Opinion
NO. 2013-CA-001192-MR NO. 2013-CA-001385-MR
09-26-2014
THE HELM COMPANY, LLC APPELLANT v. AL J. SCHNEIDER COMPANY; WILLIAM T. SAFFRAN; HUMANA INSURANCE COMPANY OF KENTUCKY; CASSIDY TURLEY OHIO, INC.; and 4 BRIDGES, LLC APPELLEES AL J. SCHNEIDER COMPANY CROSS-APPELLANT v. THE HELM COMPANY, LLC CROSS-APPELLEE
BRIEF FOR APPELLANT/CROSS- APPELLEE, THE HELM COMPANY, LLC: David Tachau Katherine Lacy Crosby Lousiville, Kentucky ORAL ARGUMENT: David Tachau BRIEF FOR APPELLEE, WILLIAM SAFFRAN: H. Kevin Eddins Kacie A. Wilkinson Louisville, Kentucky ORAL ARGUMENT: H. Kevin Eddins BRIEF FOR APPELLEE, HUMANA INSURANCE COMPANY OF KENTUCKY, INC.: Christie A. Moore Reva D. Campbell Louisville, Kentucky ORAL ARGUMENT: Christie A. Moore BRIEF FOR APPELLEES, CASSIDY TURLEY OHIO, INC., and 4 BRIDGES, LLC d/b/a CASSIDY TURLEY HARRY K. MOORE: T. Morgan Ward, Jr. Cassandra J. Wiemken Louisville, Kentucky F. Scott Galt St. Louis, MO ORAL ARGUMENT: T. Morgan Ward, Jr. BRIEF FOR APPELLEE/CROSS- APPELLANT AL J. SCHNEIDER CO.: Joseph C. Souza Matthew F. Coogle ORAL ARGUMENT: Matthew F. Coogle
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE OLU A. STEVENS, JUDGE
ACTION NO. 10-CI-006391
OPINION
AFFIRMING AS TO APPEAL NO. 2013-CA-001192-MR: DISMISSING AS MOOT APPEAL NO. 2013-CA-001385-MR
BEFORE: DIXON, MOORE, AND NICKELL, JUDGES. MOORE, JUDGE: The Helm Company, LLC, appeals a directed verdict in favor of two appellees (Al J. Schneider Company and William Saffran) and a summary judgment in favor of three other appellees (Humana Insurance Company of Kentucky, Inc.; Cassidy Turley Ohio, Inc.; and 4 Bridges, LLC), entered by the Jefferson Circuit Court regarding various tort and contract claims Helm asserted against these various persons and entities. Upon review, we affirm.
I. APPEAL NO. 2013-CA-001192-MR
Helm filed its first complaint and initiated this litigation in Jefferson Circuit Court on September 13, 2010. For the sake of brevity, we will detail the facts and procedural history of this litigation as they become relevant to our analysis of the claims forming the subject matter of this appeal. Before progressing that far, however, we will begin by noting the standards that will guide our review. Summary judgment is proper when "it is manifest that the party against whom the judgment is sought could not strengthen his case at trial and the moving party would be entitled ultimately and inevitably to a directed verdict." American Ins. Co. v. Horton, 401 S.W.2d 758, 760-61 (Ky.1966) (citation omitted). And, as noted in Daniels v. CDB Bell, LLC, 300 S.W.3d 204, 215 (Ky. App. 2009):
When a directed verdict is appealed, the standard of review on appeal consists of two prongs. The prongs are: "a trial judge cannot enter a directed verdict unless there is a complete absence of proof on a material issue or if no disputed issues of fact exist upon which reasonable minds could differ." Bierman v. Klapheke, 967 S.W.2d 16, 18-19 (Ky.1998). "A motion for directed verdict admits the truth of all evidence which is favorable to the party against whom the motion is made." National Collegiate Athletic Ass'n By and Through Bellarmine College v. Hornung, 754 S.W.2d 855, 860 (Ky. 1988), citing Kentucky & Indiana Terminal R. Co. v. Cantrell, 298 Ky. 743, 184 S.W.2d 111 (1944).
Clearly, if there is conflicting evidence, it is the responsibility of the jury, the trier of fact, to resolve such conflicts. Therefore, when a directed verdict motion is made, the court may not consider the credibility or weight of the proffered evidence because this function is reserved for the trier of fact. National, 754 S.W.2d at 860 (citing Cochran v. Downing, 247 S.W.2d 228 (Ky. 1952)).
When reviewing the propriety of either a summary judgment or a directed verdict, however, questions of law are always reviewed de novo by this Court. Hardin County Schools v. Foster, 40 S.W.3d 865, 868 (Ky. 2001). 1. Helm v. Schneider: breach of contract
Schneider owns a three-towered commercial building in downtown Louisville known as Waterfront Plaza. In January of 2002, Helm and Schneider entered into a "marketing and advisory agreement." Relevant to this litigation, an addendum to their agreement provided that Helm would receive a commission equal to 2% of the gross rentals, under contractually specified circumstances, if a tenant procured by Helm to lease space in Waterfront Plaza renewed a lease. In 2005, Helm procured Humana as a tenant in Waterfront Plaza. Over the course of the next two or three years, Humana gradually increased its leasehold interests in Waterfront Plaza. In August, 2009, Humana paid Schneider a total of $33 million for an early renewal of 19 of its leases. However, Schneider did not pay Helm any commission relating to this transaction, let alone a commission representing 2% of the $33 million (e.g., $660,000) paid by Humana. As such, Helm argues that Schneider has breached the terms of their 2002 agreement and that it is entitled to $660,000.
In response, Schneider admits that it has not paid Helm any commission relating to Humana's decision to renew its 19 leases. But, it argues that it has no contractual obligation to do so. Schneider begins by citing paragraph three of the January 2002 agreement, which provided when and how Helm would have been entitled to a commission:
Client further agrees to pay Broker a commission in accordance with the Schedule (set forth in the Addendum to Marketing and Advisory Agreement), if, within one hundred twenty (120) calendar days after the expiration or termination of the Term, the Property is leased to, or negotiations continue, resume or commence and thereafter continue leading to the execution of a lease with any person or entity (including his/her/its successors, assigns or affiliates) with whom Broker has discussed the property on Client's behalf (either directly or through another Broker or agent) or to whom the Property has been submitted prior to the expiration or termination of the Term. Broker is authorized to continue negotiations[] with such persons or entities.
Broker agrees to submit a list of such persons or entities to Client not later than fifteen (15) calendar days following the expiration or termination of the Term, provided, however, that if a written offer has been submitted it shall not be necessary to include the offeror's name on the list.
(Emphasis added.)
In the absence of a contractual definition, the plain and ordinary meaning of the word is controlling. Kentucky Ass'n of Counties All Lines Fund Trust v. McClendon, 157 S.W.3d 626, 630 (Ky. 2005). Here, the January 2002 agreement does not contractually define "discussed" or "negotiations," but uses the two words interchangeably. However, the latter word has a more specific meaning than the former. See MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (11th ed.2005), page 358 (defining "discuss" to mean "to investigate by reasoning or argument," "to present in detail for examination or consideration," or "to talk about"): id. at 830 (defining "negotiate" to mean "to confer with another so as to arrive at the settlement of some matter . . ." (emphasis added)). Reading and interpreting these words in the context of this provision as a whole, we believe the more specific definition of "negotiate" was intended to apply to both words.
