Lee Swimming Pools, LLC v. Bay Pool Co. Constr.
| Decision Date | 02 August 2021 |
| Docket Number | 1:18-cv-118-LG-RPM |
| Parties | LEE SWIMMING POOLS, LLC, f/k/a BAY POOL COMPANY, LLC PLAINTIFF v. BAY POOL COMPANY CONSTRUCTION, LLC DEFENDANT/COUNTER-PLAINTIFF v. LEE SWIMMING POOLS, LLC, f/k/a BAY POOL COMPANY, LLC COUNTER-DEFENDANT BAY POOL COMPANY CONSTRUCTION, LLC THIRD-PARTY PLAINTIFF v. JOEL LEE, individually and as the agent/member of LEE SWIMMING POOLS, LLC; ISLAND VIEW POOLS, LLC; and JOEL BUCHANAN, individually and as the agent/member of ISLAND VIEW POOLS, LLC THIRD-PARTY DEFENDANTS |
| Court | U.S. District Court — Southern District of Mississippi |
FINDINGS OF FACT AND CONCLUSIONS OF LAW UPON ISSUES TRIED WITHOUT A JURY PURSUANT TO FED. R. CIV. P. 52
THIS CAUSE came before the Court on March 22 and 23 2021, for trial without a jury pursuant to Fed.R.Civ.P. 52. This is a diversity case requiring the application of the law of the State of Mississippi. See Erie Railroad Co. v Tompkins, 304 U.S. 64 (1938). After careful consideration of the testimony presented at trial and the exhibits introduced into evidence, the Court finds that Lee Swimming Pools, LLC (“Lee Swimming Pools”) has proven its breach of contract cause of action against Bay Pool Company Construction, LLC (“BPCC”). The Court further finds that Lee Swimming Pools is entitled to a judgment against BPCC in the amount of $96, 988.10, which represents the undisputed remaining balance on the contract purchase price. By a preponderance of the admissible evidence, the parties' remaining claims are unproven and will be dismissed with prejudice.
Plaintiff Lee Swimming Pools, sues Defendant, BPCC, for the remaining balance on a $200, 000 Asset Purchase Agreement. The seller Lee Swimming Pools, was formed by owner Joel Lee and originally called Bay Pool Company, LLC (“Bay Pool Company”). In March 2016, Lee sold the assets of Bay Pool Company to Adam Landrum, who ran the business as Bay Pool Company Construction, LLC. The contract provided for a $50, 000 down payment, with the remaining $150, 000 to be paid by monthly payments calculated from monthly sales and supplier rewards. (Agmt., § 18, Ex. J-1).
On February 10, 2018, Lee Swimming Pools commenced this action, alleging that BPCC stopped making the required payments in August 2017, when the outstanding balance was $96, 988.10. Lee Swimming Pools' remaining claims against BPCC are for breach of contract and breach of the implied duty of good faith and fair dealing.
On May 31, 2018, BPCC answered and counterclaimed for damages allegedly sustained by Lee Swimming Pool's separate violation of the Agreement. The counterclaim invokes a “restrictive covenant” contained in the Agreement, which is a quasi-noncompete clause restricting Lee from building or maintaining pools in Mississippi and Louisiana. BPCC alleges that Lee Swimming Pools violated this covenant and that it is excused from paying the remaining balance of the contract purchase price due to the alleged material breach. As such, BPCC's remaining claims against Lee Swimming Pools are for breach of contract and breach of the implied duty of good faith and fair dealing.
Finally, by Third-Party Complaint, BPCC seeks damages from Third-Party Defendants Joel Lee, individually and as the agent/member of Lee Swimming Pools, LLC, Island View Pools, LLC (“Island View”), and Joel Buchanan, individually and as the agent/member of Island View. BPCC accuses these parties of tortiously interfering with its contract with Lee Swimming Pools and inducing Lee to violate the restrictive covenant.
Lee Swimming Pools and BPCC have asserted claims for breach of contract against each other. “The Mississippi Supreme Court has stated that a breach of contract case has two elements: (1) ‘the existence of a valid and binding contract,' and (2) a showing ‘that the defendant has broken, or breached it.'” Winters v. Feng, --- So.3d ---, 2020 WL 6582066, at *5 (Miss. Ct. App. Nov. 10, 2020) (quoting Maness v. K&A Enters. of Miss. LLC, 250 So.3d 402, 414 (Miss. 2018)). There is no dispute in this case that there is a valid and binding contract[1]; the issue is thereby simplified to whether the contract was breached and by whom.
