McClure v. Leafe
| Decision Date | 10 September 2019 |
| Docket Number | Civil Case No. 17-13106 |
| Parties | MICHAEL MCCLURE, Plaintiff, v. ANDREW LEAFE, JAMES MACKIN, CHRISTOPHER SMITH, AND CURAYTOR LLC, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Honorable Linda V. Parker
This lawsuit arises from conduct related to several contractual agreements, two mergers, and Defendants' cash offer to Plaintiff, who at one point held a 10 percent membership interest in Defendant company, Curaytor LLC. In an Opinion and Order entered on September 27, 2018, this Court granted in part and denied in part Defendants' Motion to Dismiss Plaintiff's First Amended Complaint. (ECF No. 31.) Presently before the Court are two motions for reconsideration of the Court's Opinion and Order, one filed by Plaintiff and the other by Defendants on October 11, 2018. (ECF Nos. 35, 36). For the reasons that follow, the Court denies both motions.
Local Rule 7.1 provides the following standard of review for motions for reconsideration:
Generally, and without restricting the court's discretion, the court will not grant motions for rehearing or reconsideration that merely present the same issues ruled upon by the court, either expressly or by reasonable implication. The movant must not only demonstrate a palpable defect by which the court and the parties and other persons entitled to be heard on the motion have been misled but also show that correcting the defect will result in a different disposition of the case.
E.D. Mich. LR 7.1(h)(3). Palpable defects are those which are "obvious, clear, unmistakable, manifest or plain." Mich. Dep't of Treasury v. Michalec, 181 F. Supp. 2d 731, 734 (E.D. Mich. 2002). "It is an exception to the norm for the Court to grant a motion for reconsideration." Maiberger v. City of Livonia, 724 F. Supp. 2d 759, 780 (E.D. Mich. 2010). "[A] motion for reconsideration is not properly used as a vehicle to re-hash old arguments or to advance positions that could have been argued earlier but were not." Smith ex rel. Smith v. Mount Pleasant Pub. Sch., 298 F. Supp. 2d 636, 637 (E.D. Mich. 2003) (citing Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998)).
Plaintiff seeks reconsideration of the Court's dismissal of Count VIII (Breach of Fiduciary Duties - Michigan Law), Count X (Violation of MCL § 450.4515 - Michigan Law: Oppression of Minority Member), Count IX (Breachof Fiduciary Duties - Delaware Law), and Count III (Breach of Contract - Michigan Law: Unlawful Merger of Frugyl into Curaytor Delaware). Although electing not to address in detail the arguments made in Plaintiff's motion for reconsideration,1 the Court fully reviewed the arguments and finds that they do not demonstrate palpable defects in the Court's Opinion and Order. Rather—to be plain—Plaintiff's motion amounts to a patchy tapestry of old arguments, new theories, and mere disagreements with the Court's conclusions. For the reasons stated in its September 27, 2018 Opinion and Order, the Court denies Plaintiff's motion for reconsideration with respect to the counts at issue—specifically, Counts III, VIII, IX, and X.
Plaintiff alternatively requests leave to amend if the Court finds the facts of these claims were not sufficiently pled. (ECF No. 35 at Pg. ID 785.) Because amendment would be futile, Foman v. Davis, 371 U.S. 178, 182 (1962), the Court denies Plaintiff's request.
Defendants seek reconsideration of the Court's decision not to dismiss Count II (Breach of Contract - Delaware Law: Dilution of McClure's Ownership Interest) of Plaintiff's First Amended Complaint. The Court declined to dismiss the count because, accepting as true Plaintiff's allegations that Curaytor LLC (i) withheld distributions; (ii) withheld tax and financial documents; and (iii) undervalued his membership interest, Plaintiff sufficiently made out plausible claims for breach of the New Operating Agreement. (ECF No. 31 at Pg. ID 738.)
Defendants argue that the Court's decision contains a palpable defect because "Plaintiff did not identify a specific provision of the New Operating Agreement that was breached by Defendants' supposed failure to pay him what he considers fair value." (ECF No. 36 at Pg. ID 793.) Here, Defendants restate an argument made in their Motion to Dismiss—specifically, that "Plaintiff identifies no provision of the Curaytor Agreement that required Defendants to offer a particular value, or follow any particular process or methodology in connection with the conversion of his interest to cash." (ECF No. 16 at Pg. ID 319.) For the reasons stated in its September 27, 2018 Opinion and Order, the Court did not err.
