MEMORANDUM OPINION & ORDER

JEFFREY J. HELMICK, District Judge.

BACKGROUND

In July 2004, Scott Hutchison and John R. Parent went into business together and formed JPSH, LLC, an Indiana limited liability company. The purpose of JPSH was to "purchase[ ], rebuild [] and build[ ] apartment buildings throughout the United States." (Doc. No. 1 at ¶ 6). Hutchison provided the "labor and knowledge in performing the construction necessary to build/rebuild the projects" while Parent's "contribution was to finance those projects." (Id. at ¶ 8). Hutchison and Parent were the sole members of JPSH, with Parent having a 51 percent interest (Doc. No. 92-19 at p. 22) and being the operating member of the entity.

Among his other business ventures, Parent was also a shareholder and officer of J-J Parent Corporation.

JPSH sought properties offered for sale at auctions by the Department of Housing and Urban Development. Among the properties purchased by JPSH between 2004 and 2005, one was located in Salyersville, Kentucky ("Magoffin Manner") and one in Eunice, Louisiana ("Beulah Gardens"). There is no dispute that following the purchase of these properties by JPSH, renovations ensued to the properties along with managing the current tenants.

Parent advanced funds to JPSH for renovations from 2004 to 2006. (Doc. No. 1 at ¶ 10). Hutchison alleges those advances, initially designated as capital contributions, were "systematically changed ... from capital contributions to loans without approval of the other member of JPSH." (Id.)

Somewhere in this time frame, Parent also became aware of previous debts incurred by Hutchison. (Doc. No. 84-1, p. 197-198). As a result, Parent advanced Hutchison $100,000 in return for a promissory note dated February 2007. (Doc. No. 92-16, pp. 5 and 16). Additional monies were advanced, according to Parent's amended counterclaim. (Doc. No. 92-16, ¶¶ 48-50).

Parent's concerns regarding Hutchison's creditors and the protection of his (Parent's) investment led him to execute the following notes and mortgages, on behalf of JPSH, on these properties:

Hutchison also signed the notes on behalf of JPSH.

It is undisputed that JPSH did not make any of the monthly payments as required in the mortgages and notes. JPSH's federal tax returns for 2008-2009 show a net operating loss for each of these years. (Doc. Nos. 92-7 to 92-12). After the execution of these documents, no payments were remitted by JPSH on their obligations. Subsequently, J-J Parent Co. initiated foreclosure proceedings against Magoffin Manor in Kentucky and against Beulah Gardens in Louisiana.

Beulah Gardens was sold at sheriff's sale on March 20, 2009 to J-J Parent Co. for $897.13. (Doc. No. 92-14). On July 31, 2009, Magoffin Manor was sold at auction to J-J Parent Co. for $533.400.00. (Doc. No. 92-13). Following the acquisition of these properties, J-J Parent organized two wholly-owned limited liability companies, Beulah Gardens, LLC and Magoffin Manor, LLC, to hold title to these properties.

On September 7, 2009, Hutchison filed suit in the Lucas County Court of Common Pleas against Parent and J-J Parent Corp. The case was placed on the commercial docket and assigned to Judge Gene Zmuda. Hutchison v. Parent et al., Case No. CI 2009-6662 ("Hutchison I"). Hutchison alleged a willful failure to make payments on the notes which resulted in the foreclosures. Parent counterclaimed on personal loans by Hutchison to JPSH as well as misappropriation of funds for a total of $177,000.00. (Doc. No. 92-16, p.6).

In November 2010, Hutchison filed a second amended complaint against Parent and J-J Parent. (Doc. No. 92-15). On February 8, 2012, Hutchison filed a notice of voluntary dismissal of his amended counterclaim. (Doc. No. 92-17). The case was scheduled for trial in April 2012. On April 18, 2012, the parties entered into a consent judgment, which Judge Zmuda approved, regarding Parent's counterclaims against Hutchison in the amount of $153,000.00. (Doc. No. 92-18).

One day after the notice of his voluntary dismissal in state court, Hutchison filed the instant action alleging the same claims against Parent and additional claims against Parent's accountant Thomas Danford. On January 15, 2014, I dismissed Danford from this litigation by granting his motion to dismiss for lack of personal jurisdiction. (Doc. Nos. 118 and 119).

