ALETA A. TRAUGER, District Judge.
Defendant Lisa A. Sanderson has filed a Motion for Summary Judgment (Docket No. 42), to which the plaintiff, Red Strokes Entertainment, Inc. ("Red Strokes"), filed a Response in opposition (Docket No. 51), and Sanderson has submitted a Reply (Docket No. 56). Sanderson has also filed a Request for Judicial Notice (Docket No. 44) and several "Objections" related to the admissibility of certain evidence (Docket No. 56, Ex. 1), to which Red Strokes has filed Responses in opposition (Docket No. 64). For the reasons stated herein, Sanderson's Objections will be overruled in part, and Sanderson's Motion for Summary Judgment will be denied.
Red Strokes is an entertainment production company that was intended to facilitate musician Garth Brooks' film career. The company was formed in 1994 in Nashville, TN, where it currently maintains an office. Sanderson was the company's General Manager from approximately 1993 until 2011. Sanderson and Brooks were also close friends during her employment with Red Strokes. During the time that she worked for Red Strokes, Sanderson resided in California, where she still lives.
This case involves an acrimonious financial dispute between Red Strokes and Sanderson. From approximately 2005 to 2007, Sanderson was involved in litigation related to a personal problem. It is undisputed that she confided in Brooks about that litigation. It is also undisputed that, at some point in time, in some manner of communication, and at some unknown place, an oral agreement was made between Brooks and Sanderson related to her legal fees for that litigation (the "Legal Fees Loan").
Red Strokes alleges that the oral agreement was a loan agreement and, specifically, that Brooks set forth that Red Strokes
Red Strokes also alleges that it loaned Sanderson $2,399.61 to satisfy various California tax liens (the "Tax Loan"). Red Strokes avers that Sanderson failed to repay Red Strokes and therefore defaulted on the loans. Sanderson argues that she does not owe Red Strokes any money related to these tax withholding orders and that she was unaware of any tax payment made on her behalf to the State of California.
Red Strokes seeks to recover the amounts it is owed, in addition to pre-and post judgment interest, reasonable attorney's fees, and costs. Red Strokes also seeks a declaratory judgment that (1) no employment contract existed between Red Strokes and Sanderson, and (2) Red Strokes does not owe any money — production fees or otherwise — to Sanderson. On April 15, 2013, during the pendency of this action, Sanderson filed a Complaint against Brooks and Red Strokes in the Superior Court for California in Los Angeles County. See Lisa A. Sanderson v. Garth Brooks and Red Strokes Entertainment, Inc., et al., Los Angeles County, California, Superior Court Case No. BC505548 (Docket No. 44; Docket No. 44, Ex. 1) (the "California Action"). According to Red Strokes' Complaint and Sanderson's Complaint in the California Action, Sanderson claims that she is entitled to a production fee and either a severance or retirement payment from Red Strokes.
Sanderson has moved for summary judgment, contending that California's statute of limitations for loan agreements bars Red Strokes' claims, that the terms of the alleged loans between the parties are too vague to be enforced, and that, because of the pending California Action, the court should abstain from exercising jurisdiction over Red Strokes' declaratory relief claims. In support of her motion, Sanderson submitted only one testimonial affidavit-her own.
In its brief opposing the Motion for Summary Judgment, Red Strokes relies on
The court's findings on the Certain Objections are outlined below.
With the Certain Objections resolved, the court will now assess the merits of Sanderson's Motion for Summary Judgment.
It appears to be undisputed that, at some point in time prior to or on November 1, 2005, Brooks and Sanderson discussed Sanderson's personal legal difficulties. (Docket No. 45; Docket No. 51, Ex. 3 ¶ 7.) The conversation that took place is scantily described in the record, and the only first-hand account is set forth in Sanderson's Affidavit.
Sanderson further avers that, "[p]rior to filing this lawsuit, neither Mr. Brooks nor Red' Strokes" ever (1) "demanded that [Sanderson] repay Red Strokes for its payment [of her legal fees];" or (2) "discussed any repayment terms with Sanderson." (Id. ¶ 11.)