In the absence of a contractual definition, the plain and ordinary meaning of the word is controlling. Kentucky Ass'n of Counties All Lines Fund Trust v. McClendon, 157 S.W.3d 626, 630 (Ky. 2005). Here, the January 2002 agreement does not contractually define "discussed" or "negotiations," but uses the two words interchangeably. However, the latter word has a more specific meaning than the former. See MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (11th ed.2005), page 358 (defining "discuss" to mean "to investigate by reasoning or argument," "to present in detail for examination or consideration," or "to talk about"): id. at 830 (defining "negotiate" to mean "to confer with another so as to arrive at the settlement of some matter . . ." (emphasis added)). Reading and interpreting these words in the context of this provision as a whole, we believe the more specific definition of "negotiate" was intended to apply to both words.
With this provision in mind, Schneider further notes the following undisputed points in support of why Helm was not entitled to any commission from the August 2009 Humana lease renewals: (1) this January 2002 agreement, which otherwise specified a 2% commission in favor of Helm, expired by its own terms on June 30, 2009; (2) Helm did not submit any protected list within fifteen calendar days of June 30, 2009, much less any protected list mentioning discussions or negotiations that could have led to the Humana lease renewals; and (3) a subsequent agreement between Helm and Schneider (executed on July 22, 2009, but retroactive to July 1, 2009) generally prohibited Helm from receiving any commissions for lease renewals beginning July 1, 2009. Thus, under the plain terms of the only two contracts that could have applied in this situation, Helm was not entitled to any commission for Humana's August 2009 lease renewals.
There were some narrow exceptions to this general prohibition, but they are not relevant to this appeal.
In rebuttal, Helm does not dispute Schneider's interpretation of the January 2002 or July 2009 agreements. It urges, however, that its failure to submit a protected list (as required by the January 2002 agreement) or its waiver of renewal commissions as of July 1, 2009 (as specified in the July 2009 agreement) did not excuse Schneider from paying it a $660,000 commission for Humana's August 2009 lease renewals. As to why, Helm asserts the doctrine of equitable estoppel.
Helm has never described its theory of the case as "equitable estoppel," but has instead characterized it as a claim of fraud asserted as a defense to the enforcement of a contractual provision, rather than as a cause of action. As explained below, this is a distinction without a difference.
To be sure, the only disputes in Helm's breach of contract claim against Schneider relate to equitable estoppel. Before discussing why Helm believes Schneider's conduct supplied a basis for equitable estoppel, however, it is important to first review what equitable estoppel is. Stated generally,
[e]quitable estoppel is a defensive doctrine founded on the principles of fraud, under which one party is prevented from taking advantage of another party whom it has falsely induced to act in some injurious or detrimental way. Under Kentucky law, "equitable estoppel requires both a material misrepresentation by one party and reliance by the other party." Fluke Corporation v. LeMaster, 306 S.W.3d 55, 62 (Ky. 2010) (discussing the elements of an equitable estoppel defense).Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581, 594-95 (Ky. 2012).
The essential elements of equitable estoppel are also as follows:
(1) conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons; and (3) knowledge, actual or constructive, of the real facts. And, broadly speaking, as related to the party claiming the estoppel, the essential elements are (1) lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and (3) action or inaction based thereon of such a character as to change the position or status of the party claiming the estoppel, to his injury, detriment, or prejudice.Sebastian-Voor Properties, LLC v. Lexington-Fayette Urban County Government, 265 S.W.3d 190, 194-95 (Ky. 2008) (citations omitted).
With that said, Helm's theory of equitable estoppel depends upon the notion that a conspiracy existed between Humana, Cassidy Turley (Humana's property broker), Schneider, and one of Helm's former agents, Bill Saffran. Helm alleges that Saffran, during his tenure with Helm, acquired information indicating Humana was interested in renewing its 19 Waterfront Plaza leases within 120 days of June 30, 2009. Saffran then "negotiated" (within the meaning of paragraph three of the 2003 agreement) the prospect of such a renewal with representatives of Humana, Cassidy Turley and Schneider over the course of several months prior to leaving Helm in late June or early July of 2009 to work for Schneider. Helm alleges that Saffran, Humana, Cassidy Turley and Schneider also concealed from it their negotiations regarding Humana's early renewals. Helm alleges that if it had been aware of their discussions and negotiations, it would have included Humana's early renewals as an item on its protected list; it would not have entered into the July 2009 agreement which, as noted above, prohibited Helm from receiving any commission in this regard; and, therefore, it would have been entitled to a commission of $660,000.
Pleadings and allegations, of course, are not evidence. Education Training System, Inc. v. Monroe Guar. Ins. Co., 129 S.W.3d 850, 853 (Ky. App. 2003). Moreover, proving fraud (and by extension equitable estoppel or a conspiracy to defraud) is a heavy burden. As explained by the former Court of Appeals in Goerter v. Shapiro, 254 Ky. 701, 72 S.W.2d 444, 445-46 (1934),
[f]raud will not be presumed, and one who charges fraud assumes the burden of sustaining his accusation by clear and convincing evidence sufficient to overcome the legal presumption of innocence and honesty. Fraud may be proved by positive evidence or circumstances and inferences fairly and reasonably deducible therefrom, but it may not be proved by mere inferences, conjecture, or suspicion, and, where the proven facts or circumstances merely show inferences, conjecture, or suspicion, or such as to leave reasonably prudent minds in doubt, it must be regarded as a failure of proof to establish fraud.(Citations omitted.)
Therefore, we will turn to Helm's evidence of a fraudulent conspiracy between Saffran, Humana, Cassidy Turley and Schneider. The legal sufficiency of this evidence is the focus of our analysis.
This was one of several bases for a directed verdict asserted by Schneider, and the circuit court granted Schneider a directed verdict on a different basis, namely, its conclusion that Saffran owed Helm no fiduciary duty of disclosure at any time relevant to the circumstances of this case. We need not address the circuit court's holding because an appellate court may affirm a lower court's decision on other grounds as long as the lower court reached the correct result. See, e.g., McCloud v. Commonwealth, 286 S.W.3d 780, 786 n.19 (Ky. 2009) ("[I]t is well-settled that an appellate court may affirm a lower court for any reason supported by the record.") (Citing Kentucky Farm Bureau Mut. Ins. Co. v. Gray, 814 S.W.2d 928, 930 (Ky. App. 1991)).
Helm begins by directing our attention to two February 4, 2009 emails and an April 20, 2009 report. Helm urges that an inference fairly and reasonably deducible from a reading of these documents is that Saffran, Humana, and Cassidy Turley discussed renewing Humana's Waterfront Plaza leases on multiple occasions between the dates of these respective documents.
However, the documents in question, in our review, do not support this assertion.
The first of the two February 4, 2009 emails is from Saffran to Robbin Hansen (Humana's representative), and it states in relevant part, "When you get a chance I want to discuss the grouping of floors so that we can narrow down the expiration dates on the Humana leases." The second February 4, 2009 email was from Hansen to Bob Ryan (Cassidy Turley's representative); it forwarded the prior email Saffran sent to Hansen and added "Bill is the leasing broker for Waterfront Plaza...see below... he is wanting to true up some of the lease expiration dates. No urgency but this would be part of the Louisville work."
The April 20, 2009 report is a two-page operations report that Saffran compiled for Schneider in his capacity as the property manager for Waterfront Plaza. As an aside, part of Helm's contract with Schneider required Helm to provide property management services for Waterfront Plaza; as indicated by the February 4, 2009 emails, part of Saffran's role with Helm was to provide those services and also function as Waterfront Plaza's leasing broker. In any event, to the extent that the April 20, 2009 report is relevant, it states:
Lease Renewal Process
I spoke with Bob Ryan with the Colliers office[] out of Cincinnati and he wants to meet with me on May 6th to start preliminary talks on Humana's renewal. He said that he will also let me know what his role will be in the process. I assume that they will be leveraging for a fee. We will address this after I meet with him. Robbin Hansen will also be at the meeting.
