CATHERINE C. BLAKE, District Judge.
This contentious diversity case centers on a West Virginia summer camp and the failed professional and personal relationships between plaintiff Luis Rullan, a Spanish national, and defendants Jill Goden and her father, Fred Greenberg. Now before the court are (1) Greenberg's motion for partial summary judgment; (2) Goden's motion for partial summary judgment; (3) Rullan's cross-motion for partial summary judgment as to Greenberg; and (4) Rullan's cross-motion for partial summary judgment as to Goden. The issues have been fully briefed, and no hearing is necessary. See Local R. 105.6 (D.Md. 2014). For the reasons stated below, Greenberg's motion will be denied; Goden's motion will be granted in part and denied in part; and Rullan's motions will be denied.
In 1955, Greenberg founded a summer camp called Camp White Mountain on 70.5 acres in High View, West Virginia. (Greenberg Decl. ¶ 1, Greenberg Reply Mot. Summ. J. Ex. 3, ECF No. 232-3; 2010 Camp Appraisal, Pl.'s Opp'n Goden Mot. Summ. J. Ex. 1, ECF No. 207-1). Greenberg also owned and operated (and ultimately sold) several other camps over the years. (Greenberg Decl. ¶ 1; Greenberg Dep. 42, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 15, ECF No. 206-15.) Camp White Mountain was later renamed Timber Ridge Camp ("the Camp"). (Greenberg Decl. ¶ 1.) As of 2010, Greenberg and Goden each held a 50% stake in the two entities that owned and managed the Camp: Timber Ridge, Inc. ("TRI") and Youth World, Ltd. ("YWL"). (Greenberg Decl. ¶¶ 2-3.)
Rullan began attending the Camp in 1990 at the age of six, and continued attending every summer for the next ten years. (Rullan Decl. ¶ 1, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 62, ECF No. 208-43; Greenberg Decl. ¶ 8.) He also served as a counselor at the Camp, and his four siblings attended the Camp as both campers and counselors over a period of about 20 years. (Rullan Decl. ¶ 1; Greenberg Decl. ¶ 8; Greenberg Dep. 16.) During this time, Rullan and his family became very close friends with Greenberg and Goden. (Rullan Decl. ¶ 2; Greenberg Decl. ¶ 9.) Indeed, Rullan viewed Goden "like [a] mother" and Greenberg "like [a] grandfather." (Rullan Dep. 269-70, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 17, ECF No. 206-17.) From either 2004 to 2010 (according to Rullan) or 2006 to 2010 (according to Greenberg and Goden), Rullan, like other former campers, helped recruit children to attend the Camp, and received a modest commission for each camper he recruited. (Rullan Decl. ¶ 1; Greenberg Decl. ¶ 10.)
Around 2010, Greenberg decided to "get out of the Camp business...." (Greenberg Decl. ¶ 5.) He believed Goden "was capable
Rullan recalls that he "talked with Goden and exchanged emails with Goden and perhaps Greenberg" during November 2010, (Rullan Decl. ¶ 3), and though "[m]ost of [his] communications in writing and by telephone were with Goden, [he] did speak with Greenberg as well," (id. ¶ 4). He says that Goden and Greenberg told him "that Greenberg was getting older, that he could no longer keep running the Camp with Goden, and that they wanted to find a partner for Goden to help manage the Camp." (Id.) He says they "proposed that [Rullan] become Goden's partner to help her manage [the Camp] and to assist with recruiting campers from Europe." (Id.) An email exchange between Rullan and Goden on November 3, 2010, shows that they had discussed the possibility of forming a partnership, with Rullan writing "let's talk about the possibility of beeing [sic] partners," and Goden responding "[t]his could be an amazing partnership." (2010 Goden/Rullan Emails PL 00780, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 25, ECF No. 208-6.) Rullan also says Greenberg and Goden informed him "that the Camp had hundreds of acres of land, and that the Camp's debt was limited to a mortgage of approximately $500,000, as shown on a copy of a 2009 tax return for [TRI] that [they] provided." (Rullan Decl. ¶ 4.)
Rullan and his father met with Goden and Greenberg at the St. Andrews Club House in St. Andrews, Florida, on December 7 and 8, 2010, to discuss Rullan's possible involvement in the Camp's business as an employee and/or partner. (Id. ¶ 5; Greenberg Decl. ¶ 12.) Rullan prepared a PowerPoint presentation based in part on the information Goden and Greenberg had provided him, and he presented it to Goden and Greenberg on December 7. (Rullan Decl. ¶ 5; Greenberg Decl. ¶ 13; PowerPoint Presentation, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 43, ECF No. 208-24.) The presentation included certain information on Rullan's understanding of the Camp's liabilities, including a $518,236 mortgage. (PowerPoint Presentation 21, 22.)