Red Strokes has filed two affidavits in support of its opposition to Sanderson's motion. These affidavits, from two different members of Red Strokes' accounting firm, O'Neil Hagaman, describe the transactions related to the Legal Fees Loan that took place after the conversation between Brooks (on behalf of Red Strokes) and Sanderson. The affidavits also recite the accounting firm's and Sanderson's actions related to the Tax Loan.
Cheryl Harris, a member of O'Neil Hagaman, testified that her firm was engaged to provide accounting services to Red Strokes in 1994. Her work for Red Strokes included managing all accounting and tax responsibilities including, among others, "general ledger maintenance, preparation of federal and state income tax returns," and "accounts payable, payroll, [and] cash receipts." It is undisputed that Harris worked closely with Sanderson in Sanderson's role as Red Strokes' General Manager.
Harris attests that she and her colleagues "facilitated" the payments sent from Red Strokes' bank account to Sanderson related to the Legal Fees Loan. She states that the initial loan payment in November 2005 was made directly to Sanderson, and subsequent payments were made directly to Sanderson's attorneys at her request. (Docket No. 2 at ¶¶ 6-8.) Harris and her colleagues recorded these payments in a ledger (the "Ledger") designated for Red Strokes' loans to Sanderson. (Docket No. 51, Ex. 3, ¶¶ 6-8; see id., Ex. A.) The Ledger reflects debits made to Sanderson and Wasser, Cooperman & Carter (Sanderson's attorneys) between November 3, 2005 and January 23, 2007. (Id., Ex. A) For the year 2005, the Ledger also calculates an interest balance amounting to $113.35. (Id.) As of January 23, 2007, the Ledger's closing balance amounted to $223,738.21. (Id.) The next entry on the Ledger is dated over four years later, May 13, 2011. (Id.) The Ledger includes credit entries attributed to Lisa Sanderson from May 13, 2011 through October 14,
Harris testifies that, contrary to Sanderson's testimony, she and Sanderson discussed the Legal Fees Loan and that "Ms. Sanderson expressed that the payments from Red Strokes to herself was a loan that she would repay when she was able." (Id. ¶ 10.) Harris further attests that, on December 1, 2005, Sanderson emailed Harris to request another installment of the Legal Fees Loan. (Id. ¶ 14; see also id., Ex. E.) Sanderson's email included the law firm's address, indicating that Harris should mail the check directly to her attorneys, and explained that the current amount due "is $17,143.06." (Id., Ex. E.) The December 1, 2005 email from Sanderson to Harris explains the amount owed and refers to the first installment of the loan:
(Id., Ex. E.) Later that day, Harris forwarded Sanderson's December 1, 2005 email to her colleague at O'Neil Hagaman, Dana Dennis, and asked Dennis to issue and mail a check. On December 2, 2005, Dennis forwarded the email chain to another colleague, Lynette Young, and noted that she believed the amount was "from Red Strokes and coded to Lisa's loan." (Id., Ex. F.)
Harris states that, on September 6, 2007, after Sanderson's legal proceedings had ended, Harris "sent an email to Sanderson with the subject line `loan history' and asked if Ms. Sanderson would rather [that Harris] email or mail the loan schedules to her." (Id. ¶ 18; see also id., Ex. H.) The next day, Harris emailed Sanderson and announced that she had attached two loan schedules: one, "all legal," and the second relating to "previous credit card activity." The email attached two spreadsheets: the first titled "Lisa — Loan Receivable.XLS" and the second, "lspersonal.xls." (Id., Exs. I, J, K; id. ¶ 19.) Harris attests that, upon receipt of the email and loan schedules, Sanderson "did not express surprise, ask for clarification, or otherwise dispute (1) the total amount she owed or (2) the fact that the payments from Red Strokes to Ms. Sanderson and her attorneys were clearly a loan." (Id. ¶ 21.)
