Second Ave Museum, LLC v. RDN Heritage, LLC
| Decision Date | 20 September 2021 |
| Docket Number | 3:20-cv-00067 |
| Parties | SECOND AVE MUSEUM, LLC d/b/a THE JOHNNY CASH MUSEUM, Plaintiff/Counter-defendant, v. RDN HERITAGE, LLC, Defendant/Counter-plaintiff. |
| Court | U.S. District Court — Middle District of Tennessee |
Before the court are (1) the Motion for Partial Summary Judgment (“MPSJ”) (Doc. No. 75) filed by defendant/counter-plaintiff RDN Heritage, LLC (“RDN” or “defendant”) and (2) the Rule 41(a) Motion for Voluntary Dismissal (Doc. No. 100) filed by plaintiff/counter-defendant Second Ave Museum, LLC d/b/a The Johnny Cash Museum (“Second Ave” or “plaintiff”).[1] For the reasons set forth herein, both motions will be granted in part and denied in part.
The facts as set forth herein are largely drawn from the defendant's Statement of Undisputed Material Facts (“SUF”) (Doc. No. 69) and exhibits submitted by the defendant and are undisputed for purposes of the MPSJ, as demonstrated by the plaintiff's Response to the SUF (Doc No. 115).
Second Ave, a Tennessee limited liability company with its principal place of business in Nashville, operates The Johnny Cash Museum (“Museum”), which is officially authorized by Johnny Cash's estate (the “Cash Estate”). Bill Miller, a Nashville businessman, is the managing member of Second Ave. (Compl., Doc. No. 1 ¶¶ 1, 6; Answer Doc. No. 12 ¶¶ 1, 6.) RDN, a Wisconsin non-profit limited liability company, was formed by Robert Nueske formerly the owner of Nueske's Meat Products, Inc. (“Nueske's Meats”), solely for the purpose of providing financing for Second Ave and the Museum. (Doc. No. 1 ¶¶ 1-2; Doc. No. 12 ¶¶ 1-2.) This dispute involves the contractual relationship between Second Ave and RDN related to the formation of, and financing for, the Museum.
In an email dated March 5, 2011, Bill Miller discussed with Nueske his long-time dream of opening a museum dedicated to honoring Johnny Cash and, for the first time, directly proposed that Nueske “sponsor” the venture. (Doc. No. 70-10.) Specifically, Miller proposed that Nueske “contribute $50, 000 to build out and guarantee the lease” of a location in downtown Nashville that Miller had already identified as suitable and available, with rent estimated to be “about $6500 per month.” (Doc. No. 70-10, at 6.) This contribution would make Nueske “the primary sponsor of the museum, ” and, as such, Nueske (or, presumably, his business, Nueske's Meats) would “receive all sponsorship benefits with signage, logo on all materials related to the museum, logo on all advertising as well as presence on the museum web site.” (Id.) In addition, Miller envisioned that Nueske would receive “10% of the gross of all receipts from museum admission tickets and gift shop sales, ” which Miller anticipated could potentially “totally offset or even wipe out your sponsorship costs, or put you in a profit position.” (Id.) Miller himself intended to “personally invest the balance required for the build out of the space as well as to capitalize the opening inventory for the gift shop.” (Id.) In response to questions from Nueske, a subsequent email from Miller laid out the projected costs of operation, markups on merchandise, and “very conservatively” estimated annual gross revenue of a minimum of $500, 000 in admission ticket sales and an additional $600, 000 in merchandise sales. (Id. at 2.) Miller indicated that the agent for the property would be in touch with him in a few days and that he was trying to put together a proposal for the property owner. (Id. at 6.) Despite the projected success of the venture, Miller had not been able to secure reasonable bank financing for the project.
Miller sent Nueske the first draft of the original Sponsorship Agreement on January 29, 2012. (Doc. No. 37-10.) In this draft of the Sponsorship Agreement, Second Ave and Nueske personally, as “Sponsor, ” are identified as the parties to the contract, and its terms largely mirrored those set forth in Miller's March 5, 2011 email. The draft also included a provision stating that “nothing in this Agreement shall be construed as creating a joint venture, partnership, franchise, agency, employer/employee, or similar relationship between the Parties.” (Doc. No. 37-10, at 4.) In the email accompanying the draft, Miller requested that Nueske “review and execute” the document “at [his] earliest convenience.” (Id. at 2.)
