Tank Holdings, Inc. v. Bell
| Decision Date | 22 August 2013 |
| Docket Number | No. 4:12-CV-713 JAR,4:12-CV-713 JAR |
| Parties | TANK HOLDINGS, INC., Plaintiff, v. BRIAN BELL, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
Now before the court are: (1) Plaintiff Tank Holdings, Inc.'s1 Motion to Stay Counterclaim Pending Arbitration (ECF 68); and (2) the Joint Motion for Summary Judgment (ECF 73) filed by Defendants Brian K. Bell ("Defendant B. Bell") and Scarlett M. Bell ("Defendant S. Bell"), individually and as Trustees for The Brian Keith Bell and Scarlett Morgana Bell Revocable Living Trust Dated June 22, 2007 ("Defendant Bell Trust") (collectively, "Bell Defendants"),2 and Defendants Chris Slinkard ("Defendant C. Slinkard") and Shawnna Slinkard ("Defendant S. Slinkard") (collectively, "Slinkard Defendants"). Both matters are fully briefed and ready for disposition. For the reasons stated below, the motion to stay counterclaim will be GRANTED in part and DENIED in part, and the motion for summary judgment will be DENIED.
Prior to December of 2010, the Bell Defendants owned Bell Ventures, LLC ("Bell Ventures"), which in turn was sole owner of USA Tank, M&W Tank Construction Co., TotalTanks, LLC, and Deep Creek Engineering, LLC (collectively, "USA Tank").3 The Slinkard Defendants were each employed by USA Tank. On September 15, 2010, Plaintiff offered to purchase USA Tank from the Bell Defendants. Between September 2010 and December 20, 2010, Plaintiff and the Bell Defendants performed due diligence and negotiated a Securities Purchase Agreement ("SPA") for the purchase of USA Tank. On December 20, 2010, the Bell Defendants and Plaintiff closed on the SPA.
Plaintiff initiated the instant action by filing a Complaint (ECF 1) in this Court on April 20, 2012, and on June 15, 2012, Plaintiff filed a First Amended Complaint (ECF 33). In its First Amended Complaint, Plaintiff alleges that prior to the sale of USA Tank, Defendants provided Plaintiff with financial statements that contained misrepresentations and omissions that inflated its profits and its earnings before interest, taxes, depreciation, and amortization ("EBITDA"), thereby inducing Plaintiff to overpay substantially for USA Tank. Plaintiff asserts the following causes of action: (1) breach of representations and warranties contained in the agreement asserted against the Bell Defendants; (2) breach of the indemnity provisions contained in the agreement asserted against the Bell Defendants; (3) violation of Rule 10b-5 of the Securities Exchange Act of 19344 asserted against all Defendants; (4) violation of the Missouri Uniform Securities Act, § 409.5-501 et seq., asserted against all Defendants; (5) common law fraud asserted against all Defendants; (6) negligent misrepresentation asserted against all Defendants; (7) civil conspiracy asserted against all Defendants; (8) breach of fiduciary duty asserted against Defendants B. Bell and C. Slinkard; and (9) indemnification asserted against Defendant C. Slinkard. (See ECF 33.)
On May 18, 2012, the Bell Defendants filed a Counterclaim (ECF 22) against Plaintiff for breach of contract, injunctive relief, and declaratory judgment. The Bell Defendants allege that Plaintiff failed, as required by the SPA, to conduct the business of USA Tank in good faith and to operate such business in the ordinary course of business. The Bell Defendants allege that, because of Plaintiff's failure, they have been denied performance payouts and the return of an amount deposited into an escrow account.
The Court shall grant a motion for summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see Fed. R. Civ. P. 56; Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011). The substantive law determines which facts are critical and which are irrelevant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Only disputes over facts that might affect the outcome will properly preclude summary judgment. Id. Summary judgment is not proper if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id.
