Sudamax Industria E Comercio De Cigarros v. Buttes, Civil Action No. 1:05CV-60-M.

• Decision Date: 26 September 2007
• Docket Number: Civil Action No. 1:05CV-60-M.
• Citation: 516 F.Supp.2d 841
• Court: U.S. District Court — Western District of Kentucky
• Parties: SUDAMAX INDUSTRIA E COMECIO DE CIGARROS, LTDA, et al., Plaintiffs v. BUTTES & ASHES, INC., et al., Defendants v. Tantus Tobacco, LLC, Defendant/Third Party Plaintiff v. YTC US, LLC, Third Party Defendant.

516 F.Supp.2d 841

SUDAMAX INDUSTRIA E COMECIO DE CIGARROS, LTDA, et al., Plaintiffs v. BUTTES & ASHES, INC., et al., Defendants v. Tantus Tobacco, LLC, Defendant/Third Party Plaintiff v. YTC US, LLC, Third Party Defendant.

Civil Action No. 1:05CV-60-M.

United States District Court, W.D. Kentucky, Bowling Green Division.

September 26, 2007.

COPYRIGHT MATERIAL OMITTED

Alex L. Scutchfield, J. Clarke Keller, Stites & Harbison, PLLC, Lexington, KY, Edward M. Joffe, Joelle H. Hervic, Sandler, Travis & Rosenberg, PA, Miami, FL, for Plaintiffs.

Michael M. Hirri, Michael Merrick, R. Kenyon Meyer, Dinsmore & Shohl LLP, Melinda T. Sunderland, Morgan & Pottinger, PSC, Louisville, KY, Robert L. Bertram, Bertram & Wilson, Jamestown, KY, Scott White, Morgan & Pottinger, PSC, Lexington, KY, for Defendants and Defendant/Third Party Plaintiff.

Thomas W. Miller, Michael Joseph Cox, Miller, Griffin & Marks PSC, Lexington, KY, for Third Party Defendant.

MEMORANDUM OPINION AND ORDER

JOSEPH IL MCKINLEY, JR., District Judge.

This matter is before the Court on a motion by Defendants, Buttes & Ashes, Inc., Pilot Importing, LLC, and Brian Cooper, to dismiss the claims against them pursuant to Fed.R.Civ.P. 9(b) and Fed. R.Civ.P. 12(b)(6) [DN 95]. Fully briefed, this matter is ripe for decision.

STANDARD OF REVIEW

Because both parties have presented substantial matters outside of the pleadings, the Court shall treat the motion to dismiss as one for summary judgment and dispose of the motion as provided in Fed.R.Civ.P. 56. See Fed.R.Civ.P. 12(b)(6); Shelby County Health Care Corp. v. Southern Council of Industrial Workers Health and Welfare Trust Fund 203 F.3d 926, 931 (6th Cir.2000). In order to grant a motion for summary judgment, the Court must find that the pleadings, together with the depositions, interrogatories and affidavits, establish that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The moving party bears the initial burden of specifying the basis for its motion and of identifying that portion of the record which demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548 91 L.Ed.2d 265 (1986). Once the moving party satisfies this burden, the nonmoving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The inquiry under Fed.R.Civ.P. 56(c) is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52, 106 S.Ct. 2505 (1986). See also Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir.1989).

Although the Court must review the evidence in the light most favorable to the nonmoving party, the non-moving party is required to do more than simply show that there is some "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The Rule requires the non-moving party to present "specific facts showing there is a genuine issue for trial." Fed. R.Civ.P. 56(e) (emphasis added). Moreover, "[t]he mere existence of a scintilla of evidence in support of the plaintiffs position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson, 477 U.S. at 252, 106 S.Ct. 2505. It is against this standard that the Court reviews the following facts.

BACKGROUND

Plaintiffs, Sudamax Industria e Cornercio de Cigarros, LTDA, et al. ("Sudamax"), brought suit alleging numerous claims against Defendants, Tantus Tobacco, Buttes & Ashes, Pilot Importing, and Brian Cooper. Sudamax is a Brazilian corporation. David Young is a shareholder and the President of Sudamax. Brian Cooper is an individual and general partner of Tantus Tobacco. The record reflects that Cooper, on behalf of Tantus, and David Young, on behalf of Sudamax, entered into an oral contract in the fall of 2002 for Sudamax to manufacture Berkley brand cigarettes for Tantus to distribute to retail sellers. To secure the contract with Sudamax, Tantus agreed to make the necessary escrow payments owed by Sudamax under the 1998 Master Settlement Agreement. Tantus and Sudamax also agreed that the escrow refunds would be returned to Tantus. For reasons already discussed in the Court's previous opinions, the relationship between Tantus and Sudamax failed.

