Sunseri v. Proctor

• Citation: 461 F.Supp.2d 551
• Decision Date: 03 November 2006
• Docket Number: No. 05-73108.,05-73108.
• Parties: Jack SUNSERI and Consolidated Partners, Ltd., Plaintiffs, v. Phyllis PROCTOR, Conrad Proctor, David Proctor, Phyllis D. Proctor Trust, Anderson-Proctor Limited Partnership, Proctor, L.L.C., and Anderson-Proctor, L.L.C., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

Page 551

461 F.Supp.2d 551

Jack SUNSERI and Consolidated Partners, Ltd., Plaintiffs, v. Phyllis PROCTOR, Conrad Proctor, David Proctor, Phyllis D. Proctor Trust, Anderson-Proctor Limited Partnership, Proctor, L.L.C., and Anderson-Proctor, L.L.C., Defendants.

No. 05-73108.

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

November 3, 2006.

Order Denying Reconsideration November 30, 2006.

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Thomas R. Waelchli, Thomas R. Waelchli Assoc., Troy, MI, for Plaintiffs.

Brian M. Ziff, David A. Breuch, Kevin H. Breck, Clark Hill, Detroit, MI, Alan M. Herman, Wilson, Elser, Miami, FL, for Defendants.

OPINION AND ORDER

ZATKOFF, District Judge.

I. INTRODUCTION

This case is before the Court upon cross-motions for summary judgment. Plaintiffs filed their Motion for Summary Judgment (Docket # 36) on August 4, 2006, and Defendants responded on September 7, 2006. On August 7, 2006, Defendants filed their own Motion for Summary Judgment (Docket # 39), to which Plaintiffs responded on September 7, 2006. Each party has since filed a reply to the other's response, along with hundreds of pages of exhibits. The Court finds that the facts and legal arguments are adequately presented in the parties' papers and the decision process would not be significantly aided by oral argument. Therefore, pursuant to E.D. MICH. LR 7.1(e)(2), it is hereby ORDERED that the motion be resolved on the briefs submitted. For the following reasons, Defendants' Motion for Summary Judgment will be GRANTED IN PART and DENIED IN PART, and Plaintiffs' Motion for Summary Judgment will be DENIED.

II. BACKGROUND

This case arises out of a dispute between alleged partners in a general partnership, and dates back over eighteen years. The basis for the current suit is a judgment in the amount of $5,984,686.01 in Plaintiffs' favor entered on April 8, 2005, by a New York court against Macro Cellular Partners ("Macro"), a general partnership. (See Docket # 45, Ex. 13). Defendants in the current suit were allegedly partners in Macro. Plaintiffs brought the current suit seeking to collect the unsatisfied portion of the New York judgment from Defendants' personal assets. (See Pis.' Compl.).

Macro was formed in 1988 as a general partnership with the purpose of participating in Federal Communications Commission ("FCC") cellular phone lotteries. (See Docket # 45, Ex. 1). Participants in these lotteries sought licenses for cellular airspace in rural markets throughout the country. Macro initially consisted of ten general partners, each owning a 10% interest in the partnership. (See id.). Defendant Conrad Proctor, a Michigan ear, nose and throat doctor who had been involved with other similar ventures, introduced the opportunity to become a partner in Macro to his son David. (See Docket # 36, Ex. A at 27-31, 80, 83). On June 7, 1988, David agreed to become an original partner in Macro, and Conrad paid for David's initial capital contribution. (See Docket # 45, Ex. 1; Docket # 36, Ex. A at 86-88, C). Conrad also paid for many of David's subsequent capital calls to Macro and, to his knowledge, David has not personally paid any money to Macro. (See Docket # 36, Ex. A at 86-88, C). David executed a general power of attorney in favor of Conrad in September 1990, which gave Conrad full authority to act on David's behalf with regard to Macro. (See Docket # 36, Ex. E).

In 1989, Macro won a FCC lottery and was awarded a license for the Ohio-4 RSA Cellular Market. Macro originally intended to develop this market, but agreed to sell its license to Cellular Communications, Inc. ("CCI"), in 1991 for several installments of cash and stock totaling approximately $20 million. Several months prior to the agreement with CCI, on January 2 1991, Conrad Proctor, on David's behalf, drafted a letter to Macro, which David signed, instructing the managing partner to transfer his "interest in the Ohio-4 RSA Cellular Market" to his mother, Phyllis D. Proctor. (See Docket # 36, Ex. A at 132, G). Thereafter, on February 9, 1991, Conrad Proctor again wrote to the managing partner of Macro, this time on Phyllis's behalf, infouning the partner that Phyllis transferred "all rights, title and interest" in the "10% interest in Ohio-4 RSA Cellular Market" to the Phyllis D. Proctor Trust. (See Docket # 36, Ex. A at 132, H). Nearly a year later, on February 3, 1992, Conrad, writing on Phyllis's behalf, instructed the managing partner to transfer Phyllis's "interest in the Ohio-4 RSA Cellular Market to: Phyllis D. Proctor Trust." (See Docket # 36, Ex. A at 132, I). The Proctors have indicated that these transfers were limited to an income interest in the partnership and did not purport to transfer a partnership interest. (See Docket # 45, Ex. 28 at 80, Ex. 7 at 50-51). Furthermore, Phyllis Proctor has stated that she never intended to become a partner in Macro. (See Docket # 45, Ex. 7 at 72-73).