This matter is now before me on cross-motions for summary judgment by the remaining parties. Also before me are the relevant responses, replies and surreplies. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332. For the reasons stated below, the motions for summary judgment are denied.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate where "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 moving party bears the initial responsibility of "informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant may meet this burden by demonstrating the absence of evidence supporting one or more essential elements of the non-movant's claim. Id. at 323-25. Once the movant meets this burden, the opposing party "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting FED. R. CIV. P. 56(e)).

Once the burden of production has so shifted, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is not sufficient "simply [to] show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the pleadings" and present some type of evidentiary material in support of its position. Celotex, 477 U.S. at 324; see also Harris v. General Motors Corp., 201 F.3d 800, 802 (6th Cir. 2000). Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322.

"In considering a motion for summary judgment, the Court must view the facts and draw all reasonable inferences therefrom in a light most favorable to the nonmoving party." Williams v. Belknap, 154 F.Supp.2d 1069, 1071 (E.D. Mich. 2001) (citing 60 Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir. 1987)). However, "`at the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter,'" Wiley v. U.S., 20 F.3d 222, 227 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 249); therefore, "[t]he Court is not required or permitted ... to judge the evidence or make findings of fact." Williams, 154 F. Supp. 2d at 1071. The purpose of summary judgment "is not to resolve factual issues, but to determine if there are genuine issues of fact to be tried." Abercrombie & Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 130 F.Supp.2d 928, 930 (S.D. Ohio 1999). Ultimately, this Court must determine "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, 477 U.S. at 251-52; see also Atchley v. RK Co., 224 F.3d 537, 539 (6th Cir. 2000).

CROSS-MOTIONS FOR SUMMARY JUDGMENT

Hutchison moves for summary judgment on his claims of breach of fiduciary duties and breach of contract. He contends there is no genuine issue of material fact that Parent violated fiduciary duties and the operating agreement, thereby entitling him to summary judgment. Parent advances three1 arguments in support of his motion for summary judgment. He contends that Hutchison's voluntary dismissal of his state court claims bars his claims from consideration under the doctrine of res judicata. Second, any actions by Parent which allegedly breach the Operating Agreement were subsequently ratified by JPSH. Third, the foreclosures on JPSH were not in breach of Parent's fiduciary duties.

1. Effect of State Court Voluntary Dismissal

Parent argues that under Ohio Civil Rule 13(A), Hutchison's voluntary dismissal in state court was ineffective insofar as it renders Hutchison's claims, refiled in this instant litigation, subject to the doctrine of res judicata. This is because the counterclaims filed by Parent in the state court litigation were compulsory counterclaims. Parent charges the Plaintiff's Ohio Civil Rule 41(A) dismissal as ineffective in dismissing those claims without prejudice.

A voluntary dismissal without prejudice is addressed by Ohio Civil Rule 41(A) as follows:

A compulsory counterclaim is addressed in Ohio Civil Rule 13(A) as follows:

Hutchison's Second Amended Complaint was based upon conduct involving the notes and mortgages regarding the Kentucky property (Magoffin Manor) and the Louisiana property (Beulah Gardens). That conduct alleged misrepresentations made to Hutchison which caused him to sign multiple notes and mortgages as a member of JPSH. Additionally, Hutchison charged that Parent, on behalf of JPSH failed to make mortgage payments, causing default on the notes and set up the subsequent foreclosure, which benefited J-J Parent Corporation.

Parent asserted the following three counterclaims in the state court litigation:

FIRST CLAIM

SECOND CLAIM

THIRD CLAIM

(Doc. No. 92-16 at p. 6).

A plaintiff has an undisputed right to dismiss an action once, without prejudice, and before the commencement of trial unless it involves a counterclaim which cannot be adjudicated independently. Holly v. Osleisek, 40 Ohio App.3d 90, 91 (1988), citing Ohio Civil Rule 41(A)(1)(a). "The party asserting preclusion bears the burden of demonstrating that the claim or issue is barred." Leatherworks Partnership v. Berk Realty, 247 Fed. App'x. 676, 679 (6th Cir. 2007), citing Goodson v. McDonough Power Equip., Inc., 2 Ohio St.3d 193 (1983).

