Headfirst Baseball LLC v. Elwood

• Decision Date: 07 March 2016
• Docket Number: Civil Action No. 13-536 (RBW)
• Citation: 168 F.Supp.3d 236
• Parties: Headfirst Baseball LLC, et al., Plaintiffs, v. Robert Elwood and Stacey Elwood, Defendants. Robert Elwood, Counterclaim Plaintiff, v. Brendan V. Sullivan Iii and Headfirst Professional Sports Camps LLC, Counterclaim Defendants. Headfirst Professional Sports, Camps LLC, Counterclaim Plaintiff, v. Robert Elwood, Counterclaim Defendant.
• Court: U.S. District Court — District of Columbia

168 F.Supp.3d 236

Headfirst Baseball LLC, et al., Plaintiffs,

v.Robert Elwood and Stacey Elwood, Defendants.

Robert Elwood, Counterclaim Plaintiff,

v.Brendan V. Sullivan Iii and Headfirst Professional Sports Camps LLC, Counterclaim Defendants.

Headfirst Professional Sports, Camps LLC, Counterclaim Plaintiff,

v.Robert Elwood, Counterclaim Defendant.

Civil Action No. 13-536 (RBW)

United States District Court, District of Columbia.

Signed March 07, 2016

Alexander Steinway Zolan, Robert Madison Cary, Simon A. Latcovich, Michael Shobe Sundermeyer, Williams & Connolly, LLP, Washington, DC, for Plaintiffs.

Caroline Petro Gately, James Douglas Baldridge, Moxila A. Upadhyaya, Benjamin E. Horowitz, Venable LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

REGGIE B. WALTON, United States District Judge

Four motions are currently pending before the Court: (1) Brendan V. Sullivan III's Motion for Summary Judgment on Counts Three, Four, and Six of Robert Elwood's Amended Counterclaim (“P'ship Summ. J. Mot.”); (2) the Motion to Bifurcate and Try First Partnership Claim and Memorandum in Support (“Bifurcation Mot.”); (3) Brendan V. Sullivan III's Motion for Summary Judgment on Count Five, and Sullivan and Headfirst Professional Sports Camps LLC's Joint Motion for Partial Summary Judgment on Counts One and Two, of Robert Elwood's Amended Counterclaim (“Estoppel/Buyout Summ. J. Mot.”); and (4) Stacey Elwood's Motion for Summary Judgment as to Count I of the Second Amended Complaint and Memorandum in Support (“Conversion Summ. J. Mot.”). After careful consideration of the parties' submissions,¹ as well as the parties' oral arguments at the January 27, 2016 hearing, and for the reasons that follow, the Court concludes that it must deny summary judgment on the issue of partnership vel non, grant in part and deny in part the motion to bifurcate the trial, grant summary judgment in favor of plaintiff Brendan V. Sullivan III on defendant Robert Elwood's promissory estoppel counterclaim, grant partial summary judgment in favor of plaintiffs Brendan V. Sullivan III and Headfirst Professional Sports Camps LLC on defendant Robert Elwood's counterclaims to the extent that the counterclaims seek a compelled buyout of defendant Robert Elwood's interests in any Headfirst entity as a remedy, and grant summary judgment in favor of defendant Stacey Elwood on plaintiffs Headfirst Baseball LLC and Headfirst Camps LLC's conversion claim.

I. BACKGROUND

A. The Various Headfirst Limited Liability Companies (“Headfirst LLCs”)

1. Headfirst Baseball LLC

Plaintiff Brendan V. Sullivan III (“Sullivan”) assisted in the formation of Headfirst Baseball LLC (“Headfirst Baseball”) under the laws of the District of Columbia in 1997. P'ship Opp'n, Defendant Robert Elwood's Statement of Material Facts in Response to Brendan V. Sullivan's Statement of Material Facts in Support of His Motion for Summary Judgment on Counts Three, Four, and Six of Elwood's Amended Counterclaim (“P'ship Opp'n Facts”) ¶ 2; see also id.¶ 3. At that time, plaintiff Sullivan and non-party Sean Flikke (“Flikke”) were the only members of Headfirst Baseball and each owned 50% of the company. Id.¶ 4. In 2001, non-party Flikke transferred his interest in Headfirst Baseball to non-party Ted Sullivan, the brother of plaintiff Sullivan. Id.¶ 7.

2. Headfirst Professional Sports Camps LLC

In July 2010, Red Sox Camps LLC was organized under the laws of the District of Columbia. See id.¶¶ 18-20. Plaintiff Sullivan and defendant Robert Elwood² “were each 50% owners” of this LLC. Id.¶ 20. “In February 2012, Red Sox Camps LLC changed its name to Headfirst Professional Sports Camps LLC [ (‘Headfirst Professional Sports Camps') ].” Id.¶ 21.