Colliers was Cassidy Turley's predecessor company.
Colliers was Cassidy Turley's predecessor company.
Collectively, these documents do not suggest that Saffran, Humana, and Cassidy Turley discussed the possibility of Humana renewing its leases on several occasions or on any occasion; they merely suggest that "Humana's renewal" would be a subject of a discussion that would take place later on May 6, 2009. However, Hanson's comment about Saffran "wanting to true up some of the lease expiration dates" warrants explanation because it provides a measure of context to much of the other evidence discussed later in this opinion.
Initially, Humana leased only the 6th, 7th, and 8th floors in the east tower of Waterfront Plaza for a term of about five years, set to expire in December, 2010. Over the course of the next two or three years, Humana then proceeded to lease over thirty other floors throughout the east, west, and center towers. By early 2009, Humana had leased the substantial majority of Waterfront Plaza, approximately 430,050 square feet. But, Humana's interest in Waterfront Plaza was subject to nineteen different leases; each of the nineteen leases applied to different areas of Waterfront Plaza; and, the terms of the nineteen leases were not uniform and instead had expiration dates in varying months during years ranging between 2010 and 2018. The phrase "true up" was, as the parties all agree, a reference to a plan for eventually consolidating Humana's leases into something more administratively workable.
Moving on, Helm points to the fact that a meeting eventually took place between Saffran, Hansen, and Ryan on May 5, 2009. Helm urges that during this meeting these individuals must have discussed the possibility of Humana renewing some or all of its leases. In support, Helm presents a May 5, 2009 email and attachment Saffran sent to Bob Ryan a few hours after the May 5, 2009 meeting concluded. The May 5, 2009 email from Saffran to Ryan states in relevant part:
Bob,
Here is the spreadsheet with the lease commencement dates for each Humana floor. All of the floors are on a 5 year term except for the 17th floor in the West Tower. It has a 10 year term. If you have any questions please feel free to call me at anytime.
The spreadsheet included as an attachment to this email lists a total of 36 floors that Humana was leasing at the time in Waterfront Plaza (i.e., 18 floors in the east tower, nine floors in the center tower, and nine floors in the west tower). It includes the commencement date of each lease corresponding to each of these 36 floors. And, using color-coding, it separates these 36 floors into five different groups, each corresponding to what it describes as "possible renewal dates." For "Group 1" (which included the 6th, 7th, and 8th floors in the east tower of Waterfront Plaza), the "possible renewal date" was "10/1/2011." For "Group 2," it was "1/1/2012." For "Group 3," it was "11/1/2012." For "Group 4," it was "12/1/2012." Lastly, the "possible renewal date for "Group 5" was "8/1/2013."
Helm acknowledges in its reply brief filed in this matter that Saffran did inform it shortly after this meeting that he met with Bob Ryan to begin negotiations for renewing Humana's leases on the 6th, 7th, and 8th floors in the east tower of Waterfront Plaza, and that Bob Ryan had told him that he would "get back to us in 30 days." However, Helm believes that Saffran's email to Bob Ryan demonstrates that Saffran was holding something back, namely, that Humana was interested in renewing all of its leases early.
Helm notes that Saffran told Schneider something slightly different in an operations report covering the period between May 21 and June 20, 2009:
I met with Bob Ryan and Robbin Hansen earlier this month regarding the Humana lease renewal. They said they would contact us by the end of June about what they would request in a renewal package.From the omission of any mention of the 6th, 7th, and 8th floors in this operations report, combined with fact that the spreadsheet Saffran sent to Bob Ryan included groupings of every Humana lease, Helm surmises that this, too, could indicate that a subject of discussion at the May 5, 2009 meeting must have been an early renewal date for all of Humana's leases within 120 days of June 30, 2009. This is, however, another example of pure conjecture on Helm's part.
The problem with the inference Helm is attempting to draw from this evidence is highlighted by the "possible renewal dates" specified in the spreadsheet, though. The terms of Helm's January 2002 agreement with Schneider would only have allowed Helm a 2% commission for a lease renewal that occurred within 120 days of the expiration of that agreement (i.e., 120 days from June 30, 2009). The earliest of the "possible renewal dates" proposed in the spreadsheet was October 1, 2011—a date well in excess of 120 days from June 30, 2009. Stated differently, lease renewal dates may have been discussed during the May 2009 meeting, but this May 5, 2009 email and its spreadsheet attachment only demonstrate the renewal dates that were discussed did not contemplate any kind of lease renewal that Helm could have benefitted from under the terms of the January 2002 agreement.
Next, Helm points to several documents tending to indicate that the following occurred (as described in Helm's appellate brief) during the month of June 2009:
On June 10, Ms. Hansen scheduled a June 19 meeting with Cassidy Turley representatives to discuss "Renewal Strategy." Ms. Hansen also set up a meeting on Tuesday, June 23 meeting [sic] to discuss "Lease Expirations & Renewal Strategy." Before that meeting, Cassidy Turley brokers conducted a conference call where they discussed "19 different expirations" and "Extend the leases for 5 years" and "4 mos Free rent in 2009." Handwritten notes from this call show that the brokers also discussed "2% comm[ission]" . . . and an item recorded as "Tues Robbin ? Fri Bill S." In fact, after Ms. Hansen got authorization from her boss to proceed with the early renewal of Humana's leases, she did communicate directly with Mr. Saffran—instead of through Humana's broker. On June 30, 2009, Ms. Hansen wrote Mr. Saffran directly at his "helmcompany.com" address and said "I wanted to let you know that Bob Ryan will be contacting you to discuss an extension of our lease. We (Humana) are evaluating opportunities landlords will extend to strong credit tenants such as ourselves based on our(Internal citations to documents of record omitted.)
commitment to an early renewal ... ." Mr. Saffran did not tell anyone at Helm Co. about this email.
In sum, Humana held meetings in June, 2009 to discuss plans for renewing its Waterfront Plaza leases. The "19 different expirations" and "extend the leases for 5 years" notations tend to indicate that all of Humana's leases were considerations in Humana's "Lease Expirations & Renewal Strategy." The "4 mos Free rent in 2009" notation suggests that Humana was intending to implement this strategy no later than four months prior to the end of 2009, which would have been September of that year. And, something in line with this plan did occur by the end of 2009. Pursuant to a strategy Humana later dubbed "blend and extend," Humana leveraged its position as a creditworthy tenant, entered into an early five-year term renewal for all of its leases on August, 2009, and it consolidated the expiration dates for those leases into three dates, all in exchange for what turned out to be four months of free rent in 2009, additional months of free rent in 2010, and a number of other favorable lease concessions from Schneider.
To the extent that Helm believes any of the information it has recited above indicates the furtherance of a fraudulent conspiracy, however, Helm's belief is misplaced for a number of reasons. First, Humana's June 2009 meetings were between itself and its own agent, Cassidy Turley. These documents do not indicate that Saffran or Schneider participated in or knew of anything that transpired in those meetings.
Second, the earliest mention in the evidence of a plan for Humana to renew any of its Waterfront Plaza leases within 120 days of June 30, 2009 (e.g., within striking distance of Helm's 2% commission rights under the January 2002 agreement) comes from the information gleaned from Humana's meetings with Cassidy Turley. This indicates that Humana and its agent originated the concept of a 2009 renewal date; it further defeats the proposition that Schneider and Saffran could have been involved in or have anticipated "negotiations" (within the meaning of paragraph three of the January 2002 agreement) regarding such an early lease renewal date at any time prior to those meetings. Again, the evidence suggests that Saffran discussed with Humana the possibility of Humana renewing three of its leases on October 1, 2011, but this is a far cry from a plan which contemplated a nineteen-lease renewal in August, 2009, entailing discounted rentals and other renegotiated terms favorable to Humana. Indeed, Hansen testified at trial that "blend and extend" was entirely a creation of Humana and Cassidy Turley, and that it was a strategy Humana had been implementing nationwide to take advantage of general economic downturn in 2009. Helm presents no evidence to the contrary.
