PNC Bank, Nat'l Ass'n v. Goyette Mech. Co.

• Decision Date: 29 January 2015
• Docket Number: Case No. 14–10527.
• Citation: 88 F.Supp.3d 775
• Parties: PNC BANK, NATIONAL ASSOCIATION, Plaintiff and Counter-defendant, v. GOYETTE MECHANICAL COMPANY, INC., Goyette–West, Inc., Dominic Goyette, and Dominic T. Goyette Trust Dated August 26, 1998, as Amended, Defendants, Cross-plaintiffs, and Cross-defendants, and EL Mechanical, Inc., Defendant, counter-plaintiff, Cross-plaintiff, and Cross-defendant, and Goyette Mechanical Company, Inc., Goyette–West, Inc., Dominic Goyette, and Dominic T. Goyette Trust Dated August 26, 1998, as Amended, Third-party plaintiffs, v. Gerald Peguese, PS Design Systems, LLC, Isaiah Stovall, and Carla Jackson–Stovall, Third-party defendants.
• Court: U.S. District Court — Eastern District of Michigan

88 F.Supp.3d 775

PNC BANK, NATIONAL ASSOCIATION, Plaintiff and Counter-defendant

v.GOYETTE MECHANICAL COMPANY, INC., Goyette–West, Inc., Dominic Goyette, and Dominic T. Goyette Trust Dated August 26, 1998, as Amended, Defendants, Cross-plaintiffs, and Cross-defendantsandEL Mechanical, Inc., Defendant, counter-plaintiff, Cross-plaintiff, and Cross-defendant

and

Goyette Mechanical Company, Inc., Goyette–West, Inc., Dominic Goyette, and Dominic T. Goyette Trust Dated August 26, 1998, as Amended, Third-party plaintiffs

v.Gerald Peguese, PS Design Systems, LLC, Isaiah Stovall, and Carla Jackson–Stovall, Third-party defendants.

Case No. 14–10527.

United States District Court, E.D. Michigan, Southern Division.

Signed Jan. 29, 2015.

Matthew J. Boettcher, Patrick C. Lannen, Plunkett & Cooney, Bloomfield Hills, MI, for Plaintiff and Counter-defendant.

Marc A. Goldman, Marc A. Goldman Assoc., Farmington Hills, MI, Chris M. Parfitt, Timothy P. Dugan, Deneweth, Dugan, Troy, MI, for Defendant, counter-plaintiff, Cross-plaintiff, and Cross-defendant.

Alan D. Penskar, Paul J. Goyette, Law Offices of Harris, Goyette & Winterfield, P.C., Flint, MI, Latoya N. McBean, Mark W. Peyser, Howard & Howard Attorneys, PLLC, Royal Oak, MI, Defendants, Cross-plaintiffs, Cross-defendants and Third-party plaintiffs.

James W. McGinnis, Detroit, MI, for Third-party defendants.

OPINION AND ORDER GRANTING MOTION BY PS DESIGN SYSTEMS, LLC, CARLA JACKSON–STOVALL AND ISAIAH STOVALL TO DISMISS THIRD–PARTY COMPLAINT, AND PERMITTING THIRD–PARTY PLAINTIFFS TO FILE AN AMENDED THIRD–PARTY COMPLAINT

DAVID M. LAWSON, District Judge.

PNC Bank commenced this action for the appointment of a receiver when joint borrowers E.L. Mechanical, Inc., Goyette Mechanical, Inc., and Goyette–West, Inc. fell out of formula on a substantial loan that funded a joint business venture involving the mechanical contracting (plumbing, electrical, heating, ventilation, air conditioning) trades. The Goyette interests joined with E.L. Mechanical, a minority-owned company, to seek mechanical contracting opportunities that might be available to minority-owned businesses. The relationship soured between the Goyette interests and E.L. Mechanical and its owner, Gerald Peguese, and the joint venture was unraveling when the bank stepped in. The dispute then trickled down to the parties in the form of a cross-claim and third-party action, in which Goyette Mechanical and Goyette–West, and loan guarantors Dominic Goyette, and Dominic T. Goyette Trust Dated August 26, 1998 have accused Peguese of diverting assets to another contractor, PS Design Systems, LLC and its “principals,” Carla Jackson–Stovall and Isaiah Stovall. The Goyette parties allege that the PS Design third-party defendants conspired to defraud them of funds paid on invoices for engineering services PS Design allegedly rendered to E.L. Mechanical, and that they were unjustly enriched. Presently before the Court is a motion to dismiss the third-party complaint (or for summary judgment) by PS Design, Jackson–Stovall, and Stovall. They argue that the third-party complaint fails to state a claim of civil conspiracy, the fraud allegations lack the requisite specificity, and the third-party plaintiffs lack standing because they conveyed their rights to profits from the joint venture to another entity, GP Trust. The Court heard oral argument on June 17, 2014, and now concludes that the third-party complaint fails to state claims against Jackson–Stovall, the third-party plaintiffs abandoned their claim for unjust enrichment, and they lack standing to bring their claims against PS Design, Jackson–Stovall, and Stovall. Therefore, the motion to dismiss will be granted.

I.

