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Adler v. Elk Glenn, LLC

United States District Court, Sixth Circuit

December 17, 2013

RICHARD C. ADLER, M.D., Plaintiff,
v.
ELK GLENN, LLC, et al., Defendants. KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY, Cross-Claimant,
v.
ELK GLENN, LLC, Cross-Defendant.

MEMORANDUM OPINION & ORDER

AMUL R. THAPAR, District Judge.

As John Adams once wrote, "Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence."[1] Adams could well have been describing this case, in which-try as the parties might-the stubborn facts resist a simple resolution. Defendants Elk Glenn, LLC and Ricky Robinson Construction, Inc. ("Ricky Robinson") and cross-claimant Kentucky Farm Bureau Mutual Insurance Company ("KFBMIC") have all moved for summary judgment. But too many disputed issues of fact remain for the Court to grant them the relief they desire. For this reason, the Court will grant in part and deny in part the three motions for summary judgment.

DISCUSSION

The Court's companion Memorandum Opinion and Order on the parties' motions in limine, R. 108, summarizes the essential factual background of this dispute.

Three motions for summary judgment are before the Court. Two-filed by Elk Glenn and Ricky Robinson-seek summary judgment against Dr. Richard C. Adler on his contractual and tort claims. R. 72; R. 81. The third, filed by KFBMIC, requests a determination of whether KFBMIC must defend or indemnify Elk Glenn against Adler's claims. R. 79.

Summary judgment is warranted if the pleadings, discovery and disclosure materials, and affidavits show that there exists "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). To prevail, the movant must demonstrate that undisputed evidence forecloses the nonmovant's claims or that the nonmovant cannot support his claims with admissible evidence. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). The nonmovant must then respond with evidence showing a genuine factual dispute. Fed.R.Civ.P. 56(c)(1); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Relying on pleadings or "metaphysical doubts" will not forestall summary judgment; instead, the nonmovant must cite the record. See Scott v. Harris, 550 U.S. 372, 380 (2007) (internal quotation marks omitted). If the nonmovant successfully rebuts the movant's showing, the Court then decides whether a reasonable juror could find for the nonmovant on each of his claims after drawing all reasonable inferences in his favor. See id.

I. Elk Glenn Is Entitled to Summary Judgment on Only Its Breach of Contract Claim

Elk Glenn's motion for summary judgment requests the dismissal of Adler's four claims for: (1) breach of contract; (2) fraud in the inducement; (3) unjust enrichment; and (4) negligence and gross negligence. R. 72-1. For the reasons discussed below, the Court will deny summary judgment on all but the breach of contract claim.

A. Kentucky Law Forecloses Adler's Breach of Contract Claim

As his first claim, Adler alleges that Elk Glenn breached the agreement that the parties reached for the sale of Lot 20. R. 5 at 10. Specifically, Adler believes that Lot 20's deed obliged Elk Glenn to convey a lot suitable for the construction of a residential dwelling and for the quiet enjoyment of that dwelling. Id. According to Adler, Lot 20 did not fit the bill. Id. Under Kentucky law, to prove breach of contract a plaintiff must demonstrate: (a) the existence of a contract, (b) a breach of one of the contract's terms, and (c) damages flowing from the breach of the contract. See Barnett v. Mercy Health Partners-Lourdes, Inc., 233 S.W.3d 723, 727 (Ky. Ct. App. 2007). Elk Glenn points out that it breached no part of the contract, and Adler does not respond with evidence demonstrating a genuine dispute. Thus, summary judgment is warranted.

Adler's pursuit of his breach of contract claim must end here because no evidence establishes that Elk Glenn breached the contract's general warranty provision, the only relevant contractual provision.[2] The deed for Lot 20 explicitly guarantees the "covenant of General Warranty" to Adler upon purchase of the property. R. 72-2 at 1. In Kentucky, a "general warranty" encompasses five covenants of warranty: (1) seisin, (2) right to sell, (3) freedom from encumbrances, (4) quiet enjoyment, and (5) warranty of title. Ralston v. Thacker, 932 S.W.2d 384, 387 (Ky. Ct. App. 1996) (citing Dortch's Ex'r v. Willoughby, 113 S.W.2d 832, 832 (Ky. 1937)). As Elk Glenn points out, Adler's complaint alleges a violation of the covenant of quiet enjoyment. R. 72-1 at 8-9. But only disturbances caused by the holder of some paramount title or right to the land can break this covenant. Jeffrey J. Shampo, 20 Am. Jur. 2d Covenants, Etc. § 104. That is, eviction or ouster is the necessary predicate for a breach of this covenant. Id .; cf. Creson v. Scott, 275 S.W.2d 406, 408 (Ky. 1955) (holding that no breach of the covenant of quiet enjoyment occurred until the tenant's physical ouster from the premises). Because the record contains no hint of an eviction or ouster, and because Adler pleaded only a breach of the covenant of quiet enjoyment, Elk Glenn has carried its burden of demonstrating that Adler failed to show that admissible evidence supports his breach of contract theory.

