Mitchell Co., Inc. v. Campus
| Decision Date | 05 November 2009 |
| Docket Number | Civil Action No. 07-0177-KD-C. |
| Citation | 672 F.Supp.2d 1217 |
| Parties | The MITCHELL CO., INC., Plaintiff, v. Joseph J. CAMPUS III, and James Y. Young, Defendants. |
| Court | U.S. District Court — Southern District of Alabama |
David J. Middlebrooks, Lehr Middle-brooks & Vreeland, P.C., Donald R. James, Jr., William J. Baxley, Charles A. Dauphin, David McKnight, Baxley, Dillard, Dauphin & McKnight, Birmingham, AL, Walter M. Cook, Jr., Arthur Grady Williams, IV, Bradley Robert Sanders, Jr., William E. Shreve, Jr., Lyons, Pipes & Cook, Mobile, AL, for Plaintiff.
Alan C. Christian, Johnstone, Adams, Bailey, Gordon & Harris, Mary Margaret Bailey, Michael E. Upchurch, Robert J. Mullican, W. Austin Mulherin, III, Frazer, Greene, Upchurch & Baker LLC, Mobile, AL, Alison P. Danacean, James H. Cox, M. Derek Harris, Atlanta, GA, for Defendants.
This matter is before the Court on Plaintiff The Mitchell Co., Inc.'s Motion for Partial Summary Judgment (Docs. 235-238), Defendant James A. Young's Motion for Summary Judgment (Docs. 239-241), Defendant Joseph J. Campus, III's Motion for Partial Summary Judgment (Docs. 242-245) and the responses and replies thereto (Docs. 248-250, 252-254, 263-266, 271-273); and Defendant Young's objection (Doc. 287) and motion to strike (Doc. 276).1
Plaintiff The Mitchell Company, Inc. ("TMC") initiated this action on March 7, 2007, alleging various claims against Defendant Joseph J. Campus, III ("Campus") relating to a series of real estate transactions in which TMC alleges that Campus conspired with others to fraudulently flip real estate and sell it to TMC for a substantial profit. (Doc. 1). Campus filed an answer to the complaint, along with a counterclaim against TMC, on April 9, 2007. (Doc. 4). TMC filed a first amended complaint adding as defendants, James Young ("Young") and Edsel Matthews ("Matthews"). (Doc. 29). The amended complaint alleges, in relevant part, that Campus obtained unlawful profits by having limited liability companies that Campus and/or Young owned and controlled, acquire real estate that Campus then recommended to TMC, that the LLCs then sold to TMC, at a significantly higher price than that which Campus and Young's LLCs purchased it. (Id.) TMC alleges that Young participated in this scheme and profited from it. (Id.)
On September 18, 2007, Campus, Young and Matthews filed separate motions to dismiss the amended complaint. (Docs. 45, 46, 48, 49, 50). The Court granted the motion to dismiss the claims of conversion and unjust enrichment but otherwise denied Campus and Young's respective motions to dismiss. (Doc. 75).
On January 28, 2008, TMC filed a Second Amended Complaint alleging that the "Defendants are persons who through unlawful and wrongful acts have profited from or are profiting from business activities in which they, in general, had a conflict of interest, misrepresented and/or suppressed information, failed to act in the best interest" of TMC, "violated their duties of due care, loyalty and good faith or otherwise conspired with each other to cause injury" to TMC "for their own profit and gain." (Doc. 79 at 1). The second amended complaint alleges: Count One-intentional, willful and reckless fraud; Count Two-negligent or mistaken fraud; Count Three-suppression; Count Four-breach of fiduciary duty; Count Five-negligence; Count Six-wantonness; Count Seven-common law civil conspiracy; Count Eight-conversion; Count Nine-officer and director's liability; Count Ten-professional negligence of counsel; Count Eleven-violation of Alabama Trade Secrets Act; Count Twelve-disgorgement; and Count Thirteen-unjust enrichment. (Id.)
On February 11, 2008, Young filed a motion to dismiss. (Doc. 84, 85). The Court reiterated the dismissal of the claims for conversion and unjust enrichment but otherwise denied Young's motion to dismiss. (Doc. 165). On December 22, 2008, Mathews filed a motion to dismiss which was granted. (Doc. 192). TMC recently dismissed its claim for misappropriation (Count Eleven). (Docs. 259, 267).
Plaintiff, The Mitchell Company, Inc. ("TMC"), is an Alabama corporation with its principal place of business in Mobile, Alabama, engaged in the development of single-family home projects, apartments, condominiums, office buildings and shopping centers in Alabama, Florida and Mississippi. (Doc. 29 at ¶ 16; Doc. 238-2 (Dep. C.Stefan at 11); Doc. 238-3). TMC Board Members included President and CEO John B. Saint ("Saint"), Don Kelly ("Kelly"), Chester J. Stefan ("Stefan") and CFO Lindsay C. Boney, III ("Boney"). (Doc. 238-4 (Dep. J.Campus at 143)). TMC is owned by JDC Corporation, which is owned by TMC officers and board members Saint, Kelly and Stefan. (Doc. 245-9 (Dep. J. Saint at 15-16)). Saint, Stefan, and Kelly have ownership interests in other related and/or affiliated companies involved in various aspects of the real estate development business and some of which were established to do business with TMC or provide TMC board members and/or owners with investment opportunities.3 (Id. at 19, 25-36, 41, 212-213).