Red Strokes alleges that, in January 2011, as part of the loan repayment process, Ms. Sanderson agreed that she would repay the Legal Fees Loan through withholding from her paycheck. (Id., Ex. K.) It appears from the Ledger that, in May 2011, Red Strokes began to withhold the entirety of Sanderson's paycheck and direct the money towards repayment of the loan. (Id., Ex. A.) Harris avers that Sanderson did not express "any alleged confusion or doubts" about the status of the payments as a loan until "after she had begun repaying the loan through paycheck reductions." (Id.) For her part, Sanderson maintains that she was not aware that the Legal Fees Loan would be treated as a "loan" — that Red Strokes never "demanded" that she repay the loan or discussed repayment terms with her — until the filing
On May 31, 2011, Harris forwarded Sanderson a Personal Income Tax Earnings Withholding Order for Taxes from the State of California Franchise Tax Board ("May Withholding Order") (Docket No. 51, Ex. 3, Exs. O-P; see id. ¶¶ 27-28). The May Withholding Order, dated May 20, 2011, was intended "to collect a delinquent tax debt owed by the [named] employee," Lisa Sanderson. The order states that the amount due is $1,591.49. The order instructs Sanderson's employer, Red Strokes, to take certain steps to comply with the order: (1) to deliver certain pages of the order to the employee within 10 days of receipt; (2) to calculate a withholding amount using an included chart; (3) to complete and return an "employer's acknowledgement" form; (4) to begin withholding from employee's earnings; and (5) to send the amount withheld to the Franchise Tax Board. (Id., Exs. O-P.)
Harris attests that Red Strokes used the withholding chart to calculate a withholding amount of $925.21 from Sanderson's May 31, 2011 paycheck and $666.28 from Sanderson's June 15, 2011 paycheck. But "because the net after-tax amount being paid" to Sanderson was applied to the Legal Fees Loan, "there were no after-tax funds available from which to withhold." (Id. ¶¶ 27-28.) Instead, Red Strokes notified Sanderson of the tax liability and remitted the amounts "on behalf of Sanderson, to the State and added [the amount] (as additional loaned funds)" to Sanderson's open loan file with Red Strokes.
Harris and Dennis took the same action with respect to a withholding order dated August 11, 2011, in the amount of $804.37. (Id. ¶¶ 29-32.) Dennis forwarded the notice to Sanderson on August 29, 2011, copying Harris on the email. (Id., Exs. Q-R.) The same day, Sanderson responded to the email, copying Harris. Sanderson thanked Dennis for passing along the August order and wrote, "I have sent it on to my business management firm/accountant." (Id., Ex. S; Docket No. 51, Ex. 4, Ex. A.) Harris attests that Sanderson never directed Red Strokes to not make payments to the State of California on her behalf. (Docket No. 51, Ex. 3, ¶ 33.) Harris submits that the total amount paid by Red Strokes to the State of California was $2399.61. (Docket No. 51, Ex. 3, ¶¶ 30-32.) Red Strokes seeks recovery of this amount, as well as the full amount of the Legal Fees Loan, from Sanderson.
In her Affidavit, Sanderson asserts that she was unaware that Red Strokes paid any tax liens on her behalf or that Red Strokes claimed that the tax fees were a loan until after the filing of this lawsuit. (Docket No. 45 ¶ 13.) She also claims that she never authorized or requested, either verbally or in writing, that Red Strokes pay the Tax Loan on her behalf. (Id.) In opposition, Red Strokes submits that Sanderson was aware that Red Strokes was legally required to withhold the relevant amounts from her paycheck and that the net amount of her paycheck was already being applied to the Legal Fees Loan, and that Sanderson never instructed Harris or Red Strokes not to pay the withholding orders. (Docket No. 51, Ex. 3, ¶ 33.)
Red Strokes filed its Complaint in the Circuit Court for Davidson County, Tennessee on November 16, 2011. (Docket No. 1, Ex. 1.) Sanderson removed the action to this court on January 5, 2012. (Docket No. 1.) On the same day, she filed a Motion to Dismiss for Lack of Jurisdiction
On April 15, 2013, Sanderson filed the California Action. On July 31, 2013, Sanderson filed the pending Motion for Summary Judgment and the Request for Judicial Notice related to the California Action.