The parties disagree as to much of what was discussed at this meeting. Rullan says Greenberg "stated that he authorized Goden to make [Rullan] her partner if she wished and, if so, that Greenberg would sell his share of the Camp to [him]." (Rullan Decl. ¶ 8.) Rullan also says the parties
Greenberg and Goden dispute that an employment agreement was reached. Instead, they say they told Rullan he would make about $70,000 in commissions if he recruited 80 new campers per year. (Greenberg Decl. ¶ 14.) They say they also told him he could "attend the Camp during the summer of 2011 to learn from Goden how to run the Camp business, to be the liaison for the European campers he recruited, and to determine if he could work together with Goden." (Id. ¶ 20.) They also dispute that Greenberg made Goden his agent such that she could enter into legal obligations on his behalf. (Id. ¶ 19.) Further, Greenberg says that he told Rullan and his father it was important that Rullan work with Goden for at least a year before entering into any partnership, and that "lawyers would need to be involved at the right time to provide for a transaction to happen." (Id. ¶ 15.) Greenberg agrees, however, that he asked Rullan about his ability to purchase Greenberg's 50% interest in TRI and YWL at a later time, and to take on his personal guarantees and financial liabilities relating to the companies. (Id. ¶ 16.) Greenberg says Rullan and his father assured him that they had the money. (Id. ¶ 17.) Greenberg also says that to give Rullan "an ego boost," the parties discussed "the creation of a recruiting company" of which Rullan would have an equity interest. (Id. ¶ 22.)
Goden and Rullan started working together soon after the Florida meeting, (Rullan Decl. ¶ 15), and Goden began referring to Rullan as a "partner" just a few days after the meeting, (see Partner Emails 1, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 27, ECF No. 208-8 ("I can not express enough how excited I am to have you as my partner."); id. at 2 ("I have a new European partner, Luis Rullan.").) Rullan says Goden "started to complain to [him] about Greenberg's financial demands on the Camp's funds and resources." (Rullan Decl. ¶ 16.) According to Rullan, Greenberg's wife limited his access to their substantial wealth, and Greenberg "constantly asked Goden to borrow money." (Id.) Rullan says Goden "wanted [Rullan] to assume Greenberg's ownership share of the Camp, so that Goden and [Rullan] would run the Camp together as partners." (Id.)
On December 21, 2010, Goden retained an immigration attorney named Richard
On January 29, 2011, Greenberg executed a promissory note recognizing that he had borrowed $350,000 from his friend, Phillips. (Promissory Note, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 44, ECF No. 208-25.) Greenberg says, however, that he actually borrowed the money in 2009, and the promissory note merely documented this prior loan. (Greenberg Decl. ¶ 30.) Rullan says he would not have continued to pursue the business venture had he known of this liability, unrelated lawsuits against the defendants and the Camp, the Camp's cash flow issues, the actual acreage of the Camp, the extent of the defendants' commingling of funds, or that Goden "apparently had no intention of allowing [Rullan] to co-manage the Camp or to act as her full partner...." (Rullan Decl. ¶ 14, 17.)
Rullan says that while he and Goden were traveling together on Camp business towards the end of February 2011, they "agreed to become full partners rather than wait until the end of the year." (Rullan Decl. ¶ 18.) Rullan says he "accepted Goden's offer to become her partner and to buy Greenberg's share of the Camp." (Id.) He says that under this agreement, Goden and Rullan would each receive a salary of between $72,000 and $100,000 and they would split the cost of an immigration lawyer to help Rullan get a U.S. visa. (Id.) He says they agreed to put the agreement in writing when he arrived at the Camp that summer. (Id.)
On March 30, 2011, Goden and Rullan executed a stock purchase agreement under which each purchased 500 shares of YWI. (YWI Corporate Documents PL 00641-45.) Under that agreement, Goden and Rullan would each pay $5,000 for the shares, and Rullan would contribute an additional $50,000 "as a loan" to be repaid over eight years. (Id. at PL 00642-43.) Rullan says, however, that Goden told him that Gershberg suggested that Goden and Rullan "each contribute $55,000 in capital" to YWI, but that Goden contributed nothing. (Rullan Decl. ¶ 23.) Rullan had already wired the money to YWI on March 17, 2011. (La Caixa Transfers to YWI, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 38, ECF No. 208-19.) Goden became president and treasurer of YWI, and Rullan became its vice president and secretary. (YWI Corporate Documents PL 00629; Rullan Decl. ¶ 24.) A few days after the stock purchase agreement, Goden told Rullan she needed to "borrow" the $55,000 he deposited to pay the Camp's bills. (Rullan Decl. ¶ 25.) Rullan says Goden told him she would return the money shortly, but never did. (Id.) Goden and Greenberg continued to use the YWI bank account to process the payments of European campers, however, as well as to provide Rullan with periodic payments. (Id.)
Rullan spent the summer of 2011 at the Camp. Greenberg says, however, that Rullan "did not demonstrate ... that he was ready or capable to run and manage the day to day activities of the Camp." (Greenberg Decl. ¶ 37.) For example, Greenberg
Starting in May 2011, Rullan says he "began to learn about the Camp['s] business," including that two separate entities, YWL and TRI, were involved in the ownership and management of the Camp, and that Camp bills were sometimes paid late. (Rullan Decl. ¶ 29.) On June 4, 2011, Rullan says he, Greenberg, and Goden met at Goden's house at the Camp to "discuss committing [his] partnership agreement with Goden into writing and to identify any outstanding issues about [their] partnership." (Id. ¶ 30.) He says that during this meeting, Goden and Greenberg "continued to refer to [him] as Goden's full partner in the Camp." (Id.) Rullan says Goden told him the Camp had enough money to pay them each a salary of between $72,000 and $100,000 per year, and neither Greenberg nor Goden disclosed to him the extent of the Camp's liabilities. (Id. ¶¶ 30, 31.)