Defendant Joseph J. Campus, III ("Campus") was an officer and a board member of TMC, Executive Vice-President and Head of the Single-Family Division at TMC, and is a citizen of the State of Florida. (Doc. 1 at 2; Doc. 238-4) (Dep. J.Campus at 142, 144; Doc. 254-2 (Aff. Campus at ¶2)). He was employed by TMC from 1990 through March 7, 2007. (Doc. 254-2 (Aff. Campus at ¶ 2)). As part of his job, he did not have authority to make decisions to purchase property for TMC without the approval of the TMC board or management. (Doc. 238-4 (Dep. J. Campus at 142-143)). Part of his compensation from TMC came in the form of a bonus. (Doc. 245-9 (Dep. J. Saint at 45)).
Defendant James A. Young ("Young") is a citizen and resident of Florida. (Doc. 1 at ¶ 19; Doc. 73 at ¶ 9). Young was in the real estate business as an investor; he provided the financing for the projects that Campus was involved with in this case. (Id.) See also Doc. 238-8 (Dep. J.Young at 30-34, 45); (Doc. 238-9). Campus has known Young since the late 1980s: "[w]e're friends and we've been involved in real estate transactions together[]" as business partners. (Doc. 238-4 (Dep. J.Campus at 68-69)).
Paul Saba ("Saba") was the Pensacola, Florida City Manager for TMC for single-family homes and the Senior Vice-President of TMC from 2004-2008. (Doc. 238-2 (Dep. C.Stefan at 39); Doc. 238-10 (Dep. D.Kelly at 16); Doc. 254-3 (Aff. Saba)). Lindsay C. Boney, III ("Boney") is the Chief Financial Officer (since August 2001) of TMC. (Doc. 238-5; Doc. 273-2 (Dep. Boney at 4)). Edsel F. Matthews, Esq., ("Matthews") a dismissed party-defendant, is an attorney licensed to practice law in the State of Florida; he represented TMC in closings on the property transactions at issue in this case. (Doc. 238-17).
The limited liability companies involving Campus and/or Young and which were part of the property transactions at issue are: Bagdad 80, LLC (with Campus and Young as members); Three Seas, LLC (Campus and one of his sons as members); JAY Consulting, LLC (with Young as a member); Stapleton 70, LLC (with Young as a member); Pond Creek 50, LLC (of which Three Seas, LLC is a 33.3% member with Young, Harry Bell and Allan Bell as members); and Loxley 16, LLC (with Young as a member). (Doc. 238-4 (Dep. J.Campus at 263-264, 351); Doc. 238-8 (Dep. J.Young at 79); Doc. 238-15; Doc. 238-19; Doc. 238-22; Doc. 245-19 at 15-21; Doc. 245-20; Doc. 245-21 at 8-9; Doc. 245-22 at 5; Doc. 249-15 (Aff. J.Young at ¶¶ 2, 5)).
This lawsuit arises out of real estate transactions in which TMC alleges that Young and Campus conspired to fraudulently flip real estate to TMC at a substantial profit. The record reveals that in 2005, Campus received $257,605.35 from JAY Consulting, LLC, and that in 2006, Three Seas, LLC received $293,636.42 from JAY Consulting, LLC. (Doc. 238-26; Doc. 238-27). Campus testified that he received approximately $1,600,000 as a result of these transactions. (Doc. 238-4 (Dep. J.Campus at 470-471)). TMC claims damages totaling $26,780,822 based upon $13,390,411 in "lost opportunity costs," $11,649,745 in "total property damage," and $1,740,666 in "due diligence" damages. (Doc. 245-18 at 6).
The process for deciding whether TMC would purchase a property in the single-family division included gathering information from the city managers and viewing the property. (Doc. 238-10 (Dep. D.Kelly at 11-12)). TMC board members tried to view the property with employees in the single-family home division in that area. (Id. at 11-12). TMC's practice and custom is for the board members to make the final decision on any property purchases: the board would "normally receive the presentation from the city manger with and through Joe [Campus] to the board, and based on those recommendations, we would make the decision to—to purchase the land." (Id. at 15-16).
TMC's city managers had primary responsibility for performing the due diligence on the properties to present to TMC for purchase as well as compiling the information necessary to present the properties to the TMC Board. (Doc. 254-3 (Aff. Saba at ¶¶ 3-6, 10)). Presentations about the properties were given by the city managers during the property tours. (Id. at ¶¶ 6, 10). Specifically, the City Manager and TMC Senior Vice-President Saba was crucial to this process. "He [Saba] was responsible for everything[]" according to TMC board member Stefan. (Doc. 238-2 (Dep. C. Stefan at 39)). Saba transmitted the information about properties to consider for purchase through Campus to the TMC board. (Doc. 238-10 (Dep. D.Kelly at 17)). According to Saba, "I was responsible for identifying...
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