Third, Hansen's June 30, 2009 email to Saffran is not evidence that Humana informed Saffran of its early renewal plans, or that Saffran negotiated with Humana regarding an early renewal date within 120 days of June 30, 2009, while the January 2002 contract was still in effect. The substance of this email only suggests that a discussion regarding "an early renewal" of Humana's leases, on an unspecified date, could happen in the future with Bob Ryan of Cassidy Turley (a discussion which, as detailed below, occurred after the June 30, 2009 expiration date of the January 2002 agreement had already passed).
Additionally, Helm's insinuation that Saffran concealed this email from it is not a fair or reasonable inference from the evidence of record. Saffran's association with Helm terminated around the time of this email. Saffran testified that he was never aware of and never read Hansen's June 30, 2009 email. Hansen testified that Saffran never responded to her regarding the email, and that she could not confirm that he actually received it. At trial, Helm offered no evidence to the contrary. Moreover, we are not aware of any authority, and Helm cites none, supporting that Kentucky law simply presumes the intended recipient of an email is aware of and has read any and every email that has been sent to his or her email account.
Saffran testified he believed his association with Helm terminated on or about June 25, 2009, whereas Evan Tarbis, the managing member of Helm, testified that Saffran's official termination date, as he understood it, was July 6, 2009—the day before Saffran's official first date of employment with Schneider. What apparently triggered Saffran's departure from Helm was an incident involving Tarbis and Saffran that occurred on June 24, 2009. Helm characterizes this incident in its appellate brief merely as a "heated exchange," but Tarbis admitted in his testimony that it involved unprofessional conduct on his part. Saffran, on the other hand, testified that Tarbis loudly and publicly humiliated him in the Galt House Hotel and in the vicinity of Helm's offices for a period of over three hours regarding what Tarbis perceived as his poor work ethic. Saffran testified that Tarbis concluded by firing him; that he tried the next day, unsuccessfully, to convince Tarbis to allow him to continue working for Helm; and, that upon discussing the matter with Orson Oliver (Schneider's managing officer), Oliver offered him a position with Schneider as the Waterfront Plaza property manager, which he eventually accepted.
Next, Helm points out that Bob Ryan undisputedly met with Saffran and that the two discussed Humana's "blend and extend" plan on July 9, 2009. Helm also points out that it was not informed of their meeting or discussion.
However, Saffran owed Helm no duty of disclosure regarding what occurred at that time because, as Helm was aware, he was exclusively Schneider's employee and had been functioning as such as of July 7, 2009. For its part, Schneider did not owe Helm any duty of disclosure because it was an arm's length business associate, not Helm's fiduciary, and nothing in the January 2002 agreement otherwise required Schneider to volunteer this information to Helm. See Quadrille Business Systems v. Kentucky Cattlemen's Association, Inc., 242 S.W.3d 359, 365 (Ky. App. 2007) ("An ordinary business relationship or an agreement reached through arm's length transactions 'cannot be turned into a fiduciary one absent factors of mutual knowledge of confidentiality or the undue exercise of power or influence.'" (Quoting Anchor v. O'Toole, 94 F.3d 1014, 1024 (6th Cir. 1996))). And, Helm's only basis for supporting that Humana and Cassidy Turley had an affirmative obligation to volunteer their "blend and extend" plans to Helm is an ethical standard of practice from the National Association of Realtors enumerated as "16-13." Even if this standard were implicated in this matter, it is an ethical standard, not an affirmative legal duty of disclosure.
The standard in question provides:
All dealings concerning property exclusively listed, or with buyer/tenants who are subject to an exclusive agreement shall be carried on with the client's representative or broker, and not with the client, except with the consent of the client's representative or broker or except where such dealings are initiated by the client. Before providing substantive services (such as writing a purchase offer or presenting a CMA) to prospects, Realtors shall ask prospects whether they are a party to any exclusive representation agreements, except with the consent of the prospects' exclusive representatives or at the direction of prospects.
Helm also asserts that Saffran acted in an illicit manner because, over the course of the July 9, 2009 meeting, Saffran gave Bob Ryan its "proprietary materials." By this, Helm is referring to the color-coded spreadsheet listing Humana's lease terms and proposed renewal dates, described earlier in this opinion.
Helm does not define what "proprietary materials" are, but "proprietary information," which we believe captures Helm's intended meaning, is "Information in which the owner has a protectable interest. See "TRADE SECRET" BLACK'S LAW DICTIONARY (7th ed. 1999), page 1235. A "trade secret," in turn, is defined as:
. . . information—including a formula, pattern, compilation, program, device, method, technique, or process—that (1) derives independent economic value, actual or potential, from not being generally known or readily ascertainable by others who can obtain economic value from its disclosure or use, and (2) is the subject of reasonable efforts, under the circumstances, to maintain its secrecy.Id. at 1501.
Here, the spreadsheet that Helm has classified as its own proprietary information consisted of information that was generally known, readily ascertainable by, and common knowledge to Humana and Schneider. This information consisted of the expiration dates of, and areas encompassed by, the lease agreements Humana and Schneider had entered into over the years—information the law of Kentucky presumes Humana and Schneider were already aware of. See Clark v. Brewer, 329 S.W.2d 384, 386 (Ky. 1959) (explaining "one who signs a contract is presumed to know its contents"). As such, Saffran did not compromise any of Helm's proprietary information when he gave Bob Ryan the spreadsheet.
Next, Helm asserts "Saffran admitted that when a Helm Co. representative conferred with him in July to discuss what projects he had been working on so they could be included on Helm Co.'s protected list, Mr. Saffran deliberately withheld information about the Humana renewal discussions." What is puzzling about this statement and what this statement omits is that Helm's representative only "conferred" with Saffran in this manner on July 17, 2009—two days after Helm's deadline for submitting a protected list had come and gone. Thus, whatever Saffran allegedly said or did not say to Helm's representative on this date is irrelevant.
Finally, Helm argues that Schneider fraudulently induced it to enter into the July 22, 2009 agreement. As discussed earlier, this agreement was retroactive to July 1, 2009, and prohibited Helm from receiving lease renewal commissions from that date going forward. Helm argues that had it known about Humana's "blend and extend" plan for an early renewal on August 9, 2009, it would not have entered the July 22, 2009 agreement.
An assumption underpinning this argument is that, absent the July 22, 2009 agreement, Helm would otherwise have had a right to a commission from the August 9, 2009 renewals. But, this assumption is unsupported. Helm had failed to submit a protected list on July 15, 2009, and had thus forfeited any chance of receiving a commission for this transaction several days before it executed the July 22, 2009 agreement. Furthermore, there is no evidence that Helm (or Saffran, while acting in Helm's employ) participated in any negotiations regarding the August 9, 2009 renewals, or that any such negotiations occurred on or before the January 2002 agreement expired on June 30, 2009.
Another unsupported assumption is that Helm had a right to know about Humana's "blend and extend" plan prior to July 15, 2009, when its protected list was due. However, Helm cites no authority supporting that Schneider was required to volunteer to Helm what it knew about Humana's plans prior to July 22, 2009, or to otherwise share responsibility for drafting and timely submitting Helm's protected list. Helm does not detail any kind of misrepresentation Schneider might have used to induce Helm into entering the July 22, 2009 agreement. In fact, Helm drafted the July 22, 2009 agreement and, according to its own managing member, Evan Tarbis, Schneider dictated the terms and Helm merely agreed to them.