Sudamax subsequently filed this action asserting the following causes of action: permanent injunction requiring Defendants to make escrow payments (Count I); permanent injunction preventing Tantus from selling Berkley or Berley brand cigarettes (Count II); breach of fiduciary duty (Count III); breach of contract for failure to make escrow payments (Count IV); action for the price under KRS § 355.2-709 (Count V); action on open account (Count VI); constructive fraud (Count WI); and fraud and conspiracy to defraud (Count VIII). Plaintiffs agreed to voluntarily dismiss Counts II, VII, and VIII against all of the Defendants [DN 118]. The Court granted summary judgment in favor of Sudamax and against Tantus on the liability portion of the claim for breach of contract for failure to make escrow payments (Count IV) [DN 139]. The Court granted summary judgment in favor of Defendants on the breach of fiduciary duty claim (Count III). [DN 139].

Defendants, Brian Cooper, Buttes & Ashes, and Pilot Importing (collectively "Defendants"), filed this motion for summary judgment arguing that they should be dismissed from all causes of action in the complaint because (1) there is no evidence to show that Buttes & Ashes or Pilot Importing were parties to the oral contract between Sudamax and Tantus (2) there is no evidence to show that Brian Cooper acted in his individual capacity in the negotiations with Sudamax or during the period in`which Tantus purchased product from Sudamax; and (3) the facts do not warrant piercing the corporate veil of Tantus. Defendants arguments shall be addressed in turn.

DISCUSSION

A. Breach of Contract

Counts I, IV, V, and VI of the Complaint set forth various causes of action against not only Tantus, but Cooper, Buttes & Ashes, and Pilot Importing, based on an underlying theory of breach of contract. Counts I and IV assert a claim for an injunction and for breach of contract for failure to make escrow payments. Counts V and VI assert claims for the price of the cigarettes under KRS § 355.2-709 and for payment of the open account. Buttes & Ashes, Pilot Importing, and Cooper argue that these contractual claims should be dismissed because they are not parties to the contract for the sale of Berkley brand cigarettes.

To recover in any action based on breach of contract under Kentucky law, the party seeking to recover must "show the existence and the breach of a contractually imposed duty." Lenning v. Commercial Union Ins. Co., 260 F.3d. 574, 581 (6th Cir.2001); Strong v. Louisville & Nashville R. Co., 240 Ky. 781, 43 S.W.2d 11, 13 (1931). The elements of a breach of contract are: (1) the existence of a valid contract; (2) breach of the contract; and (3) damages or loss to plaintiff. A contract is only binding upon the parties to a contract. Additionally, "Kentucky law insulates agents from liability for acts done within the scope of [their] agency on behalf of a disclosed principal." Summit Petroleum Corp. of Indiana v. Ingersoll-Rand Financial Corp., 909 F.2d 862, 868 (6th Cir.1990)(internal citations omitted).

In the present case, the Court finds that Sudamax failed to set forth sufficient evidence to establish the existence of a valid contract between Plaintiffs and Buttes & Ashes, Pilot Importing, and/or Brian Cooper. The evidence reflects that the Defendants were not parties to the oral contract between Sudamax and Tantus. The deposition testimony of' David Young, President and shareholder of Sudamax, reflects that the oral contract at issue here was negotiated by Young on behalf of Sudamax and Cooper on behalf of Tantus in the Fall of 2002. Specifically, Mr. Young testified as follows:

Q: Let me go back just briefly before we get much more into the production issues. When did, I'd asked you about the role between Samurai and Sudamax, and I told you I'd come back to it and now I want to come back to it and understand. The agreement that you had reached, you were basically negotiating for Sudamax and Mr. Cooper was negotiating for Tantus, correct?

A: Correct.

Q: When Sudamax and Tantus reached their agreement in 2002, when did Samurai enter the picture?

A: I think after we make the agreement, the verbal agreement, then we started.

(David Young Deposition, June 20, 2005, at 74.) Additionally, in July of 2004, Mr. Rubene Genehr, a consultant to Sudamax, sent Tantus an e-mail with a letter drafted by one of Sudamax's lawyers for execution by Mr. Cooper on behalf of Tantus. It appears from the record that Sudamax prepared the letter for Tantus to send back to Sudamax in an effort to convince one of Sudamax's vendors to be more attentive to deadlines.

Based upon the evidence in the record, it is clear that Buttes & Ashes and Pilot Importing are not parties to the oral contract. Furthermore, even though Cooper as President of Tantus negotiated with Sudamax to form the oral contract in dispute in this action, his role as agent in those negotiations does not subject him to liability. As noted above, an agent is not personally liable for acts performed within the scope of his agency on behalf of a disclosed principal. Summit Petroleum, 909 F.2d at 868. Young testified that in the formation of this oral contract he negotiated on behalf of Sudamax and Cooper was negotiating for Tantus. (Young Deposition at 73.)

Plaintiffs argue that summary judgment is not appropriate at...