On July 21, 2011, Greenberg wrote Goden an email addressing the state of the Camp. In that email, Greenberg wrote that Goden should
(July 2011 Greenberg Email, Pl.'s Opp'n Greenbeg Mot. Summ. J. Ex. 26, ECF No. 208-7 (changed from all caps in original).)
On August 8, 2011, Rullan says Goden asked him to lend $50,000 to the Camp to cover a cash flow shortage. (Rullan Decl. ¶ 32.) Rullan says Goden told him that as her full partner and co-owner of the Camp, he had co-equal financial responsibility for the Camp. (Id.) Rullan says he relied on this statement and wired $50,000, the remainder of his life savings, to YWL the next day. (Id.)
Greenberg says that in August 2011, "Rullan became increasingly concerned" that Greenberg would not sell him his interest in the Camp because of his "failure to recruit enough European campers and his poor performance at the Camp that summer." (Id. ¶ 39.) He says Rullan "was adamant about having a letter of intent that he would have the opportunity to purchase [Greenberg's] interest in the Camp the next spring." (Id. ¶ 40.) Greenberg says he told Rullan that formalizing an agreement "would take years" and "attorneys would need to handle any contract...." (Id.) Nevertheless, on August 18, 2011, Greenberg says Rullan presented him and Goden with a set of proposed terms to a deal to purchase his interest in the Camp. (Id. ¶ 41.) Greenberg says he "did not want to sign" it and "walked out of the meeting" because, among other things, Rullan "had not even completed the one year vetting period[.]" (Id. ¶ 42.) On August 24, however, Greenberg, Goden, and Rullan all agreed to sign a document titled "Partnership agreement August 24th, 2011 — Timber Ridge Camp, HV, WVA." (Id. ¶ 43; Partnership and Stock Agreement, Greenberg Mot. Partial Summ. J. Ex. V, ECF No. 189-22.) Greenberg says all parties understood the document to be nothing more than a letter of intent. (Id.)
Rullan has a different understanding. He says that in the afternoon and evenings of August 15 and 18, 2011, he met with Greenberg and Goden to discuss issues regarding the partnership and Rullan's purchase of Greenberg's stake in YWL
It is undisputed, however, that on August 22, 2011, Goden wrote Gershberg an email stating as follows: "I will call you later as he is buying 1/2 of this company, Timber Ridge for 500,000. The agreement is being finalized now. It is being paid at a rate of $50,000 a year for 10 years." (August 2011 Goden Emails to Gershberg 2, Pl.'s Opp'n Greenberg Mot. Summ. J. Ex. 34, ECF No. 208-15.) The next day, she wrote another email to Gershberg stating as follows: "I am going to have Luis send you the document that is about to be signed. It is a buy out of my father's stock for $500,000. He is paying him 50,000 over the next ten years." (Id. at 1.)
On August 24, 2011, Rullan says that he, Greenberg, and Goden together drafted the partnership and stock agreement ("PSA"), and Rullan typed it while Goden and Greenberg sat next to him. (Rullan Decl. ¶ 36.) Rullan says his father and wife were both present while he, Goden, and Greenberg discussed the agreement. (Id.) That two-page document provided that "Fred Greenberg, Jill Goden and Luis Rullan, agree to the following:"
(Id.) The PSA was signed by Goden, Greenberg, and Rullan, each of whom also appear to have initialed both of its pages. (Id.)
Rullan says he would not have entered into the PSA had he known the Camp's true financial situation. (Rullan Decl. ¶ 40.) He also says that Goden "agreed she would hire an attorney to execute additional legal documents, such as transferring and registering stock certificates," but though they "both briefly spoke to an attorney by phone, Goden never hired one." (Id. ¶ 41.)
On October 27, 2011, Rullan sent Goden an email with two attached documents, each purportedly certifying his purchase of stock in TRI and YWL. (See Stock Transfer Certification Emails, Greenberg Reply Ex. OO, ECF No. 233-4; Stock Transfer Certification, Pl.'s Opp'n Greenbeg Mot. Summ. J. Ex. 53, ECF No. 208-34.) In that email, Rullan said he "just spoke to [his] `Tax advisor'" who recommended that Rullan have some record that his $105,000 in wire transfers to the United States were used to purchase stock in TRI and YWL. (Stock Transfer Certification Emails.) Goden signed and faxed the two documents to Rullan. (See Stock Transfer Certification.)
