Xereas v. Heiss
| Decision Date | 20 September 2022 |
| Docket Number | 12-cv-456-ZMF |
| Parties | JOHN N. XEREAS, Plaintiff, v. MARJORIE A. HEISS, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Pending before the Court is Defendants' Motion for Summary Judgment on Plaintiff's fiduciary duty claim. Upon careful consideration of the record, and for the reasons stated herein, the Court will GRANT Defendants' motion.
Plaintiff John Xereas is suing his former business partners at the Riot Act DC, LLC, Defendants Geoffery Dawson and Marjorie Heiss, for alleged violations that occurred while the parties were jointly managing the Riot Act DC, LLC (or “the LLC”). See Second Am. Compl. ¶ 1-2, ECF No. 102. On October 5, 2018, Magistrate Judge Robinson granted Defendants' motion for summary judgment as to 19 of Plaintiff's 26 causes of action. See Mem. Op., ECF No. 188; Order, ECF No. 187. A jury trial on Plaintiff's remaining claims yielded a verdict awarding Plaintiff $106,000 plus legal fees for his breach of contract claim and found in favor of the Defendants on their conversion counterclaim. See Xereas v. Heiss, No. 12-cv-456, 2019 WL 3557368, at *1 (D.D.C. Aug. 5, 2019), aff'd and rev'd in part, 987 F.3d 1124 (D.C. Cir. 2021).
Judge Robinson entered judgment pursuant to the jury verdict, but reduced the amount of damages to $45,000 in harmony with the amount claimed by Xereas in his pre-trial statement. See id. at *4.
Xereas appealed. See Notice of Appeal, ECF No. 258. The D.C. Circuit affirmed Judge Robinson's decision except as to her dismissal of Xereas's breach of fiduciary duty claim, which was remanded for further proceedings. See Xereas v. Heiss, 987 F.3d 1124, 1130-34, 37 (D.C. Cir. 2021). Now before the Court is Defendants' Motion for Summary Judgment on Plaintiff's breach of fiduciary duty claim. See Defs.' Mot. for Summ. J. ( ), ECF No. 271.
The underlying business dispute stems from the parties' agreement to a launch a comedy club in 2010. See, e.g., Xereas, 987 F.3d at 1128-30 (recounting factual background). As relevant here, Xereas alleges that the Defendants breached their fiduciary duties by engaging in selfdealing, failing to disclose conflicts of interest, and suppressing Xereas's rights as a minority member. See Pl.'s Resp. 2, ECF No. 272. Xereas relies on testimony that Defendant Dawson brought Defendant Heiss into the LLC “so that the two of [them] together would be able to control the decisions of the LLC.” Def. Dawson's Decl., Ex. 2 to Pl.'s Resp. 1, ECF No. 272. Defendant Dawson counters that this arrangement “was explained to Mr. Xereas who . . . agreed to its terms.” Id. Additionally, Xereas alleges that Defendant “Heiss prepared the documents . . . to create and operate the business” and did not include a “conflict-of-interest provision [or] an independent counsel provision.” Pl.'s Resp. 6.
Xereas claims that Defendant Dawson “treat[ed] the comedy club as his personal piggybank” and that “Defendant Heiss was complicit in the scheme.” Id. at 6-7. Xereas claims that Defendant Dawson paid himself “approximately $10,000 per month in ‘management fees' and that “Defendant Dawson alone ‘negotiated' both sides of this contract.” Id. at 7. Xereas relies solely on allegations contained in the Second Amended Complaint to support this allegation. See id. at 11-13.
Xereas largely relies on testimony from his expert, James Morrissey. See Morrissey Tr., Ex. 6 to Pl.'s Resp., ECF No. 272. Morrissey highlighted discrepancies in the LLC's recordkeeping, but he did not testify about actions by Defendants that would have caused these discrepancies. Rather, Morrissey's testimony was limited to the review of the LLC's bank statements. Specifically, Morrissey identified six categories of discrepancies:
See id. at 523-29. Morrissey further explained it was “an industry practice that when there's a payment made, attached to that are all the receipts for the employee connected to that expense reimbursement; and in this case, the papers were missing.” Id. at 524. As to the improper accounting of cash category, Morrissey explained that he “[m]ade a request for documentation to support all of the ATM withdrawals, [but] none was provided.” Id. at 526. For the credit card categories, Morrissey believed he found “unsupported expense[s] and that [were] not ordinary and necessary for the business.” Id. at 528-29. Mr. Morrissey concluded that the funds in question “could have stayed in the bank account, and if it were in the bank account, eventually it would have been distributed to the owners.” Id.