At best, Helm had a right to know what Saffran knew prior to his departure from Helm. Taking Tarbis's testimony at face value, Saffran left on July 6, 2009. And, the evidence of record does not demonstrate Saffran knew about Humana's plans on that date. Until July 9, 2009, the record only demonstrates Saffran anticipated Humana might renew three of its Waterfront Plaza leases on or about October 1, 2011. Helm also admits that Saffran informed it of this prior to when he left to work for Schneider.
To conclude, this is the sum of what Helm has cited in its brief to support its theory of equitable estoppel. It gives cause for suspicion, is grounds for conjecture and surmise, but it does not constitute clear and convincing evidence necessary to support fraud or equitable estoppel. And, because equitable estoppel was Helm's only legal basis for demonstrating that Schneider was in breach of contract, we find no error in the circuit court's decision to direct a verdict on this claim in favor of Schneider. 2. Helm v. Schneider: procuring cause
In a footnote of its brief, Helm has attempted to make an additional argument that the circuit court erred by excluding certain evidence and then prohibiting it from later filing an offer of proof regarding that evidence, per Kentucky Rules of Evidence (KRE) 103(a)(2). The video record citations provided by Helm relating to this particular argument demonstrate the nature of the evidence Helm sought to introduce. At trial, Robbin Hansen testified that she had left a commission-based real estate job for her current salary-based employment with Humana. Helm then sought to elicit testimony from Hansen to the effect that leaving commission-based employment for salary-based employment was desirable. When the appellees objected to this line of questioning, Helm explained that Hansen's testimony in this respect would be relevant because Saffran had left Helm's employ, which was commission-based, for Schneider, which was salary-based, and Saffran's counsel had asserted during opening statements that because Saffran was effectively making less at Schneider, he had little incentive other than being fired from Helm to seek a job with Schneider. However, even if the circuit court had properly admitted this testimony, its admission would not have affected our analysis in any way. Conjecture regarding Saffran's motives for leaving Helm does not cure Helm's failure to prove that Saffran or any of the other appellees defrauded it.
In Kentucky, the general rule is that "a real estate broker is entitled to a commission where he has been the procuring cause of sale, even though the owner enters into negotiations with the person so procured and consummates the sale." Mayo v. Century 21 Action Realtors, Inc., 823 S.W.2d 466, 468 (Ky. App. 1992). This is what is referred to as the doctrine of procuring cause. Below, Helm asserted this doctrine as an alternative claim of recovery against Schneider. The circuit court dismissed this alternative claim, and Helm now argues the circuit court erred in doing so.
We disagree with Helm's contention of error for at least two reasons.
First, for the doctrine of procuring cause to apply at all, there must be some evidence demonstrating that the broker claiming the commission "set in motion the machinery by which the work was done, which without break in its continuity, was the procuring cause of the sale." Brooks v. Tipton, 298 Ky. 490, 183 S.W.2d 496, 498 (Ky. 1944). As discussed above and in the context of Helm's breach of contract claim, such evidence was lacking in this matter. No evidence demonstrates that Helm or any of its agents had any hand in Humana's decision to "blend and extend" its leases in August, 2009.
Second,23 Williston on Contracts § 62:19 (4th ed. 2002) (footnotes omitted, emphasis added); see also Eitel v. Owen, 284 S.W.3d 147, 148 (Ky. App. 2008).
[a] broker may by special agreement make the payment of commission dependent upon a contingency, or the happening of a condition precedent, and unless that contingency occurs or the contingency happens, or its performance is excused, there is no right to recovery. Likewise, a seller is entitled to prescribe any lawful condition on the real estate broker's right to a commission to which the parties consent, notwithstanding the general rule that the broker is entitled to a commission if the broker is the procuring cause of the sale.
In Eitel, this Court similarly indicated that the doctrine of procuring cause had no application if a commission was prohibited by contract due to the failure of a condition precedent, and the failure of the condition precedent did not arise due to the misconduct of the party who would otherwise owe the commission. Id. at 148 (explaining "[W]here a definite time is specified in the listing agreement, the broker may only recover a commission (1) if the sale occurs within the specified period or (2) if there is evidence that the owner "deferred the sale until after the time limit with the intention and purpose of circumventing the broker's right to the commission." (quoting Reedy v. Beauchamp, 307 Ky. 409, 211 S.W.2d 393, 394 (1948)).
Here, even if Helm had made a showing that it was the procuring cause of Humana's 2009 lease renewals, Helm negotiated a contract with Schneider that included a term specifically stating when and under what circumstances Helm would receive a commission for it. Their agreement clearly and unambiguously qualified Helm's right to receive a commission for any lease executed 120 days after June 30, 2009, upon Helm's submission of a protected list no later than July 15, 2009. There is nothing illegal about this agreement, and we will enforce a contract when its terms are clear and unambiguous. If Helm did not want this condition precedent, it should not have contracted for it. Because Helm did contract for it, however, and because there is no evidence of fraud or misconduct on the part of Schneider, Helm cannot now use the doctrine of procuring cause to circumvent it. 3. Helm v. Schneider: quantum meruit/unjust enrichment
Helm also asserted the equitable doctrines of quantum meruit and unjust enrichment as alternative claims of recovery against Schneider. The circuit court dismissed these alternative claims, and Helm now argues the circuit court erred in doing so. However, where there is an express contract, as there was here, the terms of the contract control and recovery is not available based upon implied contract theories such as quantum meruit and unjust enrichment. See Codell Const. Co. v. Commonwealth, 566 S.W.2d 161, 165 (Ky. App. 1977); Sparks Milling Co. v. Powell, 283 Ky. 669, 143 S.W.2d 75, 76 (1940); Bates v. Starkey, 212 Ky. 347, 279 S.W. 348, 350 (1926). Accordingly, the circuit court did not err in dismissing these claims. 4. Helm v. Saffran: breach of fiduciary duty
Helm cites two Kentucky cases in support of its argument that equitable claims of restitution and unjust enrichment are permitted even where an express contract otherwise governs the rights of the parties. The first of these cases is Quadrille Business Systems, 242 S.W.3d 359, and it undermines Helm's argument. There, no enforceable contract existed, and a quantum meruit claim was allowed to proceed. Id. at 364.
The second case is Lofton v. Fairmont Specialty Ins. Managers, Inc., 367 S.W.3d 593 (Ky. 2012). It provides that in the context of a contingency fee agreement between attorney and client, if (1) the client discharges the attorney without cause, or (2) the attorney withdraws from representation for good cause shown, the attorney can recover, and can only recover, the value of his services from the client on a quantum meruit basis. Id. at 597-98. Lofton is distinguishable because its holding does not apply outside the context of attorney-client relationships. Moreover, nothing in Lofton stands for the proposition that equity permits a fee that a contract otherwise prohibits. Typically, the "contingency" in contingency fee agreements prohibits an attorney from receiving any fee when the client loses, not when the client wins but decides to fire the attorney without cause.
In its complaint, Helm alleged Saffran breached fiduciary duties he owed to it by:
failing to treat Helm Co. honestly, loyally and faithfully; by failing to be candid and disclose information to Helm Co. that was material to Helm Co.'s business; by acting deceitfully as to his communications with Schneider Co., Humana and Humana's brokers with the apparent objective of defeating Helm Co.'s rights to hundreds of thousands of dollars in renewal commissions provided in the 2002 Agreement; by actively diverting the opportunity to renew Humana's leases from Helm Co.; and by promoting Saffran's own self-interest ahead of and to the detriment of Helm Co's interests.
