Opinion
C.A. No. 09C-02-102-JRJ/CCLD.
October 27, 2010.
ORDER
AND NOW TO WIT, this 27th day of October, 2010, the Court having heard and duly considered the parties' cross motions for summary judgment, IT
APPEARS TO THE COURT THAT:
1. On February 11, 2009, Plaintiffs filed suit against Defendants, claiming that Bridge Opportunity Finance, LLC and Bridge Healthcare Finance (collectively "Bridge") breached an October 16, 2008 Consulting Agreement (the "Consulting Agreement") by failing to pay Brad Ducorsky ("Ducorsky") and Blueberry Sales, LLP ("Blueberry) the balance of the consulting fee due to them upon sale of the assets of Simply Goodies, LLP ("Simply Goodies").
2. On April 1, 2009, Bridge filed its Answer, Affirmative Defenses and Counterclaim, alleging: (a) breach of contract; (b) breach of guaranty (against Ducorsky only); (c) breach of fiduciary duty; (d) fraudulent inducement; (e) fraudulent transfer; and (f) unjust enrichment.
3. By way of background, in May 2007, Blueberry agreed with Sweet Ventures, LLC ("Sweet") to combine their operating business assets into a new entity. This agreement led to the formation of Simply Goodies.
4. Blueberry and Sweet collectively contributed several million dollars of cash and other assets to form Simply Goodies and employed Ducorsky, a principle owner and senior executive of Blueberry, as the President of Simply Goodies.
5. Bridge financed the Simply Goodies venture with a $39.15 million financing package, including a revolving line of credit and a term loan secured by certain liens on certain business assets, and Bridge formed SG Holding DE, LLC ("SG Holding") as a vehicle to acquire the interests of Sweet and Blueberry.
6. Pursuant to the Consulting Agreement, Blueberry's 49% limited partnership interest in Simply Goodies was transferred to Holding, Ducorsky was engaged to assist Bridge in selling Simply Goodies, and Bridge agreed to pay a consulting fee (the "Payment") of $1,047,816.00 payable in weekly installments, together with a lump sum payment (the "Lump Sum Payment") in the amount of the difference between $1,047,816.00 and the sum of all weekly payments.
7. Pursuant to paragraph 8 of the Consulting Agreement, the Consulting Agreement "shall terminate upon the successful completion of a "Strategic Transaction." Contemporaneously with such termination, Bridge would be obligated to pay the remainder of the Payment as a Lump Sum Payment in accordance with paragraph 4 of the Consulting Agreement, together with outstanding reimbursable expenses.
8. Pursuant to paragraph 6 of the Consulting Agreement, Bridge "may immediately terminate this Agreement upon delivery of a Notice of Termination (as defined in paragraph 6(f) of this Agreement) to Ducorsky setting forth the facts that indicate that an event constituting `Good Cause' has occurred". "Good Cause" is defined as Ducorsky's willful and continuous failure or refusal to perform his duties hereunder for a continuous period of two weeks after receiving prior written notice from Bridge specified and detailed the particular actions or inactions by Ducorsky that would constitute Ducorsky's willful and continuous failure or refusal to perform his duties hereunder."
9. Pursuant to Paragraph 6(a)(ii) of the Consulting Agreement, Ducorsky "shall not receive, and shall not be entitled to receive" the Payment if terminated for "Good Cause."
10. According to Plaintiffs, Ducorsky introduced the eventual buyers of Simply Goodies to Bridge, and on December 8, 2008, Sunrise Candy, LLC purchased the assets of Simply Goodies. Plaintiffs allege that under the terms of the Consulting Agreement, this purchase constituted a "Strategic Transaction," and Bridge became obligated to pay the Lump Sum Payment (the difference between the weekly installments already paid and the $1,047,816.00) which is equal to $994,081.92 plus expenses. To date, Bridge has not paid the Lump Sum Payment.
11. Bridge disputes that it breached the Consulting Agreement, and claims that Ducorsky and Blueberry breached by fraudulently inducing Bridge to enter into an agreement to market and sell the very same equipment Ducorsky had already secretly pledged to his family company. Bridge alleges that at the time the Consulting Agreement was executed, Ducorsky had repeatedly misrepresented that the assets to be sold were free and clear of all liens. Consequently, according to Bridge, Ducorsky agreed to perform duties he never could have performed, i.e. selling the assets in a manner acceptable to Bridge when he had already pledged those assets to someone else.
12. Both sides claim there is no genuine issue of material fact as to whether Ducorsky fulfilled his obligations pursuant to the Consulting Agreement but they reach opposite conclusions. Plaintiffs argue Ducorsky fulfilled all his obligations; Bridge argues he did not, and could not possibly have done so given the "secret double pledge" of the assets.
13. After careful review of the record, the Court does not agree with the parties that there are no genuine issues of material fact as to whether Ducorsky fulfilled all his obligations under the Consulting Agreement.
A copy of the Consulting Agreement is attached as Exhibit A to Plaintiffs' Motion for Summary Judgment as to Plaintiffs' Causes of Actions. (Trans. I.D. 32066262)
According to the October 16, 2008 Consulting Agreement, "Ducorsky owns approximately 97% of the limited partnership interest of Blueberry, an entity which currently owns 49% of the outstanding limited partnership interests of Simply Goodies. . . ."
The pertinent provision in the Consulting Agreement provides:Fee. Subject to Section 6(g)(iii) of this Agreement, as consideration for entering into this Agreement and for providing the services described above, Bridge will pay Consultant a total of $1,047,816, payable in weekly installments in the amount of Six Thousand Seven Hundred Sixteen and 76/100 Dollars ($6,716.76) per week during the effective period of this Agreement, payable on the first day of each week, in arrears, together with a lump sum payment in the amount of the difference between (i) $1,047,816 and (ii) the sum of all weekly payments made by Bridge to Consultant ("Lump Sum Payment") payable on the earlier of the expiration of the Term or the earlier termination of this Agreement pursuant to Sections 6(a), 6(b) or 6(d) Consultant will be responsible for the payment of all taxes due on the payments made by Bridge to Consultant under this Agreement. Paragraph 4.a. of the Consulting Agreement.
"Strategic Transaction" is defined in paragraph 8 of the Consulting Agreement as "any change of ownership or the liquidation or the sale of all or substantially all of business or assets of Simply Goodies" acceptable in form and substance to Bridge in its sole discretion. . . ."
Paragraph 6(c).
Paragraph 6(g)(ii).
Ducorsky, on behalf of Simply Goodies and Dulces Blueberry, S.A. de C.V. (Dulces Blueberry"), granted a non-possessory pledge over assets of Simply Goodies (located in a Mexican manufacturing facility) in favor of Dulces Arbor S.A. de C.V., the landlord of the Mexican facility to guarantee a debt. Plaintiffs' Response to Motion by Defendants for Summary Judgment [Amended] (Trans. I.D. 32668595) at 2.
See opposition by Bridge Opportunity Finance and Bridge Healthcare Finance to Motion for Summary Judgment on Plaintiffs' Cause of Action (Trans. I.D. 32663965) at 3.
For instance, there is a genuine issue of material fact as to whether, by executing the pledge in favor of his family's company, Ducorsky breached the Consulting Agreement, and if so, whether that breach was material. Nor is the Court persuaded that the release, non-reliance and integration clauses in the Consulting Agreement entitle Plaintiffs to judgment as a matter of law on Defendants' Counterclaim. WHEREFORE, the cross motions for summary judgment are DENIED.
Ducorsky concedes that, "[i]f the Court were to conclude that the release, non-reliance, and integration clauses are insufficient to grant summary judgment in favor of Ducorsky on Bridge's counterclaims, then . . . there are underlying facts in dispute concerning notice of the Pledge." See Plaintiffs' Ans. Br. in Support of Plaintiffs' Motions for Summary Judgment and in Opposition to Defendants' Motions for Summary Judgment (Trans. I.D. 3317576) at 5.
Bridge's Motion to Strike Plaintiffs' Supplemental Summary Judgment Filing Styled "Opening Brief" (Trans. I.D. 33176254) is also DENIED.