The test for determining a compulsory counterclaim under Ohio Civil Rule 13(A) was enunciated by the Supreme Court of Ohio as follows:

Geauga Truck & Implement Co. v. Juskiewicz, 9 Ohio St.3d 12, 14 (1984). Another consideration is whether the counterclaim could have been brought as a separate action and was capable of being adjudicated independently per Ohio Civil Rule 41(A)(1)(a). See e.g., Wells Fargo Bank, Nat'l Assn. v. Wick, 2013 WL 6571830 *3 (Ohio App.8 Dist. 2013); Howard v. Sunstar Acceptance Corp., 2001 WL 481936 (Ohio App. 10 Dist. 2001).

While the loans to Hutchison were made during the life of JPSH, LLC, I cannot find they arise out of the same transaction or occurrence to characterize them as compulsory counterclaims. Parent's claim as to misappropriation of funds is related insofar as it is alleged to have occurred during Hutchison's affiliation with JPSH, but otherwise has no affiliation to the notes and mortgages which form the basis of Plaintiff's claims sufficient to render them compulsory. Similarly, Parent's allegation on the misappropriation of funds, while occurring during the life of JPSH, is a claim which could stand on its own, independent of Hutchison's claims. As Parent's counterclaims are capable of independent adjudication, they are not, in my opinion, compulsory counterclaims. Therefore, Defendant's argument on this issue is without merit.

1. Fiduciary Duties and Indiana Limited Liability Companies

As both parties move for summary judgment on the issue of fiduciary duties and the operating agreement, those arguments are considered in tandem.

The history and status of limited liability law was best summarized by an Indiana appellate court as follows:

Abdalla v. Qadorh-Zidan, 913 N.E.2d 280, 285 (Ind.Ct.App.2009).

In the context of a breach of fiduciary duty, an Indiana federal court expanded on the statutory framework in the following manner:

Grant v. Van Natta, 2013 WL 466212 *9 (S.D. Ind. 2013).

An Indiana LLC operating agreement may "eliminate or limit the personal liability of a member or manager for monetary damages for breach of a duty ...." Ind. Code § 23-18-4-42. In the absence of a stance on the duties of LLC members or managers, the Indiana courts apply traditional common law principles regarding fiduciary duties. Credentials Plus, LLC v. Calderone, 230 F.Supp.2d 890, 899 (N.D. In. 2002).

The Operating Agreement for JPSH addresses the management of the LLC in the following pertinent sections:

(Doc. No. 92-19 at pp. 6-8).

With those guiding principles in place, I now turn to the parties' arguments supporting their respective positions.

Per the terms of the Operating Agreement Parent contends he had authority to authorize the execution of notes and mortgages, to enforce his affiliate's rights on the notes and mortgages, and no duty to contribute additional capital to JPSH to prevent a default on the notes and mortgages. Upon these arguments, Parent seeks summary judgment on all claims.

Hutchison seeks summary judgment on two of the five remaining claims, breach of fiduciary duty and breach of the operating agreement. In support of his motion, Hutchison contends Parent failed meeting his fiduciary duties by "fraudulently obtaining a note and mortgage signed by the Plaintiff, failing to pay the mortgage payment due and owing by JPSH, and then not notifying Plaintiff of the problems, failure to make payment on the notes, and then buying the properties at the foreclosure sales", without advising Plaintiff in advance of these events.

Having carefully reviewed the briefs and admissible evidence in support, I find there to be genuine issues of material fact when considering Indiana common law fiduciary duties, thereby precluding summary judgment for either side.

The parties are unable to agree on the duties in question. For example, Parent states he had no affirmative duty to continue his funding of JPSH, LLC, nor did he violate any duties in foreclosing on the relevant mortgages per the terms of the Operating Agreement. However, Hutchison's quarrel with Parent is how he went about achieving these goals without notifying the other member of JPSH, LLC:

(Doc. No. 95, p. 6).

The diametrically opposing positions present questions of fact regarding the common law fiduciary duties of dealing fairly, honestly, and openly with other members. Credentials Plus, LLC, 230 F.Supp.2d at 898. Therefore, summary judgment as a matter of law cannot be granted with these factual disputes unresolved.

CONCLUSION

Accordingly, the cross-motions for summary judgment (Doc. Nos. 92 and 95) are denied.

So Ordered.