To succeed on a motion for summary judgment, the moving party must show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P 56(a). A fact is material if it “might affect the outcome of the suit under governing law,” and a dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Steele v. Schafer, 535 F.3d 689, 692 (D.C. Cir. 2008) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The moving party bears the initial burden of demonstrating that there is no genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this burden, the nonmoving party must identify “specific facts showing that there is a genuine issue for trial.” Id. at 324 (quoting Fed.R.Civ.P. 56(e)). In evaluating motions for summary judgment, the Court must review all evidence in the light most favorable to the nonmoving party and draw all inferences in the nonmoving party's favor. See Tolan v. Cotton, 572 U.S. 650, 655-56 (2014) (per curiam). In doing so, the Court must not assess credibility or weigh the evidence. See Barnett v. PA Consulting Grp., Inc., 715 F.3d 354, 358 (D.C. Cir. 2013). However, the nonmoving party “may not merely point to unsupported self-serving allegations, but must substantiate his allegations with sufficient probative evidence[.]” Reed v. City of St. Charles, Mo., 561 F.3d 788, 790 (8th Cir. 2009). A genuine issue for trial must be supported by affidavits, declarations, or other competent evidence. See Fed.R.Civ.P. 56(c). If the nonmoving party's evidence is “merely colorable” or “not significantly probative,” summary judgment may be granted. Liberty Lobby, 477 U.S. at 249-50. III. ANALYSIS
Defendants advance two arguments in support of summary judgement. First, Defendants argue that the doctrine of judicial estoppel bars Xereas from relitigating his claim under a breach of fiduciary duty. Second, Defendants argue that Xereas lacks evidence of damages proximately caused by the Defendants' alleged breach of fiduciary duty.
“Judicial estoppel is an equitable doctrine that precludes a party from ‘adopting a legal position in conflict with one earlier taken in the same or related litigation' in order to “protect the integrity of the judicial process.” Nat'l Parks Conservation Ass'n v. Semonite, 422 F.Supp.3d 92, 96 (D.D.C. 2019) (citing New Hampshire v. Maine, 532 U.S. 742, 749 (2001)). “When determining whether judicial estoppel applies, courts generally consider three factors: (1) whether a party's later position is clearly inconsistent with their earlier position; (2) whether judicial acceptance of an inconsistent position in a later proceeding would create the perception that the court was misled; and (3) whether the party asserting the inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.” Id. at 96.
Xereas's adduced testimony in support of his trademark, breach of contract and of the duty of good faith and fair dealing unjust enrichment, and cybersquatting claims at trial. See Pl.'s Resp. 16-17. Mr. Morrissey then testified about related damages calculation. See Morrissey Tr. 524:22525:13. Defendants argue that Xereas should be judicially estopped from recasting Mr. Morrissey's prior testimony in support of his breach of fiduciary duty claim. See Defs.' Mot. at 11. However, Xereas is not advancing a “clearly inconsistent” position. Winmar Constr., Inc. v. Kasemir, 233 F.Supp.3d 53, 59 (D.D.C. 2017). As detailed above, Morrissey identified discrepancies in record keeping. Xereas seeks the same damages from these discrepancies that he sought in the prior trial, except he now does so under the theory of a breach of fiduciary duty. See Pl.'s Resp. 18. The change in legal theory is permissible because Morrissey did not tie his damages testimony to any legal theory in particular. See Morrissey Tr. 524-31. Rather, Morrissey testified to Xereas's economic damages “under the assumption that liability has been determined” which was “a result of [the alleged] actions of the Defendants.” See Expert Report of James Morrissey, Ex. 1 to Defs.' Mot. 1, ECF No. 271. Thus, Xereas's position that the misappropriation of funds supported his unjust enrichment and conversion claims “is not entirely at odds with [his] argument” that the misappropriation of funds supports a breach of fiduciary duty. Vantage Commodities Fin. Servs. I, LLC v. Willis Ltd., 531 F.Supp.3d 153, 167 (D.D.C. 2021), aff'd sub nom. Vantage Commodities Fin. Servs. I, LLC v. Assured Risk Transfer PCC, LLC, ...
To continue reading
Request your trial