Salek v. Reload, Inc.
| Decision Date | 30 September 2014 |
| Docket Number | No. 11-2585-SAC,11-2585-SAC |
| Parties | CHRIS L. SALEK, Plaintiff, v. RELOAD, INC., RELOAD EXPRESS, INC., WATCO MECHANICAL CORP., WATCO TRANSLOADING LLC, and PHILLIP A. PENNER, Defendants. |
| Court | U.S. District Court — District of Kansas |
The case comes before the court on the following dispositive motions: the plaintiff Chris Salek's motion for summary judgment (Dk. 116), the defendant Phillip Penner's motion for summary judgment (Dk. 119), and the remaining defendants' motion for summary judgment (Dk. 121). As the matters have been fully and finally briefed, the court files this order as its decision on these pending motions.
A quick glance of the parties' extensive memoranda, the voluminous exhibits, and the numerous claims and defenses certainly leaves the impression about the complexity of the legal and factual issues here. Not only are the facts somewhat involved and layered, what the parties seek to infer and argue from them further complicates the case. This has been fully played out in how the parties briefed these summary judgment proceedings.Instead of simply disputing and defending their statement of facts with proper citations of the summary judgment evidentiary record, the parties spent inordinate effort arguing over what inferences and conclusions to draw from the evidentiary record. Consequently, the court's work on these motions has been extended and frustrated by the repetitive presentation of arguments. For purposes of this order, the court will present its summary of the uncontroverted facts and then discuss the respective claims focusing principally on the factual disputes relevant and critical to the summary judgment rulings.
The court recognizes the delay in issuing this decision has been unusual, as have been the parties' numerous, lengthy and contentious filings, the voluminous exhibits, the evolution of the plaintiff's numerous claims, and the repeated and varied presentations of factually disputed matters. The longest, and most recent, delay is attributable to expansive discovery produced by some of the defendants in response to a discovery order entered approximately one year ago. Because of the size of the additional discovery and the anticipation that the parties may find some evidence relevant to the summary judgment proceedings which would need to be incorporated by supplementary briefing, the court suspended its work on these motions and turned its attention to other matters. In the meantime, the parties appear to have processed the recent discovery materials, as capably guided by the magistrate judge, and have filed theirsupplementary pleadings as permitted by the district court. With the motions now ready for decision, the court has returned to these motions as permitted by its schedule.
SUMMARY JUDGMENT STANDARDS
Rule 56 authorizes a court to "grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is material if it would affect the outcome of a claim or defense under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "[T]he dispute about a material fact is 'genuine,' . . ., if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
On summary judgment, the initial burden is with the movant to point out the portions of the record which show that the movant is entitled to judgment as a matter of law. Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir. 1992), cert. denied, 506 U.S. 1013 (1992). Instead of disproving a claim or defense, the movant need only show "a lack of evidence" on an essential element. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998). If the movant meets that burden, the non-movant must come forward with specific facts based on admissible evidence from which a rational fact finder could find in the non-movant's favor. Id. The non-movant's "burden to respond arises only if the" movantmeets its initial burden of production. Neal v. Lewis, 414 F.3d 1244, 1248 (10th Cir. 2005) (citation omitted). The essential inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether the evidence is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, 477 U.S. at 251-52. Put another way, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); See Pinkerton v. Colorado Dept. of Transp., 563 F.3d 1052, 1058 (10th Cir. 2009).
In applying this standard, all inferences arising from the record must be drawn in favor of the nonmovant. Stinnett v. Safeway, Inc., 337 F.3d 1213, 1216 (10th Cir. 2003). The Supreme Court has made it clear that:
Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for a directed verdict. The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.
Anderson, 477 U.S. at 255 (citation omitted). Thus, district courts are to tread cautiously in summary judgment proceedings. Id. Nevertheless, the court will expect that the party defending against summary judgment will "establish, at a minimum, 'an inference of the existence of each element essential to the case.'" Croy v. COBE Laboratories, Inc., 345 F.3d 1199,1201 (10th Cir.2003) (quoting Hulsey v. Kmart, Inc., 43 F.3d 555, 557 (10th Cir.1994)).
SUMMARY STATEMENT OF FACTS1
The defendants Reload, Inc. ("Reload") and its affiliate Reload Express, Inc. ("Reload Express" when referred to separately but otherwise is incorporated in the joint reference of "Reload") started as a small company in LaCrosse, Wisconsin, but grew over the next 25 years. Reload operated a rail-centric transloading business that served destination customers by transloading freight shipped by rail onto semi-truck trailers for final delivery to the customers not directly served by rail. Being a customized service, a transloading business can include handling and transporting various freight, such as, lumber, roofing products, papers, steel, auto parts, dry goods, canned goods, chemicals, petroleum, and other products. Reload's business had not expanded into transloading such hazardous materials as ethanol or crude oil. Reload also provided warehousing, inventory management, trucking, and single bill rail logistics. For the 12 years before it was sold, Reload was equally owned by the plaintiff Chris Salek and the defendant Phillip Penner.
The defendant Watco Mechanical Corp. ("Watco") is one of the wholly owned subsidiaries of Watco Companies, both of which are located in Pittsburg, Kansas. Watco and its related entities own and operate shortlinerailroads and provide international transportation services. Its three divisions are transportation--shortline railroads and industrial switching, mechanical--major mechanical repair facilities across the country, and terminal and port services--warehouses, ports and transloading facilities. In the middle of 2007, wanting to expand into transloading, Watco hired Kevin Goins who recommended Watco's acquisition of Reload.
In July of 2007, negotiations for the sale of Reload to Watco began with Salek and Penner wanting $12,000,000 or one times Reload's annual sales and with Watco wanting to pay a multiple of Reload's sustainable cash flow or EBITDA" ("Earnings Before Interest Taxes Depreciation Amortization"). A couple months later, the parties executed a non-binding letter of intent that called for a purchase price of $12,000,000 with Watco paying this price through a one-time cash payment equal to 4 times Reload's "sustainable EBITDA" and if the cash payment was less than the purchase price then the balance would be paid in common stock. Counsel for Watco sent a first draft of the stock purchase agreement ("SPA") on October 15, 2007. Because the agreement contemplated Salek and Penner keeping some equity in the company, the draft did not state a purchase price but said the parties had agreed on an "Enterprise Value" of $12,000,000 and the purchase price would be equal to the multiplied sustainable EBITDA plus the equity given to Salek and Penner.
On October 23, 2007, the plaintiff Salek sent an email to Watco'sCEO Rick Webb that included the following:
We need to make sure that the growth in reloads [sic] business segment occurs in reload and not in another subsidiary that Phil and I are not shareholders in. This could be accomplished by describing our market area (transloading is the best description we could think of) and then have Watco and its subsidiaries and affiliates agree that they are not going to get in that market or service line.
(Dk. 123, Ex. L). At a meeting in Pittsburgh, Kansas, on October 26, 2007, there was discussion of this topic. The cited testimony presents a factual dispute over what CEO Webb told Salek at that time about all transloading business going under Reload. Salek testified Webb promised that all growth in the transloading business would be under Reload. Webb testified that he did not make any such representations in the context of an agreement with earn out provisions.
In an email entitled, "New deal," and dated November 29, 2007, Salek wrote Penner laying out some of the terms for selling "100% of Company," namely, "Cash price--$9,000,000" with an "Earn out--$3,000,000 over 3 years or longer based on $2,250,000 over 3 years with 1 Million cap" and a "3 year employee agreement co inside (sic) with earn out At our requested salary and benefits." (Dk. 123, Ex. P). On December 26, 2007, Salek sent an email, "This should be it," that highlighted a...
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