Haymaker Dev. Co. v. Gatton
| Decision Date | 28 January 2021 |
| Docket Number | Civil Action No. 5: 20-478-DCR |
| Parties | HAYMAKER DEVELOPMENT COMPANY, LLC, Plaintiff, v. C.M. GATTON, et al., Defendants. |
| Court | United States District Courts. 6th Circuit. United States District Court of Eastern District of Kentucky |
This dispute in this civil action involves the ownership and development of real property located in Fayette County, Kentucky. Defendants Beaumont Investments, LLC, the C.M. Gatton Trust, and C.M. Gatton (individually and as Trustee of the C.M. Gatton Trust) removed this matter from Fayette Circuit Court and have now filed motions to dismiss the Complaint. [Record Nos. 5, 6] Because Haymaker has failed to allege a justiciable claim against Defendant Beaumont Investments, LLC, that defendant's motion to dismiss will be granted. However, construing the Complaint in a light most favorable to the plaintiff, it has alleged cognizable claims against Defendants C.M. Gatton and the Gatton Trust. As a result, these defendants' motions to dismiss will be denied.
Before explaining the events alleged to have transpired in this case, it is necessary to introduce the players. The plaintiff, Haymaker Development Company, LLC ("Haymaker"), is a real estate developer based in Fayette County, Kentucky. Haymaker previously was known as Haymaker Development Company, Inc., but at some point, converted to the limited liability company it is today.1 [See Record No. 7, p. 4.] Timothy Haymaker is a member of Haymaker and a former shareholder of Haymaker Development Co., Inc.
Defendant C.M. Gatton ("Gatton") is a Tennessee citizen. Gatton is Trustee of Defendant C.M. Gatton Trust ("the Trust"), an inter vivos trust established on January 7, 1995. Defendant Beaumont Investments, LLC, ("Beaumont") is a Kentucky limited liability company organized with C.M. Gatton as its sole member.2
Haymaker alleges that Haymaker Development Company, Inc., Gatton, and Beaumont previously operated as a joint venture or partnership to develop a mixed-use development known as Beaumont ("Beaumont Development"). In count 1 of the Complaint, Haymaker alleges that Haymaker, Gatton, and the Trust more recently partnered/jointly ventured to develop property in the Hamburg area of Fayette County. Haymaker contends that it negotiated the Trust's purchase of approximately 563.3 acres of land previously owned by Preston and Anita Madden and Akbar, LLC ("Hamburg Acreage"). Haymaker further alleges that the parties agreed (apparently orally) to develop this property in a manner consistent with the Beaumont Development.
Haymaker, Gatton, and the Trust agreed that the Trust would acquire and hold fee title to the Hamburg Acreage, "for the benefit of the joint venture or partnership." The property would then be developed in phases, at which time Haymaker would "[t]ake title to sufficient acreage to develop each unit by deed from the Gatton Trust in exchange for an unsecuredpromissory note in an amount determined by Gatton to represent the Gatton Trust's basis in the acreage to be conveyed plus seventy percent (70%) of the estimated profits from the development by Haymaker." [Complaint ¶ 11v.]
The Trust acquired the Hamburg Acreage on November 17, 2003. Haymaker, Gatton, and the Trust promptly began developing the Hamburg Acreage and, to date, have developed "a substantial portion of the Hamburg Acreage in accordance with the partnership or joint venture structure" described in the Complaint. However, portions of the Hamburg Acreage have not been developed ("Remaining Hamburg Acreage").
Haymaker alleges that the partnership or joint venture has made improvements to the Remaining Hamburg Acreage and has paid for them out of the profits generated by the partnership or joint venture. However, according to Haymaker, Gatton and the Trust deny that the Remaining Hamburg Acreage is an asset of the partnership or joint venture and refuse to continue developing the property with Haymaker.
In count 2, Haymaker alleges that Gatton and the Trust agreed to partner or joint venture with Haymaker to develop a mixed-use development known as Coventry ("Coventry Development"). It appears that this also is alleged to be an oral partnership agreement. Similar to the Hamburg Development, portions of Coventry have not yet been developed ("Remaining Coventry Acreage"). Haymaker claims an interest in the Remaining Coventry Acreage as an asset of the partnership or joint venture.