Rullan says that it wasn't until a January 2012 trip to the Camp's office in Reisterstown, Maryland that he learned of the Camp's 2010 appraised value of $2.9 million, which surprised him because he says Goden had told him it was worth $6 million. (Id. ¶¶ 42, 54.) Because of the $2.4 million loan, which Rullan says he also learned about at this time,
In late 2011 and early 2012, Rullan says Goden "began to ask [him] for more money as the Camp experienced more cash shortfalls." (Id. ¶ 62.) When she learned, however, that Rullan had exhausted his savings and his family would not contribute, Goden grew agitated. (Id.) Greenberg's wife passed away in March 2012. (Greenberg Decl. ¶ 71; Rullan Decl. ¶ 65.) Rullan says Goden told him that as a result, Greenberg now had access to all their wealth. (Rullan Decl. ¶ 66.) Rullan believes that with this wealth, Greenberg wished to again involve himself in Camp business. (Id. ¶ 66.) For his part, Greenberg says that "Rullan's ineptitude caused the Camp to lose thousands of dollars and [Greenberg] was forced to infuse the [C]amp with an additional $70,000 of [his] personal money" in 2012." (Greenberg Decl. ¶ 74.)
In early May 2012, Rullan says he told Goden he wanted to keep about $40,000 in deposits he had collected from European campers because he had amassed substantial personal debt and had not been paid according to his expectations. (Rullan Decl. ¶ 67.) He says he relented when Goden "became furious," but he demanded to know when he would be paid. (Id.) Rullan estimates he was paid a total of $27,500 from December 2010 through May 2012, and received an additional $7,000 in legal services from Gershberg. (Id. ¶ 26.) He believes that the remainder of the money he says he is owed from his work constitutes an additional contribution towards the purchase of YWL and TRI through "sweat equity." (Id. ¶ 27.)
On May 7, 2012, Greenberg says he called Rullan and asked him to send "all of
Rullan filed this lawsuit on August 14, 2012, and an extraordinarily contentious litigation ensued, with the parties unable to agree even on language to include in a joint status report. YWL, TRI, and YWI have since been added as defendants, and Goden has since filed for bankruptcy.
Federal Rule of Civil Procedure 56(a) provides that summary judgment should be granted "if the movant shows 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) (emphases added). "A dispute is genuine if `a reasonable jury could return a verdict for the nonmoving party.'" Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir.2013) (quoting Dulaney v. Packaging Corp. of Am., 673 F.3d 323, 330 (4th Cir.2012)). "A fact is material if it `might affect the outcome of the suit under the governing law.'" Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Accordingly, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment[.]" Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505. The court must view the evidence in the light most favorable to
"When faced with cross-motions for summary judgment, the court must review each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir.2003) (internal quotation marks omitted). "In considering each motion, [the court must] `resolve all factual disputes and any competing, rational inferences in the light most favorable to the party opposing that motion.'" Defenders of Wildlife v. N. Carolina Dep't of Transp., 762 F.3d 374, 392-93 (4th Cir.2014) (quoting Rossignol, 316 F.3d at 523).
Greenberg seeks summary judgment on the following claims: (1) breach of the PSA; (2) fraudulent inducement to enter the PSA; (3) unjust enrichment; and (4) shareholder oppression.
The parties correctly agree that West Virginia law governs Rullan's claim for breach of the PSA.
Greenberg argues that the PSA was an unenforceable letter of intent to enter into a later agreement, and focuses on the term providing for "a due diligence of the company" and the completion of "additional legal papers." Rullan responds that the PSA unambiguously demonstrates the parties' intent to be bound and, more specifically, that the term in question plainly shows that the parties agreed that the "due diligence" and "additional legal papers" would be completed "[a]fter th[e] agreement."
"The fundamentals of a legal `contract' are competent parties, legal subject-matter, valuable consideration, and mutual assent." Wellington Power Corp. v. CNA Sur. Corp., 217 W.Va. 33, 614 S.E.2d 680, 684 (2005) (internal quotation marks omitted). "There can be no contract" if "the minds of the parties are not in agreement" as to "one of these essential elements[.]" Id. The Fourth Circuit addressed the distinction between letters of intent and traditional contracts in Burbach Broad. Co. of Delaware v. Elkins Radio Corp., 278 F.3d 401 (4th Cir.2002), applying the modern trend in contract law to a case where West Virginia controlled. Drawing substantially from the analysis set out in Teachers Insurance & Annuity Association of America v. Tribune Co., 670 F.Supp. 491 (S.D.N.Y.1987), the court noted that "[w]hile bare-boned `agreements to agree' are not binding, courts have recognized two kinds of preliminary agreements that are binding and enforceable," called Type I and Type II. Burbach, 278 F.3d at 407. A Type I agreement "occurs when parties have reached a complete agreement (including the agreement to be bound) on all issues perceived to require negotiation." Id. Such an agreement "is preliminary only in form — only in the sense that the parties desire a more elaborate formalization of the agreement" that is desirable but not necessary. Id. "Type I agreements bind parties to their ultimate contractual objective in recognition that a contract was reached, despite the anticipation of further formalities." Id. In that sense, Type I agreements are like oral agreements meant to be formalized later, and West Virginia has long recognized that such agreements create a valid and binding contract. Id. at 407-08 (citing Brown v. Western Maryland Ry. Co., 92 W.Va. 111, 114 S.E. 457, 460 (1922)). The following factors are relevant to determining whether a Type I agreement has been made:
Id. at 408.
Unlike Type I agreements, Type II agreements
Id. at 407.