Sanderson has filed a Request for Judicial Notice in this action, requesting that the court take notice of her Complaint in the California Action. (Docket No. 44, Ex. 1). Red Strokes has not opposed the motion. The court hereby takes notice of the fact that the Complaint was filed, but it makes no determination as to the validity of the allegations contained therein.
Rule 56 requires the court to grant a motion for summary judgment 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). If a moving defendant shows that there is no genuine issue of material fact as to at least one essential element of the plaintiff's claim, the burden shifts to the plaintiff to provide evidence beyond the pleadings, "set[ting] forth specific facts showing that there is a genuine issue for trial." Moldowan v. City of Warren, 578 F.3d 351, 374 (6th Cir. 2009); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "In evaluating the evidence, the court must draw all inferences in the light most favorable to the non-moving party." Moldowan, 578 F.3d at 374 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
At this stage, "`the judge's function is not ... to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial.'" Moldowan, 578 F.3d at 374 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). But "[t]he mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient," and the party's proof must be more than "merely colorable." Anderson v. Liberty Lobby, 477 U.S. 242, 249, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue of fact is "genuine" only if a reasonable jury could find for the non-moving party. Moldowan, 578 F.3d at 374 (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505).
Sanderson moves for summary judgment on Red Strokes' default claims on two grounds: first, that the statute of limitations has expired on Red Strokes' claim for default of the Legal Fees Loan under California law; and second, that the terms of the oral agreements for both the Legal Fees Loan and Tax Loan are too vague to create a binding contract. Sanderson also asks the court to refrain from exercising jurisdiction over Red Strokes' declaratory relief claims in light of the pending lawsuit in California.
In her motion, Sanderson asserts that a California statute of limitations ("SOL") for oral agreements bars Red Strokes' default claim for the Legal Fees Loan. For the reasons discussed herein, Sanderson's motion will be denied.
The parties agree that this court is bound by Tennessee choice of law rules.
In opposition, Red Strokes submits that Tennessee's statute of limitations should apply to the agreement because statutes of limitation are procedural matters. (Docket No. 51.) Red Strokes argues that the relevant Tennessee SOL provides for a six-year period that begins "on the date of the breach." Red Strokes argues that, under Tennessee law, Red Strokes' cause of action did not accrue until Sanderson breached her contract to repay the loan in 2011. (Docket No. 51 at 12.) Moreover, Red Strokes argues that its cause of action for the Legal Fees Loan accrued in Tennessee because the cause of action arises where a debtor fails to perform her promise to pay. (Id. at 16 (citing Pilcher v. Carroll, 15 Tenn.App. 423, 426 (Ct.App. 1932)).)
There is substantial uncertainty in the record with respect to the formation of the alleged Legal Fees Loan and its terms. With respect to the alleged oral agreement, the parties have submitted only a self-serving affidavit by Sanderson describing a conversation between herself and Brooks, without any detail as to time or place. And contrary to Sanderson's assertions in her brief, the Sanderson Affidavit does not support a finding that the agreement was executed in California.
For its part, Red Strokes has also failed to submit testimony with respect to the location of the alleged loan agreement's formation and its terms. However, Red Strokes offers plausible evidence from its accountants that indicates that a loan agreement was formed and executed between the parties and that substantial activity related to the loan occurred in Tennessee. Harris attests that payments to Sanderson were facilitated by O'Neil Hagaman in Nashville, Tennessee and that money was transferred from Red Strokes' bank account at SunTrust Bank in Tennessee. (Docket No. 51, Ex. 3, ¶ 6.) Moreover, documentary evidence — including correspondence and business records — substantiates Harris' testimony. The evidence submitted by Red Strokes raises genuine issues of fact as to where the contract was formed and executed, where Red Strokes' cause of action for the Legal Fees Loan accrued, and what law governs the alleged loan agreement.