Nonetheless, the Court will take this opportunity to clarify its findings regarding Count II below. Though Defendants correctly state that "Delaware law requires that a plaintiff identify an express contract provision that the defendant breached to state a claim for breach of contract," (ECF No. 36 at Pg. ID 800(quoting Fundingsland v. OMH Healthedge Holdings, Inc., 329 F. Supp. 3d 1123, 1135 (S.D. Cal. 2018))), Defendants incorrectly state that Plaintiff failed to do so.
When evaluating Plaintiff's claims, the Court construes the pleadings "so as to do justice," Stoudemire v. Michigan Dep't of Corr., 705 F.3d 560, 570 (6th Cir. 2013) (quoting Fed. R. Civ. P. 8(e)), and does "not rely solely on labels in [Plaintiff's] complaint, but . . . probe[s] deeper and examine[s] the substance of the complaint," Minger v. Green, 239 F.3d 793, 799 (6th Cir. 2001). Indeed, "the fundamental tenor of the Rules is one of liberality rather than technicality," Miller v. American Heavy Lift Shipping, 231 F.3d 242, 248 (6th Cir. 2000), and "the label which a plaintiff applies to a pleading does not determine the nature of the cause of action which he states." United States v. Louisville & Nashville R. Co., 221 F.2d 698, 701 (6th Cir. 1955).2
The pleadings, when reviewed generously and as a whole, state and provide fair notice of a claim for breach of the implied covenant of good faith and fair dealing. Specifically, in Paragraph 197, Plaintiff contends that § 3.8 "specifically requires," among other duties, Defendants' "general obligation to honor the implied contractual covenant of good faith and fair dealing." (ECF No. 12 at Pg. ID 250-51.) In full, § 3.8 states that "this [s]ection does not limit or eliminate the implied contractual covenant of good faith and fair dealing or liability for any act or omission that constitutes a bad faith violation of such implied contractual covenant." (ECF No. 36, Ex. A at 5.) Notably, Defendants themselves discuss this specific contractual provision in their Motion to Dismiss, (ECF No. 16 at Pg. ID 323), as well as the alleged inapplicability of the implied covenant in this case. (Id. at 319-20, 320 n.8; see also ECF No. 22 at Pg. ID 611-12, 616-17.) Of course, whether the Court considers this claim as breach of an express provision of the contract or as a breach of the implied covenant of good faith and fair dealing, the analysis is the same.
"[T]o state a claim for breach of the implied covenant, [Plaintiff] 'must allege a specific implied contractual obligation, a breach of that obligation by the defendant, and resulting damage to the plaintiff.'" Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 888 (Del. Ch. 2009) (quoting Fitzgerald v. Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998)). Delaware courts "recognize[] theoccasional necessity of implying contract terms to ensure the parties' reasonable expectations are fulfilled," Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 901 A.2d 106, 116 (Del. 2006) (quoting Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005)), and "will only imply contract terms when the party asserting the implied covenant proves that the other party has acted arbitrarily or unreasonably, thereby frustrating the fruits of the bargain that the asserting party expected," Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010). A party is liable for breaching the implied covenant of good faith and fair dealing when the party's conduct is such that it frustrates the general purpose of the contract "by taking advantage of [its] position to control implementation of the [contract's] terms." Dunlap, 878 A.2d at 442.
A close analysis of the statements alleged by Plaintiff in his First Amended Complaint indicates the presence of these required elements, wherein Defendants, who hired an appraiser—who used his or her own methodology—to determine the fair value of Plaintiff's interest, (ECF No. 16 at Pg. ID 319), committed "errors and/or omissions, . . . all of which severely drove down the alleged value of Curaytor." (ECF No. 12 at Pg. ID 231.) Plaintiff alleges that these errors and/or omissions include:
(Id. at 231-32.) Plaintiff contends that he will be able to demonstrate, "once all of the facts are taken into account, [his] interest is worth several millions of dollars"—not $664,000. (Id. at 232-33.)
Though Defendants argue that "there is no 'gap' to fill" in the New Operating Agreement because "Plaintiff's claims are foreclosed by the plain language of the agreement," (ECF No. 22 at Pg. ID 616-17), Defendants further state that the language governing ...
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