Lamb Mech. Servs. v. Mattson (In re Mattson)

CourtUnited States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Southern District of Indiana
Decision Date07 March 2022
Docket Number18-09103-JMC-7A,Adversary Proceeding 19-50068
PartiesIN RE: RICHARD VERNON MATTSON, Debtor. v. RICHARD VERNON MATTSON, Defendant. LAMB MECHANICAL SERVICES LLC, Plaintiff,

IN RE: RICHARD VERNON MATTSON, Debtor.

LAMB MECHANICAL SERVICES LLC, Plaintiff,
v.

RICHARD VERNON MATTSON, Defendant.

No. 18-09103-JMC-7A

Adversary Proceeding No. 19-50068

United States Bankruptcy Court, S.D. Indiana, Indianapolis Division

March 7, 2022


James M. Carr United States Bankruptcy Judge

FINDINGS OF FACT AND CONCLUSIONS OF LAW

THIS ADVERSARY PROCEEDING came before the Court for a bench trial on January 13, 2021, March 31, 2021, April 1, 2021 and May 26, 2021 (the "Trial"). Plaintiff Lamb Mechanical Services LLC ("LMS") appeared by counsel Kathleen Hart and Jaclyn M. Flint. Defendant Richard Vernon Mattson ("Debtor") appeared by counsel Julie A. Camden. At the conclusion of the Trial, the Court took the matter under advisement with the parties invited to submit proposed findings of fact and conclusions of law in lieu of post-Trial briefs.

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The Court, having reviewed the evidence presented at the Trial, the Stipulations for Trial[1] filed by the parties on October 7, 2020 (Docket No. 59) (the "Stipulation"), Plaintiff's Trial Brief filed on October 9, 2020 (Docket No. 61), Defendant's Trial Brief filed on February 15, 2021 (Docket No. 65) ("Debtor's Trial Brief), Plaintiff's Response to Defendant's Trial Brief 'filed on March 30, 2021 (Docket No. 70), the proposed findings of fact and conclusions of law submitted by LMS and Debtor on June 14, 2021 (which the Court treats as post-Trial briefs) and the other matters of record in this adversary proceeding; having weighed the credibility of the witnesses; having heard the presentations of counsel at the Trial and considered their briefs and proposed entries; and being otherwise duly advised, now enters the following findings of fact and conclusions of law as required by Fed.R.Civ.P. 52, made applicable to this adversary proceeding by Fed.R.Bankr.P. 7052.

Findings of Fact

To assist in making the following numbered findings of fact, the Court ordered and relied on a transcript of the testimony given at, as well as the recording of, the four-day Trial. However, the Court formed impressions regarding the relative credibility of all witnesses contemporaneous with their in-court testimony. The Court has retained and relied upon such impressions formed by listening to live testimony and closely observing the witnesses. The Court has annotated the findings of fact using the Trial transcript and the designated exhibits admitted at Trial. In so doing, the Court has not included every citation to the record (transcript and/or exhibits) that support its findings. The Court has cited evidence that it found most credible and convincing, yet the Court did not add other citations that, while supportive, might be

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redundant or of negligible probative value. In some but not all instances, the Court has described evidence contrary to a Court finding and how the Court weighed the evidence.

The Court makes the following findings of fact:

1. On December 5, 2018, Debtor filed a voluntary petition under chapter 7 of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq. (the "Bankruptcy Code"), [2] in the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division.[3]

2. On March 24, 2020, Debtor received his general discharge.[4]

3. On March 11, 2019, LMS timely filed its Complaint for Determination of Dischargeability and Objecting to Debtor's Discharge Pursuant to Sections 523 and 727 of the Bankruptcy Code (Docket No. 1) to initiate this adversary proceeding. After the Court ruled on one motion to dismiss (Docket No. 19) and two motions for partial summary judgment (Docket Nos. 49 and 50), LMS filed its Amended Complaint for Determination of Dischargeability Pursuant to Sections 523 of the Bankruptcy Code (Docket No. 51) (the "Complaint") on February 18, 2020, wherein LMS alleges that certain claims that LMS asserts against Debtor are nondischargeable under §§ 523(a)(2)(A), (a)(4) and/or (a)(6).

4. On February 21, 2020, Debtor filed his Answer to Amended Complaint For Determination of Dischargeability Pursuant to Sections 523 of the Bankruptcy Code (Docket No. 52), in which he denied all material allegations.