Sanderson's conclusory retelling of the Legal Fees Loan's formation — without more — is insufficient to resolve the disputes of fact as to the location of the loan's formation, execution, and its terms. At this stage, the court lacks sufficient information to assess the merits of Sanderson's statute of limitations arguments because of these genuine disputes of material fact. Accordingly, Sanderson's Motion for Summary Judgment as to the time bar on Red Strokes' claim for the Legal Fees Loan will be denied.
For substantially the same reasons stated in the previous section, there is a genuine dispute of material fact as to whether Red Strokes and Sanderson entered into an enforceable contract. Sanderson submits in her affidavit that, even if the parties had entered into loan agreements, the terms of the Legal Fees Loan and the Tax Loan are too indefinite to be enforced as a matter of law. Sanderson offers no evidence to support her argument or to rebut the documentary evidence submitted by Red Strokes related to the loans. Consequently, Sanderson's generalized affidavit is insufficient to demonstrate that there is no issue of material fact as to the contract's validity.
Red Strokes submits correspondence that was exchanged contemporaneously with the loan's formation and execution. This correspondence indicates that Red Strokes considered the legal fees payments to be a loan. Red Strokes also submits testimony and business records from its accountants that sufficiently contradict many of Sanderson's naked assertions regarding the Legal Fees Loan's terms. Indeed, Red Strokes' accountants' testimony indicates that Sanderson at the very least possessed knowledge that O'Neil Hagaman — Red Strokes' accounting firm that she herself interacted with regularly — consistently treated the Legal Fees Loan as a loan. (See, e.g., Docket No. 51, Ex. 3, Exs. E, H-K.) Red Strokes demonstrates that, as of 2007, Harris sent loan repayment schedules for the Legal Fees Loan to Sanderson. (Id. Exs. H-K.) Sanderson does not dispute that she was in close contact with Harris and Dennis at O'Neil Hagaman in her professional capacity over the period of the Legal Fees Loan and until her employment at Red Strokes ended. (Docket No. 51, Ex. 3.) Moreover, a reasonable jury could infer from Red Strokes' evidentiary submissions that the Legal Fees Loan was known to both parties to be a loan, from the agreement's formation to Sanderson's alleged default.
Accordingly, because genuine issues of material fact exist as to whether the Tax Loan and Legal Fees Loan were sufficiently definite as to be enforceable, Sanderson's Motion for Summary Judgment must be denied.
In its Complaint, Red Strokes seeks a judgment from the court declaring (1) that no employment contract exists between Red Strokes and Sanderson; and (2) that Red Strokes owes Sanderson no fee, credit, or payment of any kind, either as a producer or as part of any severance or retirement package. Sanderson's complaint in the California Action pleads claims for violation of the California Labor Code related to wages, breach of oral agreement, breach of the implied covenant of good faith and fair dealing, and fraud, stemming from her employment at Red Strokes. (Docket No. 44, Ex. 1.) Sanderson asserts that, because the pending California Action implicates factual and legal issues that overlap with Red Strokes' claims here, this court should exercise its discretion and abstain from adjudicating Red Strokes' declaratory relief claims. Red Strokes has filed a Demurrer to Sanderson's California suit as well as a Motion to Stay her case, both of which appear to be pending before the Los Angeles court. (Docket No. 51 at 25; id., Ex. 1.)
The Declaratory Judgment Act provides that, "in a case of actual controversy within its jurisdiction, ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201. Therefore, the Declaratory Judgment Act provides the district court with "unique and substantial discretion in deciding whether to declare the rights of litigants" and is an example of Congress' "creat[ing] an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286-88, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995).
