VERONA v. U.S. BANCorp.

• Court: U.S. District Court — Eastern District of North Carolina
• Writing for the Court: W. Earl Britt
• Decision Date: 29 March 2011
• Docket Number: NO: 7:09-CV-057-BR,: 7:09-CV-057-BR
• Citation: Verona v. U.S. Bancorp, NO: 7:09-CV-057-BR (E.D. N.C. Mar 29, 2011)
• Parties: STEVEN VERONA, MYGALLONS LLC, and ZENACON LLC, Plaintiffs, v. U.S. BANCORP, U.S. BANK VOYAGER FLEET SYSTEMS INC., and K.E. AUSTIN CORP., Defendants.

STEVEN VERONA, MYGALLONS LLC, and ZENACON LLC, Plaintiffs,

v.U.S. BANCORP, U.S. BANK VOYAGER FLEET SYSTEMS INC., and K.E. AUSTIN CORP., Defendants.

NO: 7:09-CV-057-BR

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NORTH CAROLINA

SOUTHERN DIVISION

Dated: March 29, 2011

ORDER

This matter is before the court on several dispositive motions as well as a motion to exclude plaintiff's proposed expert testimony and motions to seal and to strike. The parties have briefed the motions, and they are ripe for disposition.

I. BACKGROUND

Plaintiff Steven Verona ("Verona") is founder and CEO of plaintiff Zenacon LLC ("Zenacon"), a company founded in Ohio and headquartered in Philadelphia, Pennsylvania, and of plaintiff MyGallons LLC ("MyGallons"), a company founded and originally headquartered in Florida but now also headquartered in Philadelphia. (Am. Compl., DE # 73, ¶¶ 19-21.) Verona was a resident of Pennsylvania or Florida at relevant times. (Id. ¶ 21.)

This action centers on Verona's creation of the MyGallons program and his attempt to secure a payment processing network for the program. Plaintiffs describe the MyGallons program as follows:

The MyGallons program was designed to allow consumers to pre-purchase gasoline on the MyGallons website at current prices and have the gallons accrue in their MyGallons accounts. Consumers would be issued MyGallons cards, similar to debit cards. They could then redeem their gallons in the future at any service station where the MyGallons card was accepted, without regard to the future price of gasoline, thus protecting themselves from rising gasoline prices. MyGallons would use a portion of the prepaid gasoline revenues to hedge the price of gasoline in the financial markets, such that the company would break even on the gas, whether it rose or fell in price. MyGallons would charge consumers an annual membership fee, and also stood to earn interest on the portion of pre-paid gasoline revenues not needed to hedge the price of gasoline, as well as from advertisements on the MyGallons website.

(Pls.' Mem. Supp. Partial Summ. J., DE # 110, at 1-2 (footnotes omitted).)

According to plaintiffs, in the spring of 2008, Verona approached several executives at defendants U.S. Bancorp and Voyager Fleet Systems, Inc. ("Voyager") (collectively "USB"),¹namely Ken Kral, Regan Hutton, and Dennis Maxson. (Verona Dep.² at 324, 328, 335-37.) Verona explained the MyGallons consumer program to them in an attempt to secure the use of USB's Voyager payment processing network in conjunction with the program; Maxson (and perhaps others at USB) directed Verona to work with defendant K.E. Austin Corp. ("GoGas"), represented to be a "reselling agent" of the Voyager network, as USB would not work directly with the program until it reached a certain size. (Id. at 90, 134, 322-32, 329, 344-45.)

GoGas is a North Carolina corporation headquartered in Wilmington, North Carolina. (Dorroll Aff., DE # 132, ¶ 2.) As USB directed, Verona called GoGas, speaking with Phil Dorroll, the company's national fleet director. (Verona Dep. at 95, 133.) Verona explained to Dorroll that persons at USB told him to work with him (Dorroll), and they discussed the MyGallons program, specifically that it was a consumer program. (Id. at 95, 134.) Dorroll directed him to GoGas's website for a fleet card application. (Id. at 90, 95.) The parties agree that Verona completed a fleet card application in the name of Zenacon on GoGas's website. (Garzione Aff., DE # 133, ¶ 4 & Ex. 3.) Kat Garzione at GoGas verbally assisted Verona with completion of the application, including filling in projected, rather than actual, annual sales and total assets because the program was a "start-up." (Verona Dep. at 128-30.) Defendants deny that any of these conversations between Verona and USB executives and GoGas employees occurred. (See Kral Dep., DE # 88-1, at 49; Hutton Dep., DE # 88-4, at 24-25; Dorroll Aff., DE # 132, ¶¶ 8, 11, 13; Garzione Aff., DE # 133, ¶ 7; Maxson Decl., DE # 139.)

On 17 March 2008, Verona faxed the signed fleet card application in the name of Zenacon to GoGas. (See Garzione Aff., DE # 133, ¶ 6 & Ex. 3.) The parties agree that GoGas forwarded the application to USB, and USB approved the application, with a relatively small credit limit. (See id. ¶ 10; Pls.' Ex. 27, DE # 109-5.) In April 2008, fleet fuel cards in the name of "MyGallons.com" were issued to Verona. (Garzione Aff., DE # 133, ¶¶ 10, 13.) Fleet fuel cards such as those issued to Verona enable the card holders to purchase gasoline at stations which accept the Voyager card; payment to the gasoline station is settled (i.e., processed) through the Voyager network and GoGas provides the fleet customer with day to day customer support. (Dorroll Aff., DE # 132, ¶ 5.) Plaintiffs characterize the MyGallons.com cards as having been issued as part of a "pilot program" to ensure the MyGallons program would work administratively as intended. (See Verona Dep. at 106-08.) Verona distributed the cards to a handful of friends and family, who apparently used them at Voyager-approved gasoline stations, as GoGas sent "MYGALLONS.COM" invoices for the purchases. (Id. at 106; see also Pls.' Exs. 32-35, DE ## 101-2 to 101-5.)