As for the question of BPCC's breach, the Court has previously decided that “[t]here is no dispute that BPCC did not pay the full amount due under the Agreement, and thus no question that it breached the Agreement.” Lee Swimming Pools, LLC v. Bay Pool Co. Constr., No. 1:18CV118, 2020 WL 2063865, at *3 (S.D.Miss. Apr. 29, 2020). Further, the parties stipulated that BPCC “has paid $103, 011.90 of the total contract price, ” “has not made any payments toward the contract balance since August 1, 2017, and, thus, has breached the agreement.” (Pretr. Order, ¶¶ 9(a)(2)-(3), ECF No. 132). However, BPCC responds that it is excused from satisfaction of the purchase price by Lee Swimming Pool's own material breach of the Agreement. Hence, the ultimate resolution of these claims turns on whether Lee Swimming Pools breached the Agreement, and, if so, whether that breach was material.
“The termination of a contract is only permitted if there is a material breach.” Winters, 2020 WL 6582066, at *5 (citing Watkins Dev. LLC v. Jackson Redev. Auth., 283 So.3d 170, 174-75 (Miss. 2019)); see also Favre Prop. Mgmt., LLC v. Cinque Bambini, 863 So.2d 1037, 1044 (Miss. Ct. App. 2004) (). To determine whether a breach is material, the Court finds the following language pertinent:
A breach is material when there “is a failure to perform a substantial part of the contract or one or more of its essential terms or conditions, or if there is such a breach as substantially defeats its purpose, ” Gulf South Capital Corp. v. Brown, 183 So.2d 802, 805 (Miss. 1966), or when “the breach of the contract is such that upon a reasonable construction of the contract, it is shown that the parties considered the breach as vital to the existence of the contract, ” Matheney v. McClain, 248 Miss. 842, 849, 161 So.2d 516, 520 (1964).
Winters, 2020 WL 6582066, at *5 (quoting Watkins Dev., 283 So.3d at 174-75). UHS-Qualicare, Inc. v. Gulf Coast Comm. Hosp., Inc., 525 So.2d 746, 756 (Miss. 1987).
The Court begins by reading the Agreement. BPCC cites two clauses of the Agreement in accusing Lee Swimming Pools of a material breach. First, BPCC alleges that Lee Swimming Pools violated what it calls a “noncompete clause” located in § 8 of the Agreement. This provision is actually labeled a “Restrictive Covenant” and reads thus:
BPCC contends that Lee Swimming Pools violated this provision by performing pool construction and maintenance services in the restricted area. In the opinion of the Court, the evidence adduced at trial fails to support BPCC's contention. Lee testified that he did not construct or maintain any pool in the states of Mississippi or Louisiana or operate or invest in any pool business. (Tr., Vol. I, 36:2-11). He also testified that he neither invested in nor was affiliated with Island View Pools, the pool construction company of his friend Joel Buchanan. (Id. at 36:9-16). BPCC counters this testimony with various evidence, which will be discussed below.
BPCC first offers evidence of Lee's advertising and referral activity following the sale. Specifically, BPCC points to Lee's private texts to Landrum in late 2016 that he knows “the money that flows from pools” and that he wanted to “take advantage” of activity in the pool business. (See Ex. J-3 at 10). Lee first formed a pool construction and maintenance company called “Bay Pool Company” in 2012. (Tr., Vol. I, 28:4-29:1). After his 2016 sale of those assets to Landrum, who then ran the business as “Bay Pool Company Construction, ” Lee continued to operate a pool construction business under the name “Lee Swimming Pools.” (Id. at 28:3-16). This business described Mobile, Alabama as its “primary build area” (Ex. D-12 at 26), which is outside the restricted area of the Agreement. (Agmt., § 8, Ex. J-1). Per the Agreement (Id.), Lee also continued to run a pool retail store after the sale. (Tr., Vol., I, at 29:2-9).
In March 2017, Landrum accused Lee of advertising Mississippi pools and “jamming out on with Mississippi pools on [his] website.” (Ex. J-3 at 54). The next day, in an email entitled “The Mess, ” Lee acknowledged his advertising in Mississippi, promised to “adjust the website shortly, ” and advised that desiring “web traffic from the area doesn't mean [he's] competing for sure.” (See Ex. D-17). Subsequently, in early summer 2017, Lee Swimming Pools posted a photograph of a recently built pool on its Facebook page, the caption indicating that...
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