In Grand Trunk W. R.R. Co. v. Consol. Rail Corp., 746 F.2d 323 (6th Cir. 1984), the Sixth Circuit Court of Appeals articulated criteria a district court should consider when deciding whether to exercise this discretion. The court stated, "[t]he two principal criteria guiding the policy in favor of rendering declaratory judgments are (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Id. at 326; see also Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir.2000). To assist in analyzing whether these criteria
Sanderson requests that the court abstain from hearing the declaratory relief claims because of factors set forth by the Fourth Circuit in Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 423 (4th Cir.1998). Aetna proposed a balancing test similar to the Grand Trunk analysis. Id. Sanderson argues that, by exercising jurisdiction over Red Strokes' declaratory relief claims, this court would cause "unnecessary entanglement" between the federal and state court systems. Sanderson also asserts that Red Strokes has engaged in "procedural fencing and forum shopping" by bringing this suit in the federal court in Tennessee. Sanderson urges the court to apply the Aetna factors and abstain from exercising jurisdiction over Red Strokes' declaratory relief claims.
The appropriate test to be applied here is the Sixth Circuit's five-factor Grand Trunk balancing test. Assessing the Grand Trunk factors, the court is persuaded to maintain its jurisdiction over Red Strokes' declaratory relief claims.
It is undisputed that the present action for declaratory relief involves at least some of the issues pending in the California Action and could lead to settlement of at least some of the controversies between the parties. The record is scant with respect to Red Strokes' declaratory relief claims. Neither party has filed briefs related to the merits of Red Strokes' claims for declaratory relief, and little testimony has been submitted related to Sanderson's employment relationship with Red Strokes. But upon comparison of the meager record and the federal and state pleadings, it appears clear that overlapping material issues of fact exist as to the related claims in both actions. Consequently, a declaratory order in this action would have substantial — if not dispositive — effects on Sanderson's state court claims.
For instance, if the court were to grant Red Strokes' declaratory relief claim as to money owed between the parties, Sanderson's breach of oral agreement claim in the California Action would be significantly undercut, if not precluded. On the other hand, if the court were to deny Red Strokes' declaratory relief claims, the court's determinations of fact would be highly relevant to Sanderson's employment law claims in the California Action. Accordingly, the first factor weighs in favor of allowing Red Strokes' declaratory relief claims to proceed.
The second Grand Trunk factor also weighs in favor of Red Strokes, as discrete legal issues of Sanderson's claims related to her employment contract (if any) and relationship with Red Strokes could be
The third factor of "procedural fencing" is relevant here. A ruling for Red Strokes in this action may preclude some of Sanderson's claims in the California Action. However, the timing of the California Action weighs against the presumption of Red Strokes as a "forum shopper." Sanderson declined to file her employment and contract claims as counter-claims against Red Strokes here, which would have been appropriate, given their close ties to the factual 25 underpinnings of this action. Nevertheless, she waited to file the California Action until nearly a year and one-half after Red Strokes filed its declaratory relief claims, 11 months after this court denied her motion to transfer the action to California, and over six weeks after her window to file compulsory counter-claims in this action had expired. The chronology of Sanderson's initiation of the California Action suggests that Sanderson, and not Red Strokes, may have engaged in forum shopping by attempting to circumvent this court's jurisdiction and litigate issues inextricably bound to the declaratory relief claims in a more favorable forum.
The fourth Grand Trunk factor bears upon Sanderson's argument that Red Strokes' declaratory relief claims would lead to "unnecessary entanglement" between the state and federal courts. Sanderson fails to set forth a convincing argument that exercising jurisdiction over Red Strokes' declaratory relief claims here would "increase friction" between the federal and state systems or "improperly encroach" upon the California state court's jurisdiction. Although Sanderson is correct that California has an interest in determining Sanderson's rights as an employee under California law, this court has an interest in determining Red Strokes' rights as an employer and alleged party to a Tennessee contract. The fourth factor weighs in favor of neither party.
Sanderson has failed to argue that litigating these issues in the California Action would result in a better or more effective remedy. The court finds that this factor is neutral.
Balancing all of the factors, Red Strokes' declaratory relief claims should properly proceed in this court.
Accordingly, for the reasons stated herein, Sanderson's request that the court refrain from exercising jurisdiction over Red Strokes' claim for declaratory judgment will be denied.
For the reasons discussed herein, the Defendant's Motion for Summary Judgment will be
An appropriate order will enter.
