Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

TONER v. MILLER

February 4, 2004.

CARY W. TONER
v.
TESSA R. MILLER, et al



The opinion of the court was delivered by: JOHN PADOVA, District Judge

MEMORANDUM

Plaintiff Cary W. Toner brought this diversity action against Defendants Tessa R. Miller and William M. Kettler for damages resulting from Defendants' alleged breach of a contract between the parties. Defendants have filed an Amended Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56, and the matter has been fully briefed by the parties. For the reasons that follow, the Court denies Defendants' Amended Motion for Summary Judgment in its entirety.

I. BACKGROUND

  The following facts are essentially undisputed. Plaintiff is the former President, Chief Executive Officer and sole shareholder of a Pennsylvania corporation known as the Toner Organization. (Toner Dep., Def. Ex. A at 27-28.) Although the Toner Organization operated primarily as an insurance agency, the company also provided loans to start-up businesses to fund their initial operating costs. (Id. at 50-51.) In early 1999, Jack Kettler, who was then serving as the President of the Toner Organization, advised Plaintiff that his son, Defendant William Kettler, wanted to form a title insurance company in Ohio, but lacked the necessary Page 2 start-up capital. (Id. at 37-38, 42-43.) Jack Kettler asked Plaintiff to consider loaning his son the start-up capital for this new venture. (Id.) Plaintiff agreed to meet with Defendant Kettler and his business partner, Defendant Tessa Miller, to discuss the matter. (Id. at 50.)

  During this initial meeting in June 1999, Defendants presented Plaintiff with a business plan for their new company, Expedient. (Business Plan, Def. Ex. A-1.) The business plan sought $145,000 in start-up capital, which Defendants promised to repay "by the end of fiscal year 2001," and forecast "net profits of over $750,000 by the end of fiscal year 2002 from an investment of under $150,000." (Id.) The business plan also offered an equity stake in Expedient to whomever would agree to provide the start-up capital. (Id.)

  On behalf of the Toner Organization, Plaintiff agreed to loan all of the start-up capital needed to fund Expedient's initial operations. (Toner Dep., Def. Ex. A at 73.) Plaintiff declined, however, to take an equity position in Expedient. (Id. at 103-104.) Instead, Plaintiff asked for an interest in Expedient's profits, if any, as well as sufficient management rights to be able to monitor and protect his investment. (Id.)

  The parties then drafted a Management Contract to formalize their agreement. (Id. at 77.) Defendant Kettler's father, Jack Kettler, drafted the Management Contract. (Id.) The Management Contract provides, in its entirety, as follows: Page 3

  Management Contract

 
This contract, made this 7th day of October, 1999, between Tessa R. Miller and William M. Kettler (principals) and Cary Toner (manager), defines the certain terms the above parties agree to adhere to with regard to the operation of Expedient Title, LLC (company):
1. This contract will be in effect until one of the following occurs:
• manager terminates said contract.
• principals pay manager $1,000,000.00 to terminate said contract.
• ten years elapse, terminating said contract.
2. Manager will have the authority to override any operating decisions made by principals.
3. Manager will make final decisions on salary and staffing level increases based on proposals presented by principals.
4. Initial investment made by manager will be paid back at an annual percentage rate of 15%.
5. Manager will have the right to 40% of net profit until the initial investment is repaid at which time the manager's right to profit will drop to 30%.
6. Net profit distribution to principals will not occur until the initial investment is repaid except for funds necessary to pay tax liability incurred as a result of LLC tax laws.
(Management Contract, Def. Ex. B.) After the Management Contract was signed by the parties, the document was modified by Plaintiff's accountant, Michael Stewart, who inserted a handwritten amendment noting that Plaintiff had signed the Management Contract "for Toner Organization." (Toner Dep., Def. Ex. A at 110-11). Page 4

  From September 1999 through March 2000, the Toner Organization loaned Defendants approximately $79,126.55 in start-up capital, pursuant to a series of funding requests that Defendants submitted to Steven Rickel, Chief Financial Officer of the Toner Organization. (See Pl. Ex. 1-3.) Although the initial checks issued by the Toner Organization were made payable to Defendants personally, Defendants subsequently requested that the Toner Organization make checks payable to Expedient. (See Pl. Ex. 2; Toner Dep., Def. Ex. A at 148.) Defendants, who are the sole members and owners of Expedient and control all of its day-to-day operations, used this money to pay their own salaries, for office furniture and supplies, and for other related expenses. (See Pl. Ex. 3.) While monthly status reports and projections were transmitted to the Toner Organization by Expedient for some period of time following the signing of the Management Contract, Plaintiff never reviewed the personal financial information of either Defendant. (Toner Dep., Ex. A at 94-95.)

  On April 17, 2001, Defendants began repaying the initial loan by making out a $5,000 check payable to the Toner Organization. (See Pl. Ex. 4.) On May 17, 2001 and June 6, 2001, Defendants submitted loan repayment checks, made payable to the Toner Organization, in the respective amounts of $2,500 and $10,000. (Id.) On June 27, 2001, the Toner Organization sold most of its assets to BISYS Insurance Services, Inc. ("BISYS") pursuant to a Page 5 Stock Purchase Agreement between BISYS, the Toner Organization, and Plaintiff. (See Stock Purchase Agreement, Pl. Ex. 6.) Pursuant to Section 4.14(a) of the Stock Purchase Agreement, Plaintiff personally purchased the Toner Organization's rights under the Management Contract from the Toner Organization for $79,126.55. (See id.) Defendants thereafter made their loan repayment checks payable to Plaintiff, rather than the Toner Organization. (See Pl. Ex. 4.)

  By March 2002, Defendants had fully satisfied their obligation under the Management Contract to pay off the initial loan amount, thus reducing Plaintiff's profit interest to 30 percent. (See Pl. Ex. 7.) On August 27, 2002, Defendants issued a check to Plaintiff in the amount of $40,589.20, representing his 40 percent share of Expedient's profits for 2001. (Pl. Ex. 8.) All of the loan repayment and profit-share checks written to the Toner Organization and Toner during this period were signed by either Defendant Kettler or Defendant Miller or both, and paid out of Expedient's accounts. (See Pl. Ex. 3.) Plaintiff made no complaints with respect to the payments by Defendants being drawn from Expedient's accounts. (Toner Dep., Def. Ex. A. at 148-49.)

  By August 2002, Defendants had become interested in buying out Plaintiff's profit interest and management rights in Expedient under the Management Contract. (See Pl. Ex. 8.) On or about February 4, 2003, Plaintiff and Expedient executed a Page 6 Confidentiality Agreement, which was signed by Plaintiff and, on behalf of Expedient, by Defendants. (See Confidentiality Agreement, Def. Ex. A-2.) The Confidentiality Agreement facilitated the exchange between Plaintiff and Expedient of "certain confidential knowledge and information about Expedient" so that the parties could "examine the feasibility of the termination of the document entitled `Management Contract' dated October 7, 1999. . . ." (Id.)

  The financial data that Expedient subsequently disclosed to Plaintiff pursuant to the Confidentiality Agreement raised concerns to him about how Defendants had been running Expedient, and whether they had satisfied their obligations to pay a percentage of the company's profits to him. Plaintiff's accountant, Mr. Stewart, sent a spreadsheet of allegedly questionable "business" expenses totaling $15,360.41 to Defendants' accountant, Brian Long, for explanation. (See Pl. Ex. 9; Long Dep., Pl. Ex. 10 at 105-06.) Mr. Long shared the spreadsheet with ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.