Stated differently, Helm's breach of fiduciary duty claim against Saffran was a repackaging of its claim of equitable estoppel against Schneider based upon exactly the same evidence. We have already discussed at length that evidence does not support Saffran breached any fiduciary duty he might have owed Schneider. As such, the circuit court did not err in dismissing this claim. 5. Helm v. Cassidy Turley; Helm v. Humana; Helm v. 4 Bridges, LLC: aiding and abetting breach of fiduciary duty
Helm asserted civil causes of action against Cassidy Turley, its affiliate 4 Bridges (which also functioned as Humana's broker and operated under "Cassidy Turley" as its trade name) and Humana alleging these entities had assisted Saffran in breaching fiduciary duties he owed to Helm. As discussed, no evidence introduced at trial demonstrates Saffran breached any fiduciary duty he might have owed Helm; and, in the absence of any breach, Helm's claims against Cassidy Turley and Humana are untenable. Accordingly, the circuit court did not err in dismissing these claims. 6. Helm v. Saffran: breach of contract
Helm also asserted Saffran was liable to it for breach of contract. The contract Saffran allegedly breached was executed December 3, 2002, and provides in relevant part:
Joseph B. Helm, Jr. the principal broker for the Helm Company, LLC, hereinafter referred to as "Broker", and William T. Saffran, hereinafter referred to as "Agent", in consideration of the mutual covenants and promises herein contained, agree as follows:
1. Covenants of Broker.
. . .
(d) Broker agrees to assist Agent in his work by advice and cooperation in every way practical.
2. Covenants of Agent.
(a) Agent agrees to work diligently to exert his best efforts to sell, lease or manage any and all real estate listed with or managed by Broker and available to Agent and to competently perform commercial real estate services for the benefit of the Helm Company and its clients.
(b) Agent agrees to solicit additional listings, clients and customers in the name of the Helm Company and otherwise promote the business of Broker.
(c) Agent agrees to devote full time and utilize best efforts with regard to his work with Broker and the Helm Company. Agent further agrees not to engage in any business endeavor in competition with Broker or that will otherwise detract from Agent's full time responsibilities as a fiduciary of the Helm Company and its clients.
. . .
5. Responsibility for Payment of Fees and Costs.
(a) Broker and Agent agree, during the term hereof, at their own expense, to keep their respective licenses in full force and effect . . .
. . .
6. Commissions and Fees. Broker shall establish the fees to be charged any client or customer of The Helm Company. Broker shall advise Agent of all fee arrangements for projects or transactions in which Agent is a participant. When Agent shall perform any service hereunder whereby a commission or fee is earned, the commission or fee shall, within fifteen (15) days of
collection, be divided between Broker and Agent in accordance with Exhibit A to this Agreement entitled "Division of Fees". . . .
. . .
8. Assignments. Broker has the exclusive right to assign particular prospects of the Helm Company to any agent or broker of the company. . . .
9. Termination of Agreement. Either party may terminate this agreement at any time and for any reason upon written notice given to the other. The rights of the parties to fees, commissions or divisions thereof which accrued prior to the time of said notice shall not be diverted by the termination of this agreement, provided Agent has secured a signed contract, lease or other written obligation, or performed billable client services, as of the date of termination. For a period of twenty-four months following termination of this Agreement, Agent shall be obligated to pay to the Helm Company fifty percent (50%) of any fees or commissions earned by Agent for work involving persons or organizations that were clients of the Helm Company during Agent's period of association unless Agent had represented such person or organization prior to his association with the Helm Company.
13. Miscellaneous.
. . .
(b) This agreement shall be binding on and inure to the benefit of the parties hereto and their respective permitted heirs, successors and assigns. The rights of Broker under this Agreement are freely assignable by it. The obligations of the undersigned Agent are neither assumable nor assignable.
. . .
The contract also specified that Saffran would work in the capacity of an "independent contractor," and it included two different executing signatures. Saffran signed on a line that appears directly below the word, "AGENT," whereas Joseph B. Helm, Jr., signed on a line that appears as depicted below:
BROKER:
/s/_________
Joseph B. Helm, Jr.
The Helm Company
Before discussing what Helm's theory of Saffran's breach is, it is important to delineate what it is not. As noted, one of the roles Saffran played over the course of his work as Helm's independent contractor was as the property manager of Waterfront Plaza. When Schneider hired him as its salaried employee on July 7, 2009, it hired him to perform exactly the same property management duties. The evidence indicates Saffran has worked for Schneider since July 7, 2009, at an annual salary of $75,000. By the trial date in November 2012, he had received in addition to his salary a yearly bonus of $25,000 in 2009; $30,000 in 2010; and $30,000 in 2011.
Helm's argument is not that Saffran violated the December 2002 agreement by providing Schneider with property management services within twenty-four months of July 6, 2009 (i.e., the date Tarbis testified Saffran departed from Helm and the agreement terminated). Rather, Helm's argument is that all or a large, unspecified part of the salary and bonuses that Schneider has paid Saffran for property management services since July 7, 2009, was nothing more than a pretext for paying Saffran a disguised brokerage commission for the August 2009 Humana lease renewals. Accordingly, Helm invokes sections 2(c) and 9 of the December 2002 agreement to argue that because it believes this compensation essentially constituted brokerage commissions, it is entitled to half of what Saffran has made in salary and bonuses from Schneider since July 7, 2009.
As an aside, nothing of record indicates Saffran's employment with Schneider is or was a sham; and, no evidence indicates what part, if any, of his remuneration from Schneider bore any relation to the August 2009 renewals. However, the ground ultimately relied upon by the circuit court to dismiss this particular claim was more basic. The circuit court held that the contract Helm was seeking to enforce had actually terminated in 2005, and was thus unenforceable. Upon review, we agree.
We begin by noting who the parties to this agreement were: "agent" and "broker." "Agent" was, of course, a reference to Saffran. "Broker," on the other hand, was not a reference to The Helm Company, LLC. It was solely a reference to Joseph B. Helm, Jr., in his individual capacity. That much is apparent because: (1) the first sentence of the agreement defines Joseph as "broker"; (2) despite including "The Helm Company" under his signatory line, nothing in the agreement indicates Joseph was executing the agreement on behalf of the Helm Company; (3) the agreement describes "The Helm Company" in no fewer than five places as an entity separate and apart from "broker" and classifies it as "the business of Broker"; (4) "broker" is described as needing a brokerage license, which, in Kentucky, only a human being is capable of obtaining; and (5) the agreement provides that brokerage commissions shall be divided with "broker," and Kentucky law only allows brokerage commissions to be divided between human beings with brokerage licenses. In short, the December 3, 2002 agreement was an agreement between Joseph B. Helm, Jr., and Saffran. At best, Helm was merely a third-party beneficiary.
See sections 2(a) and (c), 6, 8, and 9.
See section 2(b).
See section 5(a); see also Kentucky Revised Statutes 324.040(3) (providing "Every applicant for a license shall be at least eighteen (18) years of age and shall have attained a high school diploma or its equivalent. After an applicant passes the required examination, the commission shall issue a license to him").
See section 6.
In relevant part, KRS 324.020 provides:
. . .
(4) No broker shall split fees with or compensate any person who is not licensed to perform any of the acts regulated by this chapter, except that a broker may:
(a) Pay a referral fee to a broker licensed outside of Kentucky for referring a client to the Kentucky broker; or
(b) Pay a commission or other compensation to a broker licensed outside of Kentucky in compliance with KRS 324.235 to 324.238.
With this in mind, Joseph was the sole owner, managing member, and principal broker of Helm. He hired both Saffran and Tarbis, Helm's current owner and managing member. However, he died in a tragic car accident in September, 2005.