The document at issue in Burbach was a five-page letter expressly termed a "Letter of Intent" that set out various terms concerning the potential sale of radio station assets. Id. at 404. The letter stated that the transaction was subject to various conditions including (1) the buyers' due diligence review of the assets, (2) completion of disclosure schedules, (3) negotiation and execution of a mutually agreeable asset purchase agreement, and (4) FCC approval of the transfer of the stations' licenses. Id. The district court granted the defendants' motion to dismiss, concluding that the letter was not an enforceable purchase agreement and that it expired when the parties failed to reach a mutually agreeable asset purchase agreement. Id. at 405. The Fourth Circuit, however, found that the letter contained ambiguous language as to the parties' intent to be bound. And "[w]hen intent is not clear from the face of a document, whether parties negotiating a contract intended to be bound by a writing or whether they did not intend to be bound until a formal agreement was prepared and signed by them must be determined from the facts and circumstances in each case." Id. at 406. Accordingly, resolution of the issue on a motion to dismiss was inappropriate. Id. at 409.
Turning to the PSA, it is unclear whether the Burbach "preliminary agreement" framework applies to a document that is expressly titled an "agreement" and includes no conditional language. Nowhere do the words "letter of intent" appear in the PSA, nor does the PSA state — or even suggest — that the parties have reserved the right not to be bound. Rather, the PSA provides, among other things, that Greenberg "sells" to Rullan half of the total stock of YWL and TRI for $500,000, to be paid over a period of ten years. Greenberg indicated his intent to be bound by the PSA's terms by initialing and signing it. Though it was typed by Rullan, who is neither a lawyer nor a native speaker of English, the PSA contains no ambiguous language as to the parties' intent to be bound by its terms, which are sufficiently definite to create binding obligations. The PSA therefore evidences the mutual assent necessary for an enforceable contract. See Teachers, 670 F.Supp. at 498 ("It is, of course, the aim of contract law to gratify, not to defeat, expectations that arise out of intended contractual agreement, despite informality or the need for further proceedings between the parties."); Syl. pt. 1, Fraternal Order of Police, Lodge No. 69 v. City of Fairmont, 196 W.Va. 97, 468 S.E.2d 712, 714 (1996) ("It is not the right or province of a court to alter, pervert or destroy the clear meaning and intent of the parties as expressed in unambiguous language in their written contract or to make a new or different contract for them.").
Assuming the Burbach framework does apply, however, the PSA is a Type I preliminary agreement. The first Type I factor looks to whether the language of the agreement indicates an express reservation of the right not to be bound. The PSA contains no such express reservation. Nevertheless, Greenberg argues that the PSA's final provision, which provides that "[a]fter this agreement, a due diligence of the company and the additional
The second factor looks to whether there has been partial performance of the contract. Rullan says he "performed by paying $105,000 and working as Goden's partner practically for free until fired in May, 2012." (Rullan Reply 11, ECF No. 238.) It is not so simple, however, because $55,000 of that sum was used to capitalize YWI, and Rullan concedes that the remaining $50,000 was a loan. (Rullan Decl. ¶¶ 23, 32.) As to the $55,000 used to capitalize YWI, Rullan says Goden "borrowed" the money to pay Camp expenses. (Rullan Decl. ¶ 25.) Because
The third factor looks to whether all of the terms of the alleged contract have been agreed upon. Several of the PSA's terms, including those providing for the development of a procedure by which "the partners will make decisions" and for an equal salary to be set for Goden and Rullan, do call for some degree of future agreement. But those terms are not material to the focus of the transaction — the transfer of stock from Greenberg to Rullan — and they are not so vague as to destroy the mutual assent necessary to support the agreement. See Ridgeway Coal Co. v. FMC Corp., 616 F.Supp. 404, 407 (S.D.W.Va.1985) ("It is recognized that parties can agree to agree in the future. To do so, however, it is necessary that the terms to be agreed upon in the future be substantially drawn from the initial agreement."). This factor appears neutral.
The fourth and final factor looks to whether the agreement is the type of contract that is usually committed to writing. This factor cuts in favor of finding the PSA to be a Type I agreement because the PSA was a written document, signed by the parties.
Accordingly, whether or not the Burbach framework applies, the court concludes that the PSA is a contract and not an unenforceable letter of intent.
Greenberg argues, without citation to authority, that the PSA's failure to "speak to warranties and representations" as to the debts and assets of YWL and TRI somehow renders it unenforceable. Greenberg has produced no authority demonstrating that West Virginia has such a requirement, and this argument fails.
Greenberg next argues that the PSA is unenforceable because Rullan's immigration status caused the PSA to violate both federal immigration law and federal tax law concerning S corporations. Both arguments lack merit.
A contract may be "unenforceable on public policy grounds, such as illegality," but courts are "averse to holding contracts unenforceable on the ground of public policy unless their illegality is clear and certain." Smithy Braedon Co. v. Hadid, 825 F.2d 787, 790 (4th Cir.1987) (internal quotation marks omitted). Greenberg's immigration-status argument is based on the premise that Rullan was prohibited from working in the United States on his B-1 visa.
Greenberg's second argument is that the PSA is unenforceable because an S corporation (also known as a "small business corporation") may not "have a nonresident alien as a shareholder." 26 U.S.C. § 1361(b)(1)(C). TRI was an S corporation, (see 2009 TRI Tax Return, Greenberg Mot. Summ. J. Ex. G, ECF No. 189-7), and Rullan was a "nonresident alien." But a nonresident alien's purchase of stock in an S corporation is not illegal. Rather, such a purchase merely causes the entity to lose its tax status as an S corporation. See 26 U.S.C. § 1362(d)(2)(A) (a corporation's election to be an S corporation is "terminated whenever ... such corporation ceases to be a small business corporation"). This argument therefore also fails. Greenberg has not demonstrated that the PSA is unenforceable on public policy grounds.
Greenberg argues in the alternative that Rullan breached the PSA first by failing to make payments pursuant to its terms and failing to "relegate" Greenberg of his debt obligations. Issues of fact preclude a grant of summary judgment on this claim at this time.
"[U]nder West Virginia law, a party who sues for damages for breach of contract must show his own compliance with the contract or that he was prevented or relieved from compliance by the defendant." Milner Hotels, Inc. v. Norfolk & W. Ry. Co., 822 F.Supp. 341, 345 (S.D.W.Va.1993) (citing Jones v. Kessler, 98 W.Va. 1, 126 S.E. 344 (1925)). "[T]o be barred from recovery of damages by its own breach, the plaintiff's breach must be material." Id. "Normally, the issue of whether a breach is a material one is a question of fact for the jury." Id. But where the facts are not in dispute, or where the evidence presented could lead to only one reasonable conclusion, it is a question of law for the court. Id.
Greenberg says that Rullan breached the PSA by (1) failing to pay Greenberg $25,000 in January 2012 and again failing to pay him $25,000 in July 2012; (2) failing to "relegate" Greenberg from his debt obligations and assume his personal guarantees of TRI's and YWL's debts; and (3) failing to arrange for the "due diligence" or additional legal documents contemplated by the PSA's final term.
Rullan responds that (1) his August 2011 $50,000 "loan" to YWL was understood by the parties to constitute a payment to Greenberg pursuant to the PSA; (2) Greenberg's debts were forgiven by Goden and Greenberg at the time the PSA was executed; and (3) it was Greenberg who refused to comply with the PSA's final term by not tendering his stock certificates. Rullan further argues that it was Greenberg who first breached the agreement by, among other things, repudiating the sale of his stock to Rullan and attempting to convert into unsecured debt the
The voluminous exhibits submitted by the parties contain evidence sufficient for a jury to find that either Rullan or Greenberg first breached the PSA. Accordingly, Greenberg's motion for summary judgment as to Rullan's claim for breach of the PSA will be denied.
Greenberg also has moved for summary judgment on Rullan's claim of fraudulent inducement, arguing that Greenberg made no misrepresentation or material omission.
"Generally speaking, `[f]raud has been defined as including all acts, omissions, and concealments which involve a breach of legal duty, trust or confidence justly reposed, and which are injurious to another, or by which undue and unconscientious advantage is taken of another.'" Kessel v. Leavitt, 204 W.Va. 95, 511 S.E.2d 720, 752 (1998) (citation omitted). "The essential elements in an action for fraud are: `(1) that the act claimed to be fraudulent was the act of the defendant or induced by him; (2) that it was material and false; [3] that plaintiff relied upon it and was justified under the circumstances in relying upon it; and [4] that he was damaged because he relied upon it.'" Syl. pt. 1, Lengyel v. Lint, 167 W.Va. 272, 280 S.E.2d 66, 67 (1981) (citation omitted). "The critical element of a fraudulent inducement claim is an oral promise that is used as an improper enticement to the consummation of another agreement." Traders Bank v. Dils, 226 W.Va. 691, 704 S.E.2d 691, 696 (2010).
Greenberg argues that (1) Rullan failed to produce evidence of an act or omission by Greenberg sufficient to sustain a fraud claim; (2) Rullan failed to produce evidence of justifiable reliance on any allegedly material, false statement; (3) Rullan is estopped from claiming fraud because he acquiesced to the transaction with knowledge of the Camp's true financial situation; (4) Rullan failed to produce evidence of damages; and (4) Greenberg had no duty to disclose information to Rullan.
Rullan responds that (1) Greenberg had a duty to disclose material information to Rullan; (2) Greenberg owed Rullan a duty of candor; (3) Greenberg failed to disclose material information to Rullan; (4) Greenberg fraudulently represented to Rullan that he was Goden's partner; (5) Greenberg may be held liable for Goden's misrepresentations; (6) Rullan justifiably relied on the misrepresentations; and (7) Rullan suffered damages as a result.
To begin, Rullan cites no West Virginia authority establishing that an omission may give rise to a claim for fraudulent inducement. It is true that "an action for fraud can arise by the concealment of truth," and that fraud "is the
Rullan is correct, however, that West Virginia law allows for a knowing beneficiary of fraud to share liability for the fraudulent conduct of another. Wood Cty. Bank v. King, 141 W.Va. 226, 89 S.E.2d 627, 630 (1955). Material misrepresentations made by Goden of which Greenberg had knowledge (whether because he was present when she made them or for some other reason) may therefore be attributable to Greenberg.
Rullan alleges that Goden made a number of material misrepresentations on which he relied when he decided to agree to the PSA, and says he worked for the Camp for very little pay based in part on those representations. Goden, however, has yet to be deposed, and summary judgment would therefore be premature on this claim. Accordingly, Greenberg's motion for summary judgment as to Rullan's claim of fraudulent inducement will be denied.
Greenberg also seeks summary judgment on Rullan's unjust-enrichment claim against him. Maryland's choice-of-law rule applicable to unjust-enrichment claims is not entirely clear. See RaceRedi Motorsports, LLC v. Dart Mach., Ltd., 640 F.Supp.2d 660, 665-66 (D.Md.2009) (describing alternative choice-of-law approaches to unjust-enrichment claims and ultimately applying the rule of lex loci contractus). Rullan argues, and Greenberg does not dispute, that the law of unjust enrichment is substantially similar in Maryland, West Virginia, and Florida. See Cty. Comm'rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 747 A.2d 600, 607 n. 7 (2000) (unjust enrichment under Maryland law entails "1. A benefit conferred upon the defendant by the plaintiff; 2. An appreciation or knowledge by the defendant of the benefit; and 3. The acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without the payment of its value"); Realmark Developments, Inc. v. Ranson, 208 W.Va. 717, 542 S.E.2d 880, 884-85 (2000) (unjust enrichment under West Virginia law exists "if benefits have been received and retained under such circumstance that it would be inequitable and unconscionable to permit the party receiving them to avoid payment therefor"); Morris v. ADT Sec. Servs., 580 F.Supp.2d 1305, 1312 (S.D.Fla.2008) ("Under Florida law, to prevail on a claim for unjust enrichment, a plaintiff must prove that (1) `the plaintiff has conferred a benefit on the defendant, who has knowledge thereof; (2) the defendant has voluntarily accepted and retained the benefit conferred; and (3) the circumstances are such that it would be inequitable for the defendant to retain the benefit without paying the value thereof to the plaintiff.'" (citation omitted)).
The court need not determine at this time which state's law applies, because under any of these standards Rullan has produced sufficient evidence for a jury to find that Greenberg was unjustly enriched through Rullan's cash infusions to the
Greenberg says he is entitled to summary judgment on Rullan's claims of shareholder oppression because Rullan was never a shareholder in TRI or YWL.
Rullan's claim of shareholder oppression as to TRI arises under West Virginia law. West Virginia recognizes an "oppressive conduct exception to the general rule that a corporation has complete control of its affairs." State ex rel. Smith v. Evans, 209 W.Va. 340, 547 S.E.2d 278, 283 (2001). This cause of action stems from West Virginia Code § 31D-14-1430(2)(B), which authorizes a circuit court to dissolve a corporation in a proceeding by a shareholder if it is established that the "directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent." Courts may apply a number of alternatives to dissolution, however, including an award of damages. State ex rel. Smith, 547 S.E.2d at 283-84.
Oppressive conduct is tied to a violation of fiduciary duty. "While the officers and directors of a business corporation are accorded a rather broad latitude in the conduct of the affairs of the corporation, they occupy a fiduciary relationship toward it and its shareholders. The same fiduciary relationship exists on the part of the majority shareholders of a business corporation toward its minority shareholders." Syl. pt. 2, Masinter v. WEBCO Co., 164 W.Va. 241, 262 S.E.2d 433, 435 (1980). "A violation of the fiduciary relationship may result from oppressive conduct, which is conduct that departs from the standards of good faith and fair dealing which are inherent in the concept of a fiduciary relationship." Id. at syl. pt. 3. "An attempt to `freeze or squeeze out' a minority shareholder from deriving any benefit from his investment in a private business corporation, without any legitimate business purpose, may constitute oppressive conduct." Id. at syl. pt. 4.
Rullan's claim of shareholder oppression as to YWL arises under Maryland law. Maryland, like West Virginia, recognizes a cause of action for shareholder oppression. Edenbaum v. Schwarcz-Osztreicherne, 165 Md.App. 233, 885 A.2d 365, 377-79 (2005). This cause of action stems from a statute authorizing a stockholder to petition a court to dissolve a corporation on the grounds that the "acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent." Md.Code Ann., Corps. & Ass'ns § 3-413(b)(2). Oppressive conduct includes "`conduct that substantially defeats the "reasonable expectations" held by minority shareholders in committing their capital to the particular enterprise.'" Edenbaum, 885 A.2d at 378 (citation omitted). Conduct is not oppressive, however, unless these defeated reasonable expectations were both reasonable under the circumstances and central to the aggrieved party's decision to join the venture. Id. at 379.
Greenberg argues that Rullan was never a shareholder of TRI or YWL, as no stock certificates were issued to Rullan and no "formal stock purchase agreements" concerning
Goden indicates that she seeks summary judgment "with respect to all" of Rullan's claims against her. She provides no argument, however, as to Rullan's claims of conversion (which this court previously dismissed as to Greenberg). Accordingly, the court will not address Rullan's conversion claim.
First, Goden seeks summary judgment on Rullan's breach-of-contract claim based on the PSA, raising the same arguments Greenberg raised. The court has already considered and rejected these arguments, and will therefore deny Goden summary judgment on this claim.
