its brief in support of its motion for summary judgment, Arkat referred to this transaction as "an internal restructuring that transferred assets from one Arkat entity to another Arkat entity" and as "a mere internal restructuring where equipment was transferred to a subsidiary." Document #56 at 8. Second, the purchase agreement between Ainsworth and Arkat Nutrition and Arkat Land states that Ainsworth is a buyer that is purchasing targeted assets from the sellers, Arkat Nutrition and Arkat Land. Ainsworth also contends that it purchased targeted assets,including Plant One - and by extension, the equipment remaining in Plant One. More importantly, Friedman alleges that he entered into a contract with Arkat pursuant to which he would have the exclusive right to sell the Plant One equipment. Arkat does not assert that Friedman has the ability to sell that equipment at this juncture.

Ainsworth also argues that no breach of contract occurred between Friedman and Arkat Nutrition because no evidence exists that Ainsworth or anyone else paid more than $1.5 million for the Plant One equipment. This is in essence an argument about whether Friedman is entitled to damages even if Arkat Nutrition breached the contract by not allowing Friedman to be the exclusive seller of the Plant One equipment.³ Arkat Nutrition also argues that the plaintiffs are unable to prove compensatory damages. While the complaint states that the plaintiffs are due a commission from Arkat Nutrition's sale of assets to Ainsworth, damages resulting from the possible breach of contract are not dependent on that fact. Friedman contends that he had the exclusive right to sell the Plant One equipment that Kelly Farmer had expressed was worth three million dollars. A genuine dispute exists over the price at which Friedman would have been able to sell the Plant One equipment. Cf. Bowman v. McFarlin, 1 Ark. App. 235, 239, 615 S.W.2d 383, 385 (1981) ("The underlying purpose in awarding damages for breach of contract is to place the injured party in as good position as hewould have been had the contract been performed."). It is unclear how much of that equipment remained in Plant One when Ainsworth entered into the purchase agreement with Arkat Nutrition and Arkat Land. It is similarly unclear whether the price Ainsworth paid for the equipment in Plant One is comparable to the price Friedman could have received from the equipment located in Plant One in December 2007 that he alleges he had the exclusive right to sell. See Document #80-2 at 5 (deposition of Kelly Farmer) ("There was quite a bit of equipment [in Plant One] at one time, before it started getting cleaned out and moved around. I'm not sure how much was there when Jerry [Friedman] first - when he saw it. But there was, you know, two and a half million dollars worth of equipment there at one time."); see also Document #55-3 at 11 (affidavit of John Farmer) (explaining the sale of $219,000 worth of Plant One equipment for which FM Service Equipment Group received $59,000).

The plaintiffs' complaint names Ainsworth as a successor in interest to Arkat Nutrition's obligations, including its obligations under its contract with Friedman. Ainsworth has moved for summary judgment, arguing that it purchased targeted assets and assumed targeted liabilities from Arkat Nutrition, none of which were to Friedman, and is not a successor in interest to Arkat Nutrition's liabilities. The general rule in Arkansas is that a corporation that "purchases the assets of another corporation does not succeed to the liabilities of the...