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Boodram v. Coomes

United States District Court, W.D. Kentucky, Bowling Green Division

March 18, 2015



JOSEPH H. McKINLEY, Jr., Chief District Judge.

This matter is before the Court on Defendant Ronald Coomes' Motion to Dismiss [DN 84] and Defendant Scott Crabtree's Motion to Dismiss [DN 85]. Fully briefed, these matters are ripe for review.


In 2010, Defendant Ronald Coomes ("Coomes") sought buyers for his company Philmo, Inc., a duct tape manufacturer located in Franklin, Kentucky. Coomes was motivated to sell due to the fact that "Philmo was low on cash and in need of additional operating funds." [Second Am. Compl., DN 77, at ¶ 13]. Soon after Coomes began his search for a potential buyer, Boodnarine Boodram a/k/a Mike Boodram, [1] owner and operator of Apollo Manufacturing Group, Inc. ("Apollo") located in Suwanee, Georgia, contacted Coomes concerning his interest in acquiring Philmo. As a result of these negotiations and Coomes' promise to sell Philmo to him, Boodram closed his tape converting business in Gainesville, Georgia. Id. at ¶¶ 16-17.

Ultimately, discussions between Coomes and Boodram culminated in the parties executing a Letter of Intent on December 9, 2010, which detailed Boodram's plan to purchase Philmo for $2, 305, 000.00 in a leveraged buyout. [Letter of Intent, DN 1-1]. As described by the Letter of Intent, the acquisition of Philmo involved two phases: Boodram would immediately purchase 49% of Philmo's stock for $200, 000, and then, starting in 2015, Boodram would begin scheduled payments of $1, 492, 055.90 for the remaining 51% of the stock. Id . After signing the Letter of Intent, Boodram transferred $200, 000 in cash and assets to Coomes.

In addition to a stock purchase, the parties agreed that Mike Boodram would work at Philmo as the Director of Operations. [Second Am. Compl., DN 77, at ¶ 24]. As Director of Operations, Mike Boodram implemented significant changes at Philmo, including bringing in new customers, negotiating beneficial contracts with existing customers, and developing brands held by Philmo. Id. at ¶¶ 26-30. In particular, Boodram renegotiated Philmo's contract with 3M and improved "Patriot Tapes, " an underdeveloped brand held by Philmo. Id . Also, while at Philmo, Boodram noticed that Coomes took certain actions that threatened the financial wellbeing of the company. Plaintiffs identify four specific instances of Coomes' harmful conduct:

a. Coomes owned a controlling interest in Patriot Gage, LLC a separate company. Coomes was running the payroll of Patriot Gage, LLC through Philmo;
b. Coomes allowed Patriot Gage, LLC to use a substantial portion of Philmo's property rent-free.
c. Coomes used the assets of Philmo to pay expenses related to real estate that was not owned by Philmo.
d. Coomes sold the assets of Philmo, including seconds (duct tape that fails to meet the specifications of its customers), on the secondary market and did not record the sales on Philmo's books.

Id. at ¶ 31.

In March of 2011, Coomes presented Plaintiffs with a Stock Purchase Agreement ("SPA"), drafted by counsel for Philmo, Defendant Scott Crabtree. Mike Boodram and Shelleza Boodram executed the SPA on March 8, 2011 and March 6, 2011, respectively. However, Coomes did not sign the SPA on either date. [Second Am. Compl., DN 77, at ¶¶ 35-37]. After Plaintiffs had signed the SPA, Coomes informed them that because he had previously entered into a contract with a broker for the sale of Philmo, he could not sign the SPA and convey stock to Plaintiffs until the end of the contractual period. Further, Coomes explained that he "needed to execute a Promissory Note in Plaintiffs' favor so as to avoid paying a commission to his broker...." and that "it was just a formality, and it did not affect or change their agreement." Id. at ¶¶ 39-40. On March 31, 2011, Coomes executed the Promissory Note [DN 1-3], drafted by Crabtree, which set forth the re-payment of $200, 000 plus interest Plaintiffs had previously paid to Coomes.

Despite issues with closing the sale of Philmo, Boodram continued to comply with the "parties' agreement" by winding down his tape conversion business and contributing $215, 000 in equipment and inventory to Philmo. [Second Am. Compl., DN 77, at ¶ 48]. Also, "[a]s compensation for Coomes' unilateral delay of the closing, Philmo agreed to pay rent for Plaintiffs' equipment." Id. at ¶ 49. This only lasted for two month though. During the entire process of closing his business and transferring assets to Philmo, Boodram avers that he repeatedly sought to complete the transaction with Coomes. Id. at ¶¶ 44, 50. "[D]espite Plaintiff Mike Boodram's repeated requests, Defendants refused to close on the agreement or convey the stock." Id. at ¶ 50.

In addition to problems with closing the deal, issues arose concerning Boodram's role as Director of Operations at Philmo. According to Boodram, in June of 2011, Coomes started taking steps to prevent him from performing his work at Philmo by denying him access to Philmo's business records and excluding him from important meetings. Specifically, Coomes stopped Boodram from attending a significant meeting with 3M even though Boodram had helped Coomes prepare for it. In the end, this soured relationship resulted in Boodram receiving his final paycheck from Philmo in June of 2011.

Soon after being excluded from Philmo, Boodram contacted Coomes in order to resolve problems with the deal. Boodram claims that Coomes avoided his phone calls, texts, and email. Finally, in October of 2011, Boodram received a copy of the SPA, which