Count 3 involves the Beaumont Development, which predates Hamburg and Coventry. Haymaker contends that "[t]he overall profit and loss from the development of the Hamburg Acreage, the Beaumont Development, and the Coventry Development are maintained on ajoint basis," and that Haymaker is entitled to a division of the profits and losses from these developments. [Complaint ¶¶ 33-34]
Finally, in count 4, Haymaker alleges that Gatton and the Trust have breached their fiduciary duties to Haymaker by failing to complete development of the Remaining Hamburg and Coventry Acreages.
Haymaker seeks a declaratory judgment that each of the developments was undertaken pursuant to a partnership or joint venture; that the Trust owns the Remaining Acreages as assets of the partnership or joint venture; and that Gatton and the Trust have breached the parties' agreements and their fiduciary duties by failing to develop the Remaining Acreages. Haymaker also seeks monetary damages and an injunction requiring Gatton and the Trust to complete development of the Remaining Acreages. As noted, the defendants have filed motions to dismiss the Complaint.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible upon its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court must proceed on the assumption that well-pleaded allegations are true, even if they strike it as improbable. Id. at 556 (2007). While the Court need not accept legal conclusions or unwarranted factual inferences, the complaint must be construed in the plaintiff's favor. Sharp v. Ingham Cty., 23 F. App'x 496, 498 (6th Cir. 2001). However, the Court will dismiss a complaint if the factual allegations are insufficient "to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.
Haymaker's factual allegations concerning Beaumont are limited: Beaumont is introduced in paragraph four of the Complaint as a Kentucky limited liability company, with its principal place of business in Tennessee. Beaumont is not mentioned again until paragraph 31, in which the plaintiff alleges that Haymaker, Gatton, and Beaumont "previously developed" the Beaumont Development. The plaintiff further alleges, "[t]he overall profit and loss from the development of the Hamburg Acreage, the Beaumont Development, and the Coventry Development are maintained on a joint consolidated basis." Finally, Haymaker contends that it "is entitled to a division of the profits and losses from the Beaumont Development, Coventry Development, and Hamburg Development."
Beaumont argues that Haymaker's claims against it should be dismissed because Haymaker fails to allege that Beaumont engaged in any wrongdoing. According to Beaumont, the development of Beaumont Centre (also referred to as the Beaumont Development) concluded decades ago. Further, Haymaker does not seek any damages or injunctive relief from Beaumont. Instead, Haymaker simply seeks a declaration that the parties' business transactions surrounding the Beaumont Development were a partnership or joint venture. In response to Beaumont's motion to dismiss, Haymaker agrees that it "simply seeks a declaration that Beaumont and Haymaker did have such a business relationship." [Record No. 7, p. 7]
The Complaint does not specify the law that entitles the plaintiff to such a determination. The federal Declaratory Judgment Act provides that, "in a case of actual controversy a competent court may 'declare the rights and other legal relations' of a party 'whether or not further relief is or could be sought.'" Pub. Serv. Comm'n of Utah v. WycoffCo., Inc., 344 U.S. 237, 239 (1952) (quoting 28 U.S.C. § 2201). After removal from state court, this Court applies the federal Declaratory Judgment Act rather than state law. Kentucky Mist Moonshine, Inc. v. University of Kentucky, 192 F. Supp.3d 772, 784-85 (E.D. Ky. 2016).
In deciding whether to grant declaratory relief, federal courts generally consider five factors:
(1) whether the judgment would settle the controversy; (2) whether the declaratory judgment would serve a useful purpose in clarifying the legal relations at issue; (3) whether the declaratory remedy is being used merely for the purpose of 'procedural fencing' or 'to provide an arena for a race for res judicata;' (4) whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach on state jurisdiction; and (5) whether there is an alternative remedy that is better or more effective.
Grand Trunk W.R.R. Co. v. Consol. Rail Co., 746 F.2d 323, 326 (6th Cir. 1984).
The answer to the first inquiry clearly is "no." There is no allegation that Beaumont is involved in the development of Hamburg or Coventry or that any property remains to be developed in Beaumont. Additionally, the plaintiff does not claim that Beaumont owes it any money or has breached any duty.
The answer to the second question also is "no." While the historical relationship between Beaumont, Gatton, and Haymaker may constitute relevant background information, it is unclear that a legal determination of the nature of these parties' relationship is particularly relevant to the issues that are actually in controversy.
The defendants contend that Beaumont was joined as a party in an effort to defeat removal from state court, since the plaintiff...
To continue reading
Request your trial