3. Headfirst Camps LLC

Headfirst Camps LLC (“Headfirst Camps”) was established in January 2012 under the laws of the District of Columbia. Id.¶ 26. Plaintiff Sullivan and his brother Ted Sullivan each own a 50% interest in the company. See id.¶¶ 37-38.

B. The Parties' Dispute

Plaintiffs Sullivan, Headfirst Baseball, and Headfirst Camps commenced this action, alleging that Headfirst Baseball and Headfirst Camps terminated their relationship with defendant Robert Elwood after the plaintiffs discovered that he had allegedly misappropriated hundreds of thousands of dollars from Headfirst Baseball and Headfirst Camps over several years, using the money for non-business purposes, i.e., personal expenditures, and that defendant Stacey Elwood was complicit in this conduct. See Headfirst Baseball LLC v. Elwood, 999 F.Supp.2d 199, 203–04 (D.D.C.2013) ; see also Second Am. Compl. ¶¶ 1-2, 15. Defendant Robert Elwood insists that the non-business expenditures were permitted because he and plaintiff Sullivan allegedly formed an “overarching” Headfirst partnership, which authorized, inter alia, the use of Headfirst Baseball and Headfirst Camps funds for such expenditures. P'ship Opp'n at 6, 7.

Defendant Robert Elwood has filed several counterclaims against plaintiff Sullivan, generally seeking a declaration of the existence of the alleged Headfirst partnership, see Elwood Countercl. I ¶¶ 110-17 (count three); see also id.¶¶ 122-28 (alleging, in count five, that he detrimentally relied upon repeated promises from plaintiff Sullivan that they were equal partners in the Headfirst partnership), as well as damages resulting from being ousted from the alleged partnership, see id.¶¶ 118-21 (requesting, in count four, a full accounting and compelled buyout of the partnership if it exists); id.¶¶ 129-35 (claiming, in count six, that if a partnership is found to exist, then damages have resulted from plaintiff Sullivan's breach of his fiduciary duty as a partner). He has also counterclaimed against Headfirst Professional Sports Camps for a compelled buyout of his undisputed 50% interest in the company.³ Id.¶¶ 93-109 (counts one and two).

II. STANDARD OF REVIEW

Before granting a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56, a court must find that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A fact is material ‘if it might affect the outcome of the suit under the governing law,’ and a dispute about a material fact is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the non[ ]moving party.’ ” Steele v. Schafer, 535 F.3d 689, 692 (D.C.Cir.2008) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).

On a motion for summary judgment, “[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S. at 255, 106 S.Ct. 2505 (citation omitted). “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge ... ruling on a motion for summary judgment ....” Id. The movant has the burden of demonstrating the absence of a genuine issue of material fact and that the non-moving party “fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In responding to a summary judgment motion, the non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Accordingly, the non-moving party must not rely on “mere allegations or denials ... but must set forth specific facts showing that there [are] genuine issue[s] for trial.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505 (one ellipsis omitted) (quoting First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968) ). “The mere existence of a scintilla of evidence in support of the [non-moving party's] position [is] insufficient” to withstand a motion for summary judgment, but “there must be [some] evidence on which the jury could reasonably find for the [non-movant].” Id. at 252, 106 S.Ct. 2505.

III. ANALYSIS

A. Summary Judgment On Counts Three, Four, And Six Of Defendant Robert Elwood's Amended Counterclaim

Defendant Robert Elwood's third, fourth, and sixth counterclaims are only viable if his alleged, overarching Headfirst partnership exists. See Elwood Countercl. I ¶¶ 110-21, 129-35. Plaintiff Sullivan contends that defendant Robert Elwood was merely an employee of Headfirst Baseball and Headfirst Camps, see, e.g., P'ship Opp'n Facts ¶ 9, and that as a matter of law there can be no Headfirst partnership because the parties do not dispute that Headfirst Baseball and Headfirst Camps were LLCs, and a finding that an overarching Headfirst partnership existed would effectively convert the LLCs into partnerships, which is prohibited under D.C. Code § 29–602.02(a) (2001), see P'ship Summ. J. Mot. at 11-18. This is not exactly so, however.

Under District of Columbia law, a partnership exists where there is an “association of [two] or more persons to carry on as co-owners of a business for profit ..., whether or not the persons intend to form a partnership.”⁴ D.C. Code § 29–602.02(a) ; see also Beckman v. Farmer, 579 A.2d 618, 629–30 (D.C.1990) (“The trial court correctly recognized the central issue as whether the parties, despite the absence of an express partnership agreement, intended to carry on the business as co-owners for profit, and that their intent must be inferred from their conduct and dealings with each other.” (citation omitted)). And “[a] person that receives a share of the profits of a business shall be presumed to be a partner in the business, unless the profits were received in payment,” inter alia, “[f]or services as an independent contractor or of wages or other compensation to an employee ....” D.C. Code § 29–602.02(c...