A moving party always bears the burden of informing the Court of the basis of its motion. Celotex Corp., 477 U.S. at 323. Once the moving party discharges this burden, the nonmoving party must set forth specific facts demonstrating that there is a dispute as to a genuine issue of material fact, not the "mere existence of some alleged factual dispute." Anderson, 477 U.S. at247. The nonmoving party may not rest upon mere allegations or denials of its pleading. Id. at 248-49.
In passing on a motion for summary judgment, the Court must view the facts in the light most favorable to the nonmoving party, and all justifiable inferences are to be drawn in its favor. Torgerson, 643 F.3d at 1042. The Court's function is not to weigh the evidence but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. "'Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.'" Torgerson, 643 F.3d at 1042 (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)).
The following facts are either specifically agreed upon or not sufficiently controverted pursuant to E.D.Mo. L.R. 4.01(E), and are therefore accepted as true for purposes of this motion. Prior to December 20, 2010, the Bell Defendants were the owners of 100% of the outstanding capital stock of Bell Ventures. (Defendants' Joint Statement of Uncontroverted Material Facts in Support of Summary Judgment, ECF 101, ¶1). Prior to December 20, 2010, Bell Ventures was the sole owner of USA Tank. (Id., ¶2.) Prior to December 20, 2010, Defendant C. Slinkard was the General Manager for USA Tank and Defendant S. Slinkard was the Controller, Secretary, and Treasurer for USA Tank. (Id., ¶¶3-4.)
Historically, USA Tank was a storage tank sale and construction company that sold and installed commercial bolted-steel storage tanks. (Id., ¶5.) In approximately 2009, USA Tank began working on "turnkey projects" that incorporated commercial storage tanks, such as water treatment and sand processing facilities. (Id., ¶6.) One of the turnkey projects included thedesign and construction of a sand processing facility in Cadre, Texas ("Cadre Project"). (Id., ¶7.) The Cadre Project was an ongoing project during the time relevant to this action.
On April 6, 2010, Plaintiff offered to purchase USA Tank from the Bell Defendants for $24 million, subject to many additional terms and conditions, including a $4 million hold-back that would be paid in the event that USA Tank reached certain financial targets in 2011. (Id., ¶10.) The Bell Defendants rejected Plaintiff's April 6, 2010 offer and thereafter entered into negotiations with a different potential buyer. (Id., ¶11.)
The parties then resumed negotiations and agreed to meet on September 13, 2010 to discuss USA Tank's financial projections. (Plaintiff's Statement of Additional Material Facts in Response to Defendants' Joint Motion for Summary Judgment, ECF 115, ¶8.) At the September 13, 2010 meeting, Defendants provided Plaintiff with a PowerPoint presentation that included financial information about USA Tank. (Id., ¶9.)
On September 15, 2010, Plaintiff offered to purchase USA Tank from the Bell Defendants for $28 million, subject to many additional terms and conditions, including certain adjustments and a $4 million hold-back that would be paid in the event that USA Tank reached certain financial targets in 2011. (ECF 101, ¶12.) Between September 2010 and December 20, 2010, Plaintiff and the Bell Defendants performed due diligence and negotiated the SPA for the purchase of USA Tank. (Id., ¶13.) RSM McGladrey acted as Plaintiff's due diligence advisors during this period. (Id., ¶29.) As part of the due diligence process, Defendants delivered to Plaintiff interim financial statements that provided USA Tank financial information for fiscal year 2010, up to and through September 30, 2010. (Id., ¶14.)
The SPA, which closed on December 20, 2010 ("Closing Date") (Id., ¶15), reflected a base purchase price of $24,000,000.00, "minus (i) the Seller Expenses, minus (ii) the ClosingRepaid Indebtedness, plus or minus (iii) the Estimated Cash Amount, determined in accordance with Section 2.5(B), and minus (iv) to the extent that the Estimated Project Margin Position is less than zero, the Estimated Project Margin Position . . . ." (SPA, ECF 117 at 18.) Section 2.5, which concerned certain base purchase price adjustments, stated as follows:
(Id. at 21.) The subsequent section, § 2.6, concerned Interim Payments, and stated as...
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