United States District Court, W.D. Kentucky, Paducah Division
B. Russell Chief Judge, U.S. District Court
matter comes before the Court upon Third Party Defendant,
Wayne Shelton, C.P.A.'s, Motion for Summary Judgment as
to Osborne's counterclaims and Shelton's
counterclaims against Osborne (Docket # 25). The Third Party
Plaintiff, Thomas L. Osborne, has not responded. This matter
is now ripe for adjudication. For the reasons that follow,
the Third Party Defendant's Motion for Summary Judgment
about November 17, 2007, Thomas Osborne, filed a civil action
(“2007 Class Action”) against Wayne Shelton and
others, on behalf of himself and others. Osborne alleged
mismanagement of the American Justice School of Law (AJSL),
and, among other things, alleged the commission by Shelton of
numerous acts of fraud which allegedly damaged Osborne. A
Settlement Agreement and Reciprocal Release (the
“Agreement and Release”) was entered into on
Feburary 15, 2008, by Osborne and Shelton, as well as others,
with respect to the 2007 Class Action and all claims which
were asserted, or could have been asserted, therein. On
February 18, 2008, an order was entered from this Court that
“all claims asserted or which could be asserted”
in the 2007 Class Action were dismissed with prejudice.
Agreement and Release states that it represented a
“FULL AND FINAL SETTLEMENT of any and all claims,
debts, suits, actions and causes of action of whatsoever kind
or nature, whether civil or administrative, or complaints
with any administrative agency or private organization or
professional association or licensing agencies, whether at
law, in equity or mixed, whether matured, contingent or
inchoate, and whether known or unknown, that any party, now
has, has had or may hereafter have against any other party,
their predecessors, affiliates, successors, assigns,
officers, directors, shareholders, employees, agents,
representatives, and insurers, in any way, manner or degree
arising from or related to the subject matter of the civil
actions, or the making of this agreement, or any other aspect
whatsoever of the organization or operation of AJSL or its
law school from the beginning of time through the effective
date of this Agreement.” Additionally, in the second
paragraph, “General and Complete Reciprocal Release,
” Osborne stated that he “forever and irrevocably
dischare[d] and release[d] any and all claims, debts, suits,
actions and causes of action of whatsoever kind or nature,
whether at law, in equity or mixed, whether matured,
contingent or inchoate, whether known or unknown that any
party, now has, has had or may hereafter have against any
other party, in any way, manner or degree arising from or
relating to any act, omission, occurrence or transaction
occurring in whole or in part prior to the date of this
agreement.” The agreement lists the $296, 885.00 debt
to Banterra Bank, the debt involved in the present action, as
a debt to which Osborne would indemnify Shelton.
current action was filed by Banterra Bank against Osborne and
Paul Hendrick on December 12, 2008, in McCraken County
Circuit Court. It was removed to federal court based on
diversity on January 20, 2009. This action concerns the
October 26, 2006, line of credit loan for $300, 000.00. The
loan was collateralized and there were two personal guaranty
agreements executed by both Hendrick and Osborne. Osborne was
serving on the Law School's Board of Directors at this
time. The loan was fully secured by three lots of
approximately ten acres each in Paducah's Information Age
Park. At the time of the loan, the Law School reported to
Banterra the lots were valued at $1, 455, 000.00. The Law
School was unable to pay the note on the stated maturity
date, and subsequently filed for Chapter 7 bankruptcy relief.
Banterra then notified Hendrick and Osborne of the Law
School's default and made demand for payment of the note.
The note remains unpaid.
filed a Third Party Complaint and Answer of the Defendant on
February 25, 2009. Osborne alleges in his Third Party
Complaint that Shelton is liable to Osborne for the debt to
Banterra Bank because Shelton misrepresented information to
Osborne which induced him to guaranty that debt personally.
Shelton filed a Counterclaim with his Answer on April 20,
2009, alleging Osborne breached the Agreement and Release.
Shelton moves for summary judgment as to Osborne's claims
against him and his claims against Osborne for breach of the
Agreement and Release. Shelton requests dismissal of the
action, as well as attorneys fees and litigation costs.
judgment is appropriate where “the pleadings, the
discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as
a matter of law.” Fed.R.Civ.P. 56(c). In determining
whether summary judgment is appropriate, a court must resolve
all ambiguities and draw all reasonable inferences against
the moving party. See Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986).
every issue of fact or conflicting inference presents a
genuine issue of material fact.” Street v. J. C.
Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989).
The test is whether the party bearing the burden of proof has
presented a jury question as to each element in the case.
Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996).
The nonmoving party must present more than a mere scintilla
of evidence in support of his position; the nonmoving party
must present evidence on which the trier of fact could
reasonably find for the nonmoving party. See Id.
(citing Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 252 (1986)). Mere speculation will not suffice to defeat
a motion for summary judgment: “the mere existence of a
colorable factual dispute will not defeat a properly
supported motion for summary judgment. A genuine dispute
between the parties on an issue of material fact must exist
to render summary judgment inappropriate.” Moinette
v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir.
while Kentucky state law is applicable to this case pursuant
to Erie Railroad v. Tompkins, 304 U.S. 64 (1938), a
federal court in a diversity action applies the standards of
Fed.R.Civ.P. 56, not “Kentucky's summary judgment
standard as expressed in Steelvest, Inc. v. Scansteel
Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991).”
Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th
has asserted that the claims of Osborne in the Third Party
Complaint are barred by res judicata and the release affirmed
in the Agreement and Release. Shelton also asserts that he is
entitled to judgment as a matter of law as to his claims
against Osborne arising from breach of the Agreement and