Even prior to Miller's sending the draft to Nueske, Miller and Nueske had apparently had a conversation about involving attorneys in the deal. In an email to Nueske dated January 18, 2012, Miller reiterated that he was not “crazy about attorneys, ” even though they are sometimes “necessary, ” in part because he had seen “lawyers kill deals.” (Doc. No. 38-7.) “[I]nject[ing]” a lawyer “into the deal at this late hour” “seem[ed] and fe[lt] very onerous (and scary)” to him. (Id.)
Regardless, rather than signing the draft agreement sent to him by Miller, Nueske forwarded it to his attorney, Herbert Liebmann. Liebmann, upon receiving the draft agreement from Nueske, emailed Miller a revised draft. Liebmann summarized the revisions he proposed in an email to Miller accompanying the revised draft. Among other proposed changes, Liebmann noted that the revisions included: (1) naming RDN, an entity to be formed by Nueske solely for the purpose of financing the Museum, as a party to the Agreement, rather than Nueske himself, and making Nueske's Meats, a separate entity, the express beneficiary of the sponsorship rights; (2) incorporating language to “protect [Nueske] from potentially being in a position where he had all of the down side risk without any upside benefit, ” such as, for example, if “things went swimmingly well and [Miller] were to buy the building and end the lease after a couple of years, ” in anticipation of which Liebmann “built in some standards for how long the Benefits to the Sponsor will run”; and (3) changing the revenue structure to a “stepped percentage of the gross revenues.” (Doc. No. 38-14, at 3 ().) Absolutely nothing in the language of this email remotely suggests that Liebmann was operating as anything other than an advocate for Nueske alone.
Miller responded by email that he had “reviewed the sponsorship agreement, as amended, and will agree to the terms and conditions as proposed therein, ” with some “exceptions” and additional revisions upon which he insisted. (Id. at 2 ().) Regarding the “stepped percentage, ” he stated:
Please take notice that Bob [Nueske] and I had previously agreed to a 10% of gross revenues as compensation to Bob. However, in light of my great affection for Bob and in recognition of my desire to see to it that he is adequately rewarded for the faith he had placed in us, I will agree to the 50% increase in the first $600, 000 of gross annual revenue, as well as the 20% increase in the next $200, 000 of revenue. [This is a] concession which should be recognized by everyone [as such].
(Id.) In addition, he proposed a revision of the language regarding his personal guarantee of the Agreement and demanded that certain language requiring RDN's approval of plans and cost estimates be stricken. (Id.) He did not object to the proposal to extend the term of the sponsorship. Moreover, Miller was clearly aware that the revisions proposed by Liebmann were less favorable to him (and more favorable to Nueske) than Miller's originally proposed terms. The language of his response indicates that Miller understood that Liebmann was functioning as Nueske's attorney and not as an attorney for both him and Nueske in this transaction.
Miller and Nueske eventually finalized and signed the original Sponsorship Agreement, effective April 12, 2012 (“2012 Agreement”). (Doc. No. 70-1.) As Miller had originally proposed to Nueske, the 2012 Agreement required RDN to (1) provide the plaintiff with $50, 000 toward the build-out of the Museum; and (2) make all rent payments on the Museum space for a period of five years, irrespective of the Museum's financial performance. Nueske personally agreed to guarantee RDN's performance under the 2012 Agreement. In return, regarding the “stepped percentages, ” rather than 10% of all gross revenues, as Miller had originally proposed, the finalized 2012 Agreement provided that RDN, during the first five years of the Agreement, would be entitled to 15% of the first $600, 000 in annual gross revenue, 12% of the next $200, 000 in annual gross revenue, and 10% of gross annual revenues in excess of $800, 000. (Doc. No. 70-1, at 3 ¶ 2(F).) In addition, RDN would receive placement of Nueske's Meats branding on signage and brochures for at least five years. The 2012 Agreement had an initial five-year term but provided RDN with the option of extending it an additional five years.
On the same day, Second Ave and RDN jointly as “Tenant” entered into a lease (the “2012 Lease”) with the owner of the building in which the Museum would be housed, Ritzen Properties II, LLC. (Doc. No. 12-3.) The 2012 Lease gave “Tenant, or either entity comprising Tenant, or a nominee owned by either entity comprising Tenant, ” an exclusive option to purchase the building” (id. at 25), and Nueske, individually, agreed to personally guarantee payments under the 2012 Lease (id. at 3). In addition, Nueske signed a Personal Guaranty guarantying RDN's performance under the 2012 Agreement, and Miller signed a Personal Guaranty, guarantying Second Ave's performance under the 2012 Agreement. (Doc. No. 12-2, at 6-7.)
The parties apparently operated under the 2012 Agreement...
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