Goyette Mechanical Company, Inc. is a Michigan corporation that performs mechanical contracting work, including plumbing, heating, HVAC, and electrical installations. Dominic Goyette and two other shareholders—Cherie Parks and Paul Goyette—own and operate Goyette Mechanical. E.L. Mechanical (ELM) is a Michigan corporation, 55 percent of which was owned initially by Peguese. According to the pleadings filed by the several parties in this case, in 2009, Goyette Mechanical partnered with ELM to expand Goyette Mechanical's minority contracting work in Detroit. Under the partnership, Goyette Mechanical provided capital, equipment, tools, vehicles, employees, and administrative and accounting support to ELM. Additionally, Goyette Mechanical collected all of ELM's receivables, managed cash, and paid ELM's obligations, including payroll, subcontractors, suppliers, and loan obligations.

To fund the partnership, plaintiff PNC Bank extended a $6 million line of credit and a $451,107 term loan to defendants ELM, Goyette Mechanical Company, Inc., and Goyette–West, Inc. as joint borrowers. The loan was guaranteed by Dominic Goyette, and Dominic T. Goyette Trust Dated August 26, 1998. PNC Bank made advances on the line of credit between 2012 and 2013. Goyette Mechanical and ELM jointly used the funds to support ELM's operations. Goyette Mechanical paid PNC all of ELM's payment obligations under the line of credit after it collected and processed ELM's accounts receivables and account payables. By January 28, 2014, the indebtedness to PNC Bank totaled $5,636,434.02.

Between 2009 and April 29, 2013, Peguese owned 55 percent of ELM's stock and another Goyette entity, GP Trust, owned 45 percent. The beneficiaries of the GP Trust are Dominic Goyette, Cherie Parks, and Paul Goyette. On April 29, 2013, GP Trust, Peguese, and ELM executed a profit split agreement to help ELM qualify for certain minority business certifications. Under the agreement, GP Trust conveyed all of its stock to Peguese, granting him 100 percent ownership of ELM. As consideration for conveying the stock, Peguese agreed to split profits 50–50 with GP Trust.

The Goyette parties accuse ELM of diverting the partnership's profits and ELM's receivables. For instance, the Goyette parties allege that ELM diverted approximately $1.175 million in funds, including $107,000 in receivables to a Charter One account rather than the established PNC account for payment on the line of credit.

According to the Goyette parties, on January 21, 2014, Peguese terminated ELM's contractual relationship with Goyette Mechanical and stopped sharing ELM's profits in violation of the profit split agreement. The Goyette parties also allege that Peguese fraudulently misrepresented the existence of a contract with third-party defendant PS Design. They allege that PS Design produces website designs and is not licensed to provide engineering services. According to the Goyette parties, neither Isaiah Stovall nor Carla Jackson–Stovall have any formal training or education in the field of engineering. They allege that one invoice that PS Design submitted to Goyette Mechanical included an address at a UPS store in Lexington, Kentucky.

The Goyette parties accuse Peguese of using PS Design to “fraudulently funnel partnership funds,” presumably away from ELM. They allege that ELM paid PS Design $140,000 for engineering services without appropriate documentation or contracts. In December 2013, Peguese also requested that Goyette Mechanical pay $150,000 on an invoice on a $300,000 contract with PS Design in connection with the Chrysler JNAP project. Goyette Mechanical says that it refused to pay PS Design the $150,000 because it did not have any records or information about a pending project involving PS Design or any contract with PS Design. At no time, according to the Goyette parties, did PS Design ever provide any services or employees for the Chrysler JNAP project or any other project involving Goyette Mechanical and ELM.

After PNC Bank commenced the present action, Goyette Mechanical, Goyette–West, and Dominic Goyette and his trust filed a cross-claim against ELM and a third-party complaint against Gerald Peguese, PS Design, Stovall, and Jackson–Stovall alleging breach of contract, fraudulent misrepresentation, civil conspiracy, claim and delivery, conversion, violation of Michigan's anti-bribery statute, and unjust enrichment. The breach of contract, fraudulent misrepresentation, claim and delivery, conversion, and violation of Michigan's anti-bribery statute counts are directed at Gerald Peguese only. The motion to dismiss or for summary judgment presently before the Court was brought by PS Design, Stovall, and Jackson–Stovall only; ELM and Peguese have not joined in the motion.

II.

The purpose of Rule 12(b)(6) is to assess whether the complaint—or third-party complaint in this case—is legally sufficient to allow the case to proceed further, even if all the allegations in the complaint are taken as true. Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir.2001) (citing Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993) ). Under Rule 12(b)(6), the third-party complaint is viewed in the light most favorable to the third-party plaintiffs, the allegations in the complaint are accepted as true, and all reasonable inferences are drawn in favor of the third-party plaintiffs. Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir.2008). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint's factual allegations.” Saglioccolo v. Eagle Ins. Co., 112 F.3d 226, 228–29 (6th Cir.1997) (quoting Columbia Nat'l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995) ). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Tatum, 58 F.3d at 1109 ; Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478, 488 (6th Cir.2009). “To survive a motion to dismiss, [a third-party plaintiff] must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘proba...