PATRICK J. DUGGAN, District Judge.
On February 12, 2010, Plaintiff John Wolding ("Plaintiff") filed this action against Defendant Richard Clark ("Defendant"), his partner in various "nonstandard auto insurance" corporations. In an Amended Complaint filed on September 28, 2010, Plaintiff alleges the following "claims" against Defendant: (1) violation of the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.; (2) "violation of fiduciary duties and oppression of minority shareholder by controlling shareholder" pursuant to Michigan Compiled Laws Section 450.1489; (3) fraud; and (4) "injunctive relief against Defendant Clark." Pursuant to the parties' stipulation, the Court entered an order on July 12, 2011, allowing Defendant to file a counter-claim.
Plaintiff and Defendant are equal (50%-50%) shareholders in a number of closely held Michigan corporations, which they formed between 1993 and 1996 to sell sub-standard or high risk automobile insurance and to sell and manage "Look!" insurance franchises. The corporations are: (1) SR Corporation of Canton, Inc. ("SR Corporation") (f/k/a 6022 North Sheldon Road Corporation); (2) A Cherry Hill Corporation ("Cherryhill Corporation") (f/k/a 32620 Cherryhill Corporation); (3) Look! Insurance Agencies, Inc. (f/k/a Look! No-Fault Auto Insurance Agencies, Inc.); (4) Look! Advertising Fund, Inc. (f/k/a Look No-Fault Auto, Inc.); (5) LIAC, Inc.; and (6) Look! Printing, Inc. (Def.'s Mot. Exs. A-G.) For ease of reference, the Court will refer to the entities collectively as "Look!" except where the name of the individual corporation is relevant. From 1993 through 2001, Plaintiff and Defendant participated in Look! as co-employees, -officers, and -directors.
Plaintiff's wife died in 2001, and he re-married a woman from California in April 2002. Plaintiff and his new wife, Susan Wolding, took an extended vacation to Florida in late 2002, and purchased a home there in 2003. Defendant believes that Plaintiff did little or nothing to manage Look! or promote Look! franchises following his move to Florida. (Def.'s Mot. Ex. H at 50-51.) Plaintiff maintains that he traveled from Florida to Michigan whenever he was needed, and for however long he was needed, when something arose at Look!. He also conducted work via telephone.
While living in Florida, Plaintiff received his full salary as an officer of Look! and the same shareholder distributions as Defendant. This money was paid to Plaintiff, as it was to Defendant, through Cherryhill Corporation. In late 2006, however, Defendant told Plaintiff that Look! would no longer pay Plaintiff's salary unless he returned to work. Plaintiff decided to retire and, at the January 5, 2007 annual meeting of shareholders, he and Defendant began to negotiate an agreement concerning the terms of Plaintiff's retirement from Look!. On January 3, 2008, Plaintiff and Defendant executed a Waiver, Consent and Approval of Shareholder's Meeting of the Look! entities, which memorialized the parties' agreement and outlined the terms of Plaintiff's retirement effective July 1, 2007. (Def.'s Mot. Exs. M, N.)
Pursuant to the Waiver, Consent and Approval of Shareholder's Meeting of the Look! entities, Plaintiff resigned from his position as co-president but retained his position on the Board of Directors and as a shareholder. (Id. Ex. M.) Upon Plaintiff's retirement, Defendant is indicated as holding the positions of Chairman, President, Director, Treasurer and Secretary, and of receiving Plaintiff's salary until Defendant also retires.
Plaintiff alleges that Defendant fraudulently induced him to retire by promising Plaintiff that he could return to Look! whenever he desired. (See Pl.'s Am. Compl. ¶¶ 80-81.) This "term" is not included in the Waiver, Consent and Approval of Shareholder's Meeting of the Look! entities that the parties executed on January 3, 2008, and Plaintiff concedes that it is not memorialized in any written agreement between the parties. (Pl.'s Resp. Ex. 60-11 at 137-38.) Plaintiff contends, however, that Defendant told him on the day Plaintiff signed the above document: "We're partners. You try it out. If you don't like it, come on back." (Id. at 136.)
In December 2008, Plaintiff divorced Susan Wolding and went to live in Europe for five and a half months. In January 2009, Plaintiff contacted Henry Beausejour II, Look's Vice President of Marketing and Defendant's son-in-law, and requested corporate financial information because Plaintiff's son was attempting to locate a buyer for Plaintiff's interest in Look!. (Def.'s Mot. Ex. H at 30, Ex. O.) Plaintiff's son was provided Look!'s tax returns. (Id. Ex. H at 30.)
On July 27, 2009, Plaintiff wrote Defendant a letter requesting that he "be given full access and supplied . . . in electronic form or hard copy . . . all of the companies [sic] records." (Def.'s Mot. Ex. P.) Apparently questioning Plaintiff's right as shareholder and board member to the documents requested, Defendant forwarded the request to Look!'s corporate counsel at Bodman, LLP, and asked the firm to respond to Plaintiff's request. (Pl.'s Resp. Exs. 66-69.) On August 7, 2009, David Walters, a lawyer at Bodman, sent Plaintiff a letter responding to his document request. (Id. Ex. 69.) The letter indicates that certain documentation had been or was being provided to Plaintiff, but that Plaintiff had no right to company newsletters as a shareholder or director. (Id.) Commenting on Plaintiff's direct communications with company employees and officers and attempts to provide direction to company employees, Mr. Walters advises Plaintiff that such contact is inappropriate, not authorized by his position as shareholder or director, and disruptive of Look!'s ability to conduct its business operations.
Plaintiff hired an attorney, Thomas Pagett, who negotiated the production of documents from Look! with Look!'s counsel during the second half of 2009. Look! produced approximately 6000 indexed documents to Plaintiff in response to his requests. (Def.'s Mot. Ex. H at 190-98, Ex. R.)
At some point in 2009, Plaintiff sought to return to Look! as an active officer and employee. Defendant responded in a letter dated November 18, 2009:
(Doc. 69 Ex. 1.)
A meeting of Look!'s Board of Directors was held on June 7, 2011, which Plaintiff and Defendant (among others) attended. At the meeting, Plaintiff and Defendant were not able to agree on a single point concerning Look!, including the election of officers or a future business plan. (Def.'s Mot. Ex. S.)
Summary judgment pursuant to Federal Rule of Civil Procedure 56 is appropriate "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). The central inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512 (1986). After adequate time for discovery and upon motion, Rule 56(c) mandates summary judgment against a party who fails to establish the existence of an element essential to that party's case and on which that party bears the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552 (1986).
The movant has an initial burden of showing "the absence of a genuine issue of material fact." Id. at 323, 106 S. Ct. at 2553. Once the movant meets this burden, the "nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986) (quoting Fed. R. Civ. P. 56(e)). To demonstrate a genuine issue, the nonmoving party must present sufficient evidence upon which a jury could reasonably find for that party; a "scintilla of evidence" is insufficient. See Liberty Lobby, 477 U.S. at 252, 106 S. Ct. at 2512. The court must accept as true the non-movant's evidence and draw "all justifiable inferences" in the non-movant's favor. See id. at 255, 106 S. Ct. at 2513.
As set forth earlier, Plaintiff alleges four "claims" against Defendant: (1) violation of the federal Fair Credit Reporting Act ("FCRA"); (2) "violation of fiduciary duties and oppression of minority shareholder by controlling shareholder" pursuant to Michigan Compiled Laws Section 450.1489; (3) fraud; and (4) "injunctive relief." Only Plaintiff's first, second, and third claims require analysis. This Court previously made clear that Plaintiff's fourth "claim" does not set forth a cause of action. (See Doc. 16 at 13.)
As indicated in the factual background section, Plaintiff alleges in his initial and amended complaints that Defendant fraudulently induced him to retire by promising that Plaintiff could return to Look! whenever he desired. (See Pl.'s Am. Compl. ¶¶ 80-81.) In response to an earlier motion to dismiss, Plaintiff contended that he is asserting a claim of fraud "by false token." Prior to the hearing on the pending motion for summary judgment, this Court assumed Plaintiff had abandoned this claim because, in response to the motion, Plaintiff neither addressed Defendant's arguments as to why the claim fails nor presented evidence to create a genuine issue of material fact with respect to the elements of this claim. See Anglers of the Au Sable v. U.S. Forest Service, 565 F.Supp.2d 812, 839 (E.D. Mich. 2008) (citing cases to find it "well settled that abandonment may occur where a party asserts a claim in its complaint, but then fails to address the issue in response to an omnibus motion for summary judgment"). At the motion hearing, however, Plaintiff's counsel cited a portion of Plaintiff's deposition testimony to show that Defendant made the alleged promise.
To allege a claim of fraud under Michigan law, a plaintiff must show (1) the defendant made a material representation; (2) the representation was false; (3) when the defendant made the representation, the defendant knew that it was false, or made it recklessly, without knowledge of its truth as a positive assertion; (4) the defendant made the representation with the intention that the plaintiff would act upon it; (5) the plaintiff acted in reasonable reliance upon it; and (6) the plaintiff suffered damage. Cummins v. Robinson Twp., 283 Mich.App. 677, 770 N.W.2d 421, 435 (Mich. Ct. App. 2009). "Future promises, along with statements pertaining to future events, generally cannot form the basis for a claim of fraud." Busch v. Dyno Nobel, Inc., 40 F. App'x 947, 964 (6th Cir. 2002) (unpublished opinion) (citing Hi-Way Motor Co. v. Int'l Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813 (1976); Van Tassel v. McDonald Corp., 159 Mich.App. 745, 750, 407 N.W.2d 6 (1987)). Promises to render future performance are normally considered contractual in nature, not the basis of a complaint for fraudulent misrepresentation. Boston Piano and Music Co. v. Pontiac Clothing Co., 199 Mich. 141, 147, 165 N.W.2d 856, 857 (1917). There is a narrow exception to this rule when the promise is "made without a present intention of performance, when the promise is given for the purpose of deceiving the promisee and influencing his conduct." Connellan v. Himelhoch, 506 F.Supp. 1290, 1297 (E.D. Mich. 1981) (citing Ainscough v. O'Shaughnessey, 346 Mich. 307, 78 N.W.2d 209 (1956); Hi-Way Motor Co., 398 Mich. at 339, 247 N.W.2d at 817 ("Th[e `false token'] exception pertains where, although no proof of the promisor's intent exists, the facts of the case compel the inference that the promise was but a devise to perpetrate a fraud."); see also Thompson v. Paasche, 950 F.2d 306, 312 (6th Cir. 1991) (citing Van Marter v. Am. Fid. Life Ins. Co., 114 Mich.App. 171, 318 N.W.2d 679, 684 (1982) ("[U]nder Michigan law, one can be held liable for broken promises when one has, at the time of the promise, a then-existing bad faith intent to break the promise.")).
In the motion for summary judgment, Defendant argues that Plaintiff's fraud claim fails because any reliance by Plaintiff on Defendant's alleged fraudulent statement was not reasonable. This is because Plaintiff inserted a provision allowing the parties to return to their positions following their retirement in a draft agreement which he submitted to Defendant and, as Plaintiff acknowledges, Defendant rejected: "I tried to put things into that retirement agreement that — to definitely make sure things were fair. It was rejected because it was too complicated. This is all that he would allow. I would not expect anything else to be allowed." (Def.'s Mot. Ex. H at 51.) It also is because, according to Plaintiff's deposition testimony, Defendant also was "badgering" Plaintiff at this time, leaving Plaintiff with the feeling that did not really have any choice but to retire, with such statements as: "You're not working here anymore. You're not productive. You're not doing anything. I'm just going to pay you the dividends. Just go away." (Id. at 52.)
Even if the Court considers Plaintiff's counsel's belated citation to Plaintiff's deposition testimony at the motion hearing to find that the alleged promise was made, Plaintiff nevertheless has not responded to Defendant's remaining arguments as to why his fraud claim fails. Moreover, having reviewed the record, the Court sees no evidence by which Plaintiff could show that, at the time the alleged promise was made, Defendant had a bad faith intent to break it. For these reasons, the Court is granting summary judgment to Defendant on Plaintiff's fraud claim.
Plaintiff's FCRA claim does not require lengthy analysis. Plaintiff alleges that Defendant violated the FCRA by obtaining or having Look!'s corporate counsel obtain Plaintiff's credit report. The only evidence Plaintiff cites in support of this claim is an August 25, 2009 entry in Bodman's billing invoices, providing:
Review by Mr. Walters of Fair Credit Reporting Act.
(Pl.'s Resp. Ex. 87.) Plaintiff argues that this entry is sufficient to create an inference that Defendant or Bodman obtained Plaintiff's credit report. This Court cannot agree.
Even when viewed in a light most favorable to Plaintiff, this evidence shows at most only that there may have been some discussion and/or research regarding the legality of obtaining Plaintiff's credit report. It fails to show that a credit report actually was obtained. In fact, Mr. Walters [Look!'s corporate counsel at Bodman] testified at his deposition in this matter that Look!'s Chief Financial Officer, C. Lynn Edel, inquired about the propriety of pulling Plaintiff's credit report and, after his firm conducted some research on the issue, he advised her not to do so. (Def.'s Mot. Ex. W at 163-64.) Defendant testified during his deposition in this matter that a credit report for Plaintiff in fact was not obtained by Look!. (Def.'s Mot. Ex. I at 254.) As Plaintiff fails to present any evidence to show that Defendant or anyone at Defendant's direction obtained such a report, Defendant is entitled to summary judgment with respect to Plaintiff's FCRA claim.