"Verona decided to establish a new company- [MyGallons]- specifically branded to handle the MyGllons program, as Zenacon, the predecessor entity, was an existing company with various other ventures." (Pls.' Mem. Supp. Partial Summ. J., DE # 110, at 6-7.) MyGallons filed its articles of incorporation in Florida on 14 April 2008. (Defs.' Ex. 27, DE # 89-4.) Verona intended to "transition" the fleet account from Zenacon to the newly formed entity MyGallons. (See Verona Dep. at 140, 167-68, 170.) On 20 May 2008, Verona submitted via fax a second fleet card application to GoGas, this application being in the name of MyGallons. (Verona Dep. at 172, 174; Pls.' Ex. 36, DE # 101-6; see also Pls.' Ex. 37, DE # 101-7 (5/7/08 email from Verona to GoGas stating, "I will submit an app [sic] to change to MyGallons LLC once I get settled in FL . . . . I expect to be there within 2 weeks.").) GoGas denies ever having received this application or forwarding it to USB for credit approval. (Dorroll Aff., DE #132, ¶¶ 16, 17; Garzione Aff., DE # 133, ¶ 27.) According to GoGas, the fleet account at all times was considered to be in the name of MyGallons.com, a d/b/a of Zenacon. (Garzione Aff., DE # 133, ¶ 22.)

In the meantime, there were a number of communications between Verona and GoGas employees about testing of the MyGallons program; implementation of the "full" program, including whether USB would require collateral, the billing cycle, the transmission of data directly between MyGallons and USB servers; and logistical issues, such as billing, ordering of cards, card design, and use of the Voyager logo. (Verona Dep. at 131-32, 135-45, 149-50.) During some of these communications, GoGas employees represented that USB had approved or authorized certain things. (Id. at 132, 142-43, 145, 236-37, 361.) Although there is one communication directly between Verona and a USB employee, (see Pls.' Ex. 51, DE # 101-19 (regarding the transmission of data between MyGallons and USB servers)), it is apparent that Verona dealt primarily with GoGas and GoGas in turn communicated with USB.

Verona, on behalf of MyGallons, entered into two additional agreements with GoGas: (1) a 10/11 June 2008 confidentiality agreement, (Pls.' Ex. 53, DE # 101-21; Dorroll Aff., DE # 132, ¶ 27), and (2) a 27 June 2008 rebate agreement, (Pls.' Ex. 54, DE # 101-22; Dorroll Aff., DE # 132, ¶ 43). All defendants contend that USB was in the process of drafting a separate, direct agreement between USB and MyGallons for use of the Voyager payment processing network (separate and apart from GoGas) and that Verona and/or his attorney were aware of that fact. (See Loveridge Dep., DE # 88-2, at 138-43; Dorroll Dep., DE # 87-6, at 168; Dorroll Aff., DE # 132, ¶¶ 25, 30, 37, 42 & Exs. 18, 23, 33, 34, 38.)

As the court understands it, plaintiffs' theory is that no direct agreement between USB and MyGallons was needed because of the existence of the 17 March 2008 Zenacon contract, the purported contract created by virtue of the 20 May 2008 MyGallons fleet card application, the confidentiality agreement, and the rebate agreement. As support for this theory, plaintiffs rely on the actions of USB and GoGas prior to 1 July 2008 which purportedly indicate the parties were moving forward with the MyGallons program, (Verona Dep. at 168, 174; see also Loveridge Dep., DE # 88-2, at 144 (the working relationship between Voyager and Zenacon or MyGallons continued while the partner agreement was being drafted); Dorroll Dep., DE # 87-6, at 167-68 (no one at Voyager asked Dorroll to halt the relationship with or cease working with MyGallons; he did not stop communicating with Verona while the partner agreement was being drafted)); and, the failure of anyone to communicate to Verona that a direct agreement with USB was required, (see Loveridge Dep. at 143, DE # 88-2 (no knowledge of anyone at Voyager speaking with anyone at Zenacon or MyGallons regarding drafting of an agreement); Dorroll Dep., DE # 87-6 at 168 (no one at Voyager ever communicated to Verona that a partner agreement was being drafted)).

On 30 June 2008, Verona issued a press release announcing the launch of the MyGallons program. (Pls.' Ex. 57, DE # 101-25.) The press release stated that "the gas redemption program uses the Voyager fleet network" and described the program as a consumer-based membership program. (Id.) According to plaintiffs, 6,000 consumers entered into contractual relationships with MyGallons following the launch (i.e., became members). (Pls.' Mem. Supp. Partial Summ. J., DE # 110, at 27; see also Verona Dep. at 146.) Media interest also ensued. (See Pls.' Exs. 12-15, DE ## 97-8 to 97-11.)

According to USB, it did not become aware of the...