After receiving the interest from David Proctor, Phyllis was identified as a general partner in Macro by several Macro documents. (See Docket # 36, Ex. J, K, N). Specifically, Phyllis signed and seconded partnership resolutions that identify her as a general partner in Macro. (See Docket # 36, Ex. J, K). Moreover, Macro meeting minutes refer to Phyllis as a general partner and indicate that she was present, either in person or by proxy, at meetings on February 16, 1992, April 17, 1992, and April 17, 1993. (See Docket # 36, Ex. K, N). Phyllis, however, testified at her deposition that she had no memory of signing any documents, but acknowledged that they bear her signature. (See Docket # 45, Ex. 7 at 50-51, 72-73). Conrad Proctor indicated that these documents were signed at the request of Macro's attorney and managing partner because he and Phyllis trusted their judgment. (See Docket # 45, Ex. 9 at 206-07). Furthermore, Phyllis expressly denied ever attending any partnership meeting, participating in any partnership conference call, or participating in any partnership business whatsoever. (See Docket # 45, Ex. 7 at 72-73).

In 1992 or 1993, Macro was threatened with litigation by a company called Astronet. In response to this threat, Conrad Proctor drafted a letter to Macro, on behalf of Phyllis, informing the partnership that she intended to resign as a general partner. (See Docket # 36, Ex. A at 144-46, P). The Proctors also drafted another letter in which they state that the transfer from David to Phyllis in 1991 only transferred David's income interest in Macro. (See Docket # 36, Ex. P). The Proctors have since stated that these letters were drafted on the advice of counsel to clarify that Phyllis was never intended to be a partner in Macro. (See Docket # 45, Ex. 9 at 206-07).

Various other documents also identify Conrad and Phyllis Proctor as partners in Macro. From 1991 to 1994, Phyllis Proctor received K-1 tax forms for her income from Macro that refer to her as a general partner. (See Docket # 36, Ex. R). Furthermore, a letter from Macro's general partner in 1992 in connection with the Proctors' mortgage application states that they are 10% owners of Macro. (See Docket # 36, Ex. V).

Plaintiff Jack Sunseri acquired his interest in Macro by an assignment from his father, Anthony Sunseri, in July 1991. (See Docket # 36, Ex. DD). That same year, Macro moved its principal place of business from California to Florida, and subsequently resolved to be governed under Florida law, retroactive to September 1991. (See Docket # 39, Ex. B). Beginning in 1992, a dispute arose between the Sunseris and the other partners in Macro involving the management of the partnership and various other partnership decisions. As part of this dispute, Macro resolved to withhold distributions to the Sunseris to off-set litigations costs the other partners attributed to the Sunseris. (See Docket # 46, Ex. B at 9-10). The bulk of the withholdings consisted of the proceeds of the agreement with CCI in 1991. (See id.)

Also in 1992, Jack Sunseri, believing that Conrad Proctor was a partner in Macro, gave him two proxies to vote at Macro partnership meetings. (See Docket # 36, Ex. DD). Jack Sunseri, although nominating David Proctor for a partnership management position prior to giving Conrad proxies, and referring to David Proctor as a Macro partner after, believed that due to Conrad's involvement with Macro, Conrad Proctor was a partner. (See id.; Docket # 45, Ex. 17, 18). Jack Sunseri has stated that based on his personal knowledge David Proctor did not participate in any partnership business. (See Docket # 36, Ex. DD). However, there is some indication that Jack Sunseri never physically attended any partnership meetings. (See Docket # 46, Ex. B at 9).

In 1996, Anthony Sunseri filed suit in California against Macro to recover the distributions he felt were wrongfully withheld. In connection with this litigation, Jack Sunseri filed a declaration stating that his father, Anthony Sunseri, was the general partner in Macro and was entitled to the Sunseri share of Macro's profits. (See Docket # 39, Ex. C). However, the California court dismissed this case with prejudice as a sanction for Anthony Sunseri's failure to appear at a deposition.

Later in 1996, Plaintiffs commenced suit in New York against Macro. Plaintiffs served the current Defendants with a copy of the summons and complaint for the New York action, but did not name them as parties. (See Docket # 36, Ex. S). Plaintiffs asserted that Macro had breached the partnership agreement, breached its fiduciary duties, and deprived Jack Sunseri of his share of the Macro profits. (See Docket # 45, Ex. 11). All of the claims were predicated on Plaintiffs' assertion that Macro had wrongfully withheld or intentionally converted the Sunseris' share of the profits in Macro. (See id.). Plaintiffs sought $1.8 million in compensatory damages. Essential to Plaintiffs' request was the fact that CCI merged...