Michigan law permits a shareholder to sue for acts of the directors or those in control of the corporation which are "illegal, fraudulent, or willfully unfair and oppressive to the corporation or to the shareholder." Mich. Comp. Laws § 450.1489(1). "Willfully unfair and oppressive conduct" is defined in the statute as:
Id. § 450.1489(3). Defendant seeks summary judgment with respect to this claim, arguing that Plaintiff fails to offer evidence of "illegal, fraudulent, or willfully unfair and oppressive" conduct by Defendant.
In his Amended Complaint, Plaintiff identifies a dozen actions as examples of conduct violating the statute.
With respect to Plaintiff's request for Look!'s financial records, he fails to show that he did not receive all of the records to which he is entitled as a shareholder and Board member (and more) before this lawsuit was initiated. In fact at the motion hearing, Plaintiff's counsel conceded that Plaintiff received "everything." Initially, Plaintiff requested "all of the companies [sic] records." (Def.'s Mot. Ex. P.) Believing that this request was over-broad for entities that had been operating for sixteen years, Defendant sought guidance from Look!'s corporate counsel as to which records Plaintiff was entitled to receive and asked corporate counsel to resolve with Plaintiff's counsel any disputes regarding the document production. Plaintiff fails to identify any records that he requested but did not receive before this lawsuit was initiated, much less any records he was entitled to receive as a shareholder and Board member.
With respect to the building and opening of two company-owned franchises, Defendant shows that this was part of a business plan that (1) Plaintiff has acknowledged was presented to him during an annual shareholder meeting (see Def.'s Mot. Ex. F and Ex. B at 164-65)
Plaintiff fails to demonstrate that the remaining actions on which he relies for his minority shareholder oppression claim were illegal, fraudulent, or willfully unfair and oppressive. Plaintiff voluntarily retired from Look! and voted to approve the minutes from the January 5, 2007 annual meeting at which he voted to accept his retirement, his resignation as co-president of Look!, Defendant's appointment to the positions of Chairman, President, Director, Treasurer, and Secretary, and Defendant's receipt of Plaintiff's salary until Defendant retires. (Def.'s Mot. Ex. M.) Plaintiff does not establish that he had a right (for example, pursuant to an agreement or the corporate bylaws) to return to those positions absent agreement by a majority of the shareholders. The prepayment of expenses that allegedly reduced distributions impacted Plaintiff and Defendant proportionally.
In short, Plaintiff fails to demonstrate actions by Defendant which interfered with Plaintiff's interest as a shareholder. Defendant therefore is entitled to summary judgment with respect to Plaintiff's claim under Michigan Compiled Laws Section 450.1489.
As indicated earlier, on May 10, 2012, Plaintiff filed an emergency motion in which he seeks: (1) an amendment to the scheduling order to permit the listing of an additional expert witness regarding the impact of the alleged improper prepayments on the value of Look!; (2) an extension of discovery to investigate "financial irregularities" (i.e. prepayment of expenses) of Look!; (3) an order requiring Defendant and Look! "to correct the books and records of Look to properly disclose the transactions described above" and to account for all financial transactions occurring from 2010 to present as pertaining to undisclosed or under-disclosed expenses and payments; (4) an order requiring Defendant to refrain from interfering with Plaintiff's access to the companies' offices and records; (5) an order requiring that Look! be jointly managed by the parties until resolution of this case, with both parties receiving equal salaries and benefits; and (6) scheduling a hearing to determine if Defendant should be immediately removed from active control of Look! and whether a receiver should be appointed. Defendant filed a response to the motion indicating, inter alia, that Plaintiff was aware of the information that precipitated the emergency motion prior to Defendant's filing of its summary judgment motion and that the emergency motion is simply a tactic to delay a ruling on that motion.
The "new" information outlined in Plaintiff's emergency motion is contained in his response to Defendant's motion for summary judgment. It does not impact the Court's resolution of that motion. Nor would any of the information Plaintiff seeks to uncover through further discovery. Based on the Court's ruling with respect to the summary judgment motion, it finds no basis to grant the remaining relief requested in the emergency motion. For these reasons, the motion is being denied.
Accordingly,
Rule 18(b) to the Appendix ECF (emphasis added).
The Court wasted significant resources searching to find Plaintiff's exhibits as a result. Although the Court is grateful for defense counsel's compliance with these rules, the Court notes that Defendant's counsel should use more care in citing exhibits, as the cited testimony on several occasions was found on pages other than that which was cited, (see, e.g., Def.'s Br. in Supp. of Mot. at 5 citing Ex. H at 40, at 6 citing Ex. H at 30) and on more than one occasion, the cited exhibit did not relate to the factual assertion for which it was cited. (See, e.g., id. at 6 citing Ex. Q.)
(Am. Compl. ¶ 39.)