Helm asserts that the December 3, 2002 agreement remained in force in spite of Joseph's death and that it continued to exist until it was eventually terminated in 2009 when Saffran went to work for Schneider. As to how it survived Joseph's death, Helm points to section 13(b), which provides the agreement was intended to "be binding on and inure to the benefit of the parties hereto and their respective permitted heirs, successors and assigns. The rights of Broker under this Agreement are freely assignable by it." As it goes, Helm's theory is that Joseph's rights and duties under the agreement either passed directly upon his death to Helm, or to Joseph's widow, Rose Helm, who then assigned the agreement to Tarbis when he bought Helm from her later on in 2006.
To the extent Helm is arguing that the death of one party to a contract does not generally constitute a revocation or termination of the contract, Helm is correct. However, there are caveats. As explained in Bates v. Starkey, 212 Ky. 347, 279 S.W. 348, 349 (1926),
[w]here distinctly personal services, requiring peculiar skill, are to be rendered by each of the contracting parties as inducements of the contract, the death of either of the parties is the death of the contract. But the fact that one of the parties to the contract is to render personal services does not necessarily have the effect of terminating the contract upon the death of the other party. For instance, whether a contract is terminated by the death of an employer must depend upon the nature of the contract—whether it is one requiring the continuing existence of the employer, for performance on his part, or one which can, according to its spirit and meaning, be performed by his administrators.(Quoting 6 R. C. L. 1011).
Here, the December 2002 agreement was unquestionably a personal services contract. Pursuant to its terms, it required Saffran to utilize his experience, skill, and qualifications to work for Joseph as a sales associate at Joseph's brokerage firm, Helm. By its plain terms, however, Joseph was also required to render personal services to Saffran as an inducement to the contract: section 1(d) required Joseph, in turn, to assist Saffran "in his work by advice and cooperation in every way practical." Moreover, Joseph obligated himself to function as Saffran's "principal broker" and to allow Saffran to work under his principal broker's license. See section 5(a). In the absence of a principal broker, Kentucky law prohibited Saffran from performing any work as a sales associate. Stated differently, Joseph agreed to advise and guide Saffran based upon his own unique business skill and experience and to function as Saffran's principal broker; and Saffran did not agree to accept the advice and guidance of anyone other than Joseph, or to work under any principal broker other than Joseph.
See, e.g., KRS 324.010(4) (providing that "principal broker" means "a person licensed as a broker under KRS 324.046 who, in addition to performing acts of real estate brokerage or transactions comprehended by that definition, is the single broker responsible for the operation of the company with which he or she is associated"); KRS 324.010(6) (providing that "sales associate" means "any person licensed in accordance with KRS 324.046(2) that is affiliated with a Kentucky-licensed principal broker and who, when engaging in real estate brokerage, does so under the supervision of the principal broker").
Rose Helm could not have performed any of Joseph's duties under the December 2002 agreement. As an obvious matter, she could not have supplied Saffran with Joseph's business advice. More importantly, it would have been illegal for her to insist upon Saffran working for her as a brokerage sales associate, or to assume any of Joseph's rights (e.g., to split commission fees) or duties under the agreement because, as all parties to this matter acknowledge, she has never been licensed as a principal broker or any other kind of broker. The same is true of Helm; as noted previously, limited liability companies cannot become licensed brokers in Kentucky.
As for Helm's contention that Rose Helm could have assigned Joseph's rights under the December 2002 agreement to Tarbis when Tarbis purchased Helm from her in 2006 and became Helm's principal broker, Helm ignores that an assignee acquires no greater right than was possessed by his assignor. Whayne Supply Co. v. Morgan Const. Co., 440 S.W.2d 779, 782 (Ky. 1969). Rose Helm was incapable of possessing any rights or binding herself to any of Joseph's principal broker duties under the December 2002 agreement; she could not, therefore, have been a "permitted" heir, per section 13(b) of the agreement, within the plain meaning of that word; and, thus, she could not have assigned any rights under the December 2002 agreement to Tarbis. In short, the December 2002 agreement terminated when Joseph died in September, 2005. And, because Helm's breach of contract claim against Saffran is based solely upon the enforceability of the December 2002 contract, Helm's claim must fail. 7. Helm v. Schneider: the dismissal of Schneider's counterclaims against Helm without prejudice
A question Helm leaves unanswered is how it was capable of functioning as a brokerage firm between September, 2005, and the date in mid-2006 when Tarbis eventually purchased the company from Rose Helm and became Helm's principal broker. It is unclear whether anyone functioned as Helm's principal broker during this interim.
In a footnote of its appellate brief located in its statement of the case, Helm also contends that the circuit court erred in dismissing certain counterclaims Schneider asserted against it without prejudice, rather than with prejudice. Whether or not this argument has been properly raised, we will not reverse the circuit court on this point.
We review a circuit court's decision to dismiss a cause of action with or without prejudice for abuse of discretion, which is a deferential standard. Sublett v. Hall, 589 S.W.2d 888, 893 (Ky. 1979). The test for abuse of discretion is whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles. Goodyear Tire & Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000) (citing Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999). And, as explained in Sublett, 589 S.W.2d at 893,
Many things must be taken into consideration by the trial judge prior to entering an order dismissing an action without prejudice. Some of the salient inquiries that the judge may desire to make could be:
1. What preparation have the opposing parties and their counsel made for trial?
2. What was the lapse of time between the filing of the complaint and the date of the motion to dismiss?
3. Will a dismissal without prejudice be prejudicial to the opposing parties?
4. Will the dismissal without prejudice act as an adjudication of the issues made by the pleadings?
5. Should the order of dismissal contain terms and conditions?
6. Would any term or condition attached to the order prejudice the movant?
In essence, the basic criterion is whether the opposing party will suffer some substantial injustice or be substantially prejudiced.
With that said, some additional background now becomes necessary. The counterclaims that are at the heart of Helm's argument were based upon essentially the same allegations, and filed on exactly the same date (January 27, 2011), as a set of claims Schneider attempted to assert in a third-party complaint against Helm's managing member, Evan Tarbis. As they appeared in its counterclaim against Helm, those allegations were:
3. Effective July 1, 2009 Schneider entered into an Exclusive Marketing and Advisory Agreement ("the Agreement") relating to two buildings in Louisville, Kentucky with Helm. The Agreement involves properties at 321, 323 and 325 W. Main Street, Louisville, Kentucky ("Waterfront Plaza") and 401 W. Main Street, Louisville, Kentucky ("One Riverfront Plaza").
4. Under the terms of the Agreement, broker will assume the responsibility for the marketing efforts associated with new leasing in the property utilizing the following specific methods:
a. Direct marketing,
b. Intensive communications with Broker,
c. Data analysis,
d. Networking,
e. Web marketing,
f. Economic development,
g. Relationship building.
5. Under Kentucky law, Helm, as a broker, owed Schneider a duty of absolute good faith and fair dealing in transactions arising from and relating to the leasing of Schneider's properties. Likewise, under Kentucky law, Helm had a duty to advise Schneider, as principal, fully of all facts within his knowledge.
6. Helm further had a duty under Kentucky law to avoid conflicts of interest with respect to the performance of his duties as broker.
7. In violation of the performance of those duties, Helm failed to diligently represent the interest of Schneider with respect to the marketing of the subject properties and with respect to promoting the lease of property to prospective tenants.
8. In particular, but without limitation, Helm refused to show property at Waterfront Plaza to a prospective tenant at Waterfront Plaza, failed to return phone calls to a representative of a prospective tenant even though said broker's representative informed Helm of a potential tenant's expressed interest in becoming a tenant of Schneider at Waterfront Plaza.
9. Moreover, Helm directed potential tenants of Schneider's property to properties owned by other landlords for which Helm served as broker even though the potential or prospective tenant or representative or agent of the potential or prospective tenant had expressed a desire or interest to view or otherwise obtain information of Schneider's properties for the purpose of considering a lease of such properties or despite the fact that the Schneider properties met the criteria for the tenant.