Goden also argues in the alternative that the PSA did not constitute a partnership agreement because it concerned the sale of stock. A partnership is "an association of two or more persons to carry on as coowners a business for profit...." W. Va.Code Ann. § 47B-1-1(7); see also W. Va.Code Ann. § 47B-2-2(a) ("[T]he association of two or more persons to carry on as coowners a business for profit forms a partnership[.]"). Goden certainly represented to Rullan and others that she was Rullan's partner. (See, e.g., Goden Mot. Summ. J. Ex. JJJ, ECF No. 232-25, 232-25; Partner Emails.) She even used Rullan's supposed status as a partner to suggest that he was required to invest more money in the Camp. (See Pl.'s Ex. 27 at 5 ("Do I have a partner who is willing and able to help me with the problems of running a business? ... If I put 10000 into the business then so must you.").) Despite this, Goden suggests that her and Rullan's "use of the term `partner' should be viewed as an informal term of their relationship, not a legal binding terms between them." (Goden Reply 28 n. 25, ECF No. 232.) But Goden cites no authority suggesting that partners may not also share ownership of corporations involved in their business venture. Accordingly, this argument fails.
Second, Goden seeks summary judgment on Rullan's breach-of-contract claim based on the oral employment agreement allegedly reached in Florida in early December 2010. The court previously dismissed this claim as to Greenberg because it was barred by the statute of frauds, as the agreement could not be performed within one year of its making. See Fla. Stat. Ann. § 725.01 ("[A]ny agreement that is not to be performed within the space of 1 year from the making thereof... shall be in writing and signed by the party to be charged therewith...."). This was so because the alleged oral agreement was reached in early December 2010, but the year-long employment agreement that was its focus was not to begin until January 2011.
Rullan now raises a new argument, suggesting that Florida's statute of frauds did
This argument ignores both Rullan's allegations in his amended complaint, which refer explicitly to "an oral agreement that was to last one year," (Am.Compl. ¶ 40), and Rullan's own minutes of the meeting that gave rise to the oral agreement, which repeatedly refer to an employment term of one year that would begin in January 2011, (Pl.'s Opp'n Mot. Summ. J. Ex. 49, ECF No. 207-49). The agreement was not fully performed, as Rullan concedes that the parties terminated it before the one-year term was completed. Accordingly, Rullan's claim for breach of this agreement remains barred by Florida's statute of frauds, and summary judgment will be granted to Goden on this claim.
This case was previously stayed as to Goden, and she has not yet been deposed. Rullan's counsel has filed an affidavit pursuant to Federal Rule of Civil Procedure 56(d) pointing to relevant information that Goden's deposition could provide. The court will not grant summary judgment to Goden on her fraud claim at this time.
Rullan has produced sufficient evidence for a jury to find that Goden was unjustly enriched through Rullan's cash infusions to the Camp and by accepting Rullan's labor for little payment in return. Accordingly, Goden's motion for summary judgment on this claim will be denied.
Goden also seeks summary judgment on Rullan's claims of shareholder oppression as to TRI and YWL for the same reasons the court has already rejected, and the court will deny Goden summary judgment as to those entities.
As to YWI,
Goden briefly (and without citation to authority) argues that she is also entitled to summary judgment on Rullan's claims of negligence, breach of fiduciary
Rullan has cross-moved for summary judgment on several of his claims. None of his arguments succeed. The court has already determined that issues of fact preclude a grant of summary judgment at this time on Rullan's claim that Greenberg breached the PSA, and will therefore deny Rullan's cross-motion for summary judgment on this claim. The same goes for Rullan's claim as to Goden.
The court has granted summary judgment to Goden on Rullan's claim based on the alleged breach of an oral employment agreement, and will therefore also deny Rullan's cross-motion for summary judgment as to that claim.
For the reasons stated above, Greenberg's motion will be denied; Goden's motion will be granted in part and denied in part; and Rullan's motions will be denied.
A separate order follows.
To the extent Greenberg argues that the PSA's final provision is ambiguous and parol evidence should be admitted to clarify it, he is also mistaken. "Prior or contemporaneous parol statements may not be admitted to vary written contracts, but may be admitted to explain uncertain, incomplete or ambiguous contract terms." Glenmark Associates, Inc. v. Americare of W. Virginia, Inc., 179 W.Va. 632, 371 S.E.2d 353, 354 (1988). "Contract language is considered ambiguous where an agreement's terms are inconsistent on their face or where the phraseology can support reasonable differences of opinion as to the meaning of words employed and obligations undertaken." Syl. pt. 6, State ex rel. Frazier & Oxley, L.C. v. Cummings, 212 W.Va. 275, 569 S.E.2d 796, 798 (2002). "[A] mere difference of interpretation between the parties will not render a provision in a contract ambiguous." Jessee v. Aycoth, 202 W.Va. 215, 503 S.E.2d 528, 531 (1998). Rather, "[t]he question as to whether a contract is ambiguous is a question of law to be determined by the court." Id. Viewed in context, the PSA's final provision cannot reasonably support Greenberg's interpretation of it. The PSA is entirely devoid of conditional language, and is not ambiguous as to the parties' intent to be bound by it. The "due diligence" language appears immediately after a clause recognizing the PSA as an "agreement," and immediately before a clause providing that "the additional legal papers required for the transaction" be made, making clear that the parties did not view the agreement as contingent on the results of a due-diligence investigation.