5. At all relevant times, LMS installed and serviced heating, ventilation, air conditioning, refrigeration, restaurant and plumbing equipment or systems (collectively, "HVAC

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Services") for commercial clients.[5] LMS was owned by Ed Lamb ("Lamb"), who was responsible for the service and construction operations, and Jay Wilson ("Wilson"), who was responsible for managing accounts payable and payroll and served as the Secretary/Treasurer.[6]

6. In the fall of 2016, LMS decided to hire a "Service Manager" who would be primarily responsible for overseeing and managing LMS's provision of day-to-day HVAC Services, meeting the needs of its service customers and supervising service technicians.[7]

7. The person sought for the Service Manager was required to have training and management experience as well as "hands on experience"; a college degree was preferred but not required.[8]

8. Debtor applied for LMS's Service Manager position.[9] As part of the application/ hiring process, Debtor represented to LMS that:

a. Debtor obtained an undergraduate degree from IUPUI. Debtor does not have a college degree.[10]

b. Debtor sold his company, Mattson Mechanical, LLC, to Indy Connection Electrical Contractors, Inc. ("Mister Quik") for $1, 745, 000. Debtor did not sell his company to Mister Quik. Debtor gave to LMS a copy of a fake "Business Purchase Agreement" with respect

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to the purported sale.[11] The record is unclear as to when the fake "Business Purchase Agreement" was given to LMS (that is to say whether it was provided before or after LMS decided to hire Debtor) and whether LMS requested a copy of such agreement or Debtor offered it.[12]

c. Debtor held a license to provide HVAC Services and that Mr. Quik was using his license. Debtor never held a license.[13]

9. LMS hired Debtor to serve as LMS's Service Manager.[14]

10. LMS agreed to pay Debtor $85, 000 annually, the salary Debtor requested.[15]

11. On or about October 2, 2016, Debtor and LMS executed an employment agreement (the "Employment Agreement").[16] Both LMS and Debtor were represented by counsel in negotiating the Employment Agreement.[17]

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12. The "bonus compensation"[18]section of the Employment Agreement was left substantially blank because there was not a "meeting of the minds" of the parties as to how the amount of the bonus compensation should be calculated and when (and subject to what conditions) a bonus should be paid.[19]

13. The Employment Agreement included a limited non-compete clause and a non-solicitation clause. The non-solicitation clause prohibited Debtor from soliciting the sale of HVAC Services to customers of LMS and soliciting LMS employees for a 3-year period following Debtor's separation from LMS. The limited non-compete clause prohibited Debtor from competing in any capacity against LMS for a 3-year period following Debtor's separation from LMS.[20]At the time the Employment Agreement was executed, Debtor understood those provisions to be unenforceable.[21]At the time the Employment Agreement was executed, LMS intended the non-compete clause to be applicable to Taco Bell (as defined below).[22]

14. Debtor was entitled to an automobile allowance of $350 per month.[23]

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15. Debtor began working at LMS on October 3, 2016.[24]

16. As Service Manager, Debtor was the primary individual responsible for managing LMS's HVAC Services, including LMS's HVAC employees and operations.[25]Even though Debtor was hired, Lamb continued to be heavily involved in the operations of LMS.[26] Lamb suggested that Debtor "kept him at bay" regarding Taco Bell, [27]but Lamb also acknowledged that by the time Debtor was terminated as an employee of LMS, Lamb had the names, telephone numbers or other contact information for Taco Bell representatives.[28]

17. During his employment with LMS, Debtor began using the self-appointed title of "Vice President of Operations", which Debtor gave himself without approval from either Lamb or Wilson.[29]Debtor was never an owner, officer or director of LMS.[30]

18. While working at LMS, Debtor established a new Google e-mail suite for LMS utilizing the "@lambmechanicalservices.com" domain name ("Google Domain").[31] LMS employees, while using the Google Domain, also continued to monitor and respond to emails on

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their ''@hotmail.com'' email addresses. [32]

19. During the application/hiring process, the parties discussed Debtor bringing business from a new customer to LMS, namely Flynn Restaurant Group, Inc. d/b/a Bell American Group ("Taco Bell").[33] As a franchisee, Taco Bell owned and operated around 60 Taco Bell restaurants.[34] The principal motivation of LMS in hiring Debtor was the desire and expectation of LMS that by hiring him LMS would obtain a substantial amount of HVAC Services business from Taco Bell. Debtor brought a substantial amount of Taco Bell work to LMS.[35]

20. LMS did not have a written contract with Taco Bell, and LMS was not Taco Bell's exclusive provider of HVAC Services. Taco Bell could have stopped using LMS's HVAC Services at any time.[36]

21. During 2016 and 2017, LMS acquired additional trucks and necessary equipment to deal with the anticipated and actual increase in work from Taco Bell.[37]

22. Between 2016 and 2017, LMS made gross sales to Taco Bell for HVAC Services

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and related construction services for Taco Bell restaurants totaling $1, 033, 122.68.[38] Based on the sales and profit data presented by LMS, Taco Bell business generated approximately $499, 952.10 in profit for LMS for 2016 and 2017.[39]

23. LMS received work orders from Taco Bell through the Google Domain emails and/or telephone calls, but LMS also had access to Taco Bell's online vendor portal...

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