As noted, Schneider repeated these allegations in its third-party complaint against Tarbis. It added, however, that Tarbis was personally liable for any of Helm's wrongdoing as Helm's principal broker or as the Helm employee who actually committed the acts complained of. The only other difference between Schneider's counterclaims and third-party claims was that Schneider's counterclaims against Helm included a claim that Helm had breached their July 1, 2009 contract.
The remaining claims Schneider asserted against Helm, and the only two claims Schneider asserted against Tarbis, were for breach of fiduciary duty arising from the July 1, 2009 contract, and for interference with Schneider's prospective contractual relations
--------
On May 27, 2011, the circuit court dismissed Schneider's third-party complaint against Tarbis without prejudice. As to why, the order it entered explained in relevant part:
The Third-Party Complaint alleges that Tarbis is liable to Schneider for breach of fiduciary duty and interference with contract for prospective economic relations under a 2009 Agreement between Helm and Schneider. However, Helm's original Verified Complaint against Schneider involves a 2002 Agreement between Helm and Schneider. Schneider's Third-Party Complaint against Tarbis does not address the 2002 Agreement in any way. CR [Kentucky Rules of Civil Procedure]14.01, in pertinent part, states as follows:
A defendant may move for leave as third-party plaintiff to assert a claim against a person not a party to the action who is or may be liable to him for all or part of the plaintiff's claims against him.
Therefore, CR 14.01 plainly indicates that a defendant may join a person to the action as a third-party defendant only if that party is or may be liable to him for all or part
of the plaintiff's claim against him. The language in CR 14.01 is clear and the rules of construction require this Court to apply the plain, ordinary meaning of the words used. Peterson v. Shake, 120 S.W.3d 707 (Ky. 2003). Here, none of Tarbis' alleged liability in Schneider's Third-Party Complaint is based on Helm's original claim against Schneider. Schneider never claims that Tarbis is liable to it for all or part of Helm's original Verified Complaint against it. Therefore, as plainly read, CR 14.01 does not permit Schneider to join Tarbis as a third-party defendant.
Going beyond the plain language of CR 14.01, one of the purposes of that rule—which is implicitly one of the bases of the circuit court's May 27, 2011 order—is to allow a court the discretion to prohibit parties from asserting claims that do not share a sufficient nexus with the claims asserted in the initial complaint, and would have the potential for unduly complicating the case. See Jackson & Church Division, York-Shipley, Inc. v. Miller, 414 S.W.2d 893, 894 (Ky. 1967). Here, the circuit court recognized (and we agree) that to allow Schneider's claims against Tarbis to have gone forward—claims that did not share a sufficient nexus with Helm's claims against Schneider—would have unduly complicated this case.
In spite of this, however, Schneider's counterclaims against Helm, which were functionally identical to its third-party claims against Tarbis, remained in force until the circuit court ultimately dismissed them without prejudice on November 21, 2012, in response to a request for it to do so which Schneider filed on October 9, 2012.
On appeal, Helm argues that the circuit court should have dismissed Schneider's counterclaims with prejudice because: (1) at the time Schneider moved to dismiss its claims without prejudice, Helm had already filed a motion for summary judgment regarding Schneider's counterclaims on September 14, 2012, and Schneider's response to it had been filed five days late according to the local rules of practice and was, according to Helm, insufficient to demonstrate Schneider's claims were adequately supported by evidence; (2) at the time of the circuit court's decision to dismiss without prejudice, Helm had already incurred what it represents as "significant legal expenses pursuing written discovery, deposition testimony and summary judgment briefing"; and (3) in not dismissing Schneider's claims with prejudice, Helm believes the circuit court has unfairly deprived it of the opportunity to sue Schneider for wrongful use of civil proceedings.
As to the first of Helm's reasons, Helm presents no authority and we are aware of no authority providing that the filing of a summary judgment motion or the timeliness of a response thereto forecloses a circuit court from exercising its discretion under CR 41.01(2) to dismiss a claim without prejudice, or that the circuit court's discretion in that regard is dependent upon an assessment of the evidence.
As to its second reason, the expense of litigation up until the point of a motion to dismiss without prejudice does not, in and of itself, justify the extreme remedy of dismissing a claim with prejudice. Indeed, if Helm was concerned about the amount of time and effort it had expended in preparing a defense to Schneider's counterclaim, it was certainly permitted to ask the circuit court, as a condition of granting Schneider a dismissal without prejudice, to impose some or all of its costs upon Schneider. See Sublett, 589 S.W.2d at 893; see also Estes v. Kentucky Utilities Co., 636 F.2d 1131, 1134 (6th Cir. 1980) (holding in the similar situation where a party moves to assert a valid, but untimely, dispositive defense that a court's discretion in this area is "broad" and "in a proper case conditions may be imposed on the party seeking the amendment; for example, costs of preparing for litigation could be imposed on the party . . .). However, Helm made no such request.
As to its third reason, it appears Helm is effectively asking this Court to agree that a claim Helm might potentially file against Schneider has merit; hold that a dismissal without prejudice prohibits Helm from filing such a claim; and, therefore, hold that Helm has suffered substantial injustice as a result. On its face, this is nothing more than a request for an advisory opinion, which we are forbidden from giving. See Sullivan v. Tucker, 29 S.W.3d 805, 808 (Ky. App. 2000).
We understand Schneider's frustration at the circuit court's decision. However belated its decision was, though, we cannot find that its decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles. A dismissal with prejudice would have been inconsistent with its prior decision regarding Tarbis; Schneider's counterclaim against Helm was permissive at best; and, considering how involved those claims were, and how little they related to the detailed claims asserted by Helm, it is clear that dismissing them without resolving them promoted judicial ecomomy. Thus, we affirm the circuit court's decision.
II. PROTECTIVE CROSS-APPEAL, NO. 2013-CA-001385-MR
Schneider has filed a protective cross-appeal, arguing that if the circuit court's directed verdict is found to be erroneous, the circuit court alternatively could have granted it summary judgment based upon several other legal theories it asserted over the course of this litigation. Because we have found no error in the circuit court's decision to grant Schneider a directed verdict, its cross-appeal is now moot and we need not address it.
CONCLUSION
We AFFIRM the circuit court's judgment. Consequently, we DISMISS Schneider's protective cross-appeal as MOOT.
ALL CONCUR. BRIEF FOR APPELLANT/CROSS-
APPELLEE, THE HELM
COMPANY, LLC:
David Tachau
Katherine Lacy Crosby
Lousiville, Kentucky
ORAL ARGUMENT: David Tachau BRIEF FOR APPELLEE, WILLIAM
SAFFRAN:
H. Kevin Eddins
Kacie A. Wilkinson
Louisville, Kentucky
ORAL ARGUMENT: H. Kevin Eddins BRIEF FOR APPELLEE, HUMANA
INSURANCE COMPANY OF
KENTUCKY, INC.:
Christie A. Moore
Reva D. Campbell
Louisville, Kentucky
ORAL ARGUMENT: Christie A. Moore BRIEF FOR APPELLEES, CASSIDY
TURLEY OHIO, INC., and 4
BRIDGES, LLC d/b/a CASSIDY
TURLEY HARRY K. MOORE:
T. Morgan Ward, Jr.
Cassandra J. Wiemken
Louisville, Kentucky
F. Scott Galt
St. Louis, MO
ORAL ARGUMENT: T. Morgan Ward, Jr. BRIEF FOR APPELLEE/CROSS-
APPELLANT AL J. SCHNEIDER
CO.:
Joseph C. Souza
Matthew F. Coogle
ORAL ARGUMENT: Matthew F. Coogle