Adler appears to oppose this conclusion, but it is unclear on what grounds he bases his opposition. See R. 96-2 at 14 (baldly stating that genuine issues of material fact preclude summary judgment on the breach of contract claim). Adler might have successfully responded to Elk Glenn's motion in two ways: by challenging Elk Glenn's argument that it did not breach the deed's covenant of general warranty or by explaining that Elk Glenn actually breached another aspect of the agreement. Instead, Adler inexplicably urges the Court to consider his breach of contract claim concurrently with his fraudulent inducement claim-going so far as to assert that his "breach of contract and fraud in the inducement claims merge, and the claim is based in tort." Id. In his view, Elk Glenn's fraudulent inducement to purchase Lot 20 vitiated the agreement between the parties. Id. But this tactic actually undermines his breach of contract claim in two respects. First, it suggests that no valid agreement between the parties ever existed-and the existence of a valid agreement is the first element of a breach of contract claim. Second, it effectively writes Adler's breach of contract claim out of his complaint by equating it with a wholly different cause of action.

For these reasons, the Court will grant summary judgment to Elk Glenn on Adler's breach of contract claim.

B. Elk Glenn Is Not Entitled to Summary Judgment on Adler's Fraud in the Inducement Claim

Adler next claims that Elk Glenn fraudulently induced him to purchase Lot 20, even though its representatives knew or should have known of the lot's unsuitability for residential development. R. 5 at 11-12. Specifically, he states that two Elk Glenn representatives, Jessica Thacker Combs and William Grigsby, assured him that Lot 20 could support the construction of a home. R. 96-2 at 15. To succeed on this claim, Adler must establish six elements: (1) a material representation (2) which is false (3) known to be false or made recklessly (4) made with inducement to be acted upon (5) acted in reliance thereon and (6) causing injury. PCR Contractors, Inc. v. Daniel, 354 S.W.3d 610, 613 (Ky. Ct. App. 2011). Elk Glenn challenges Adler's evidentiary support for two elements: falsity, and knowledge of falsity or recklessness. R. 72-1 at 14. Because genuine issues of material fact remain as to these elements, the Court must deny Elk Glenn's motion for summary judgment on Adler's fraud in the inducement claim.

Falsity: Elk Glenn maintains that it truthfully represented Lot 20 as stable and appropriate for normal residential construction. R. 72-1 at 11. However, the expert testimony in this case creates a genuine dispute of material fact as to Lot 20's suitability for this purpose.

Elk Glenn employs three strategies, none successful, to deny the existence of a material factual dispute. First, Elk Glenn attempts to debunk the testimony of Joseph Cooke, Adler's expert civil engineering witness, id. at 11-14, who stated in a deposition that Lot 20 is inappropriate for residential construction. See generally R. 67; R. 89. But the Court has already ruled Cooke's testimony admissible under Federal Rule of Evidence 702, R. 108 at 4-10, and any evaluation of Cooke's credibility and persuasiveness is the province of the jury. Next, Elk Glenn points out that Cooke made several concessions favorable to its position. R. 72-1 at 11-14. For example, Cooke acknowledged that he noticed no problem with the subdivision's sidewalks and streets, that he could not comment on the adequacy of the house's construction, and that successful residential developments on reclaimed mine sites do exist in eastern Kentucky. Id. However, these points of agreement do not erase the existence of a genuine controversy over whether Lot 20 specifically, as opposed to reclaimed mine sites generally, can sustain conventional residential construction. Cooke's testimony creates a genuine and material factual dispute on that subject.

Finally, Elk Glenn encourages the Court to dismiss Combs's and Grigsby's purported assurances as mere puffery, which occurs when salespeople offer inflated opinions of their wares. See R. 72-1 at 14-15. Under Kentucky law, a misrepresentation is actionable under a fraud in the inducement theory only if it relates to a past or present material fact, rather than to an opinion or prediction. Republic Bank & Trust Co. v. Bear Stearns & Co., Inc., 683 F.3d 239, 248 (6th Cir. 2012) (citing Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 549 (Ky. 2009)); see also Morris Aviation, LLC v. Diamond Aircraft Indus., Inc., No. 12-6021, 2013 WL 4564740, at *4 (6th Cir. Aug. 29, 2013); David J. Leibson, 13 Ky. Prac. Tort L. § 19:1 (2013). With few exceptions, puffery does not amount to an actionable misrepresentation, and a buyer has a duty to exercise ordinary vigilance when confronted by a salesperson's assurances of quality or future benefits. Republic Bank & Trust, 683 F.3d at 251.

In this case, however, Combs's and Grigsby's alleged statements relate to a present material fact rather than to an opinion, so the Court need not even reach the sales puffery issue. A hypothetical example offered by the Sixth Circuit in Republic Bank & Trust perfectly frames this distinction:

Perhaps a homeowner whose house crumbled one year after purchase could not maintain an action against a builder who predicted the home would last for a reasonably long time. But surely, he could sue the builder for claiming that the foundation was made of reasonably good cement when, in reality, it was made of sand.

See id. at 249. Similarly, Adler would have no case against Elk Glenn for telling Adler that he would reap sizable profits upon resale of Lot 20. Such representations would sound in opinion, not fact. But Elk Glenn's allegedly specific statements about how Adler could use Lot 20 at the time of sale are no different from the hypothetical builder's averment that he had installed a solid foundation. Both describe features of the subject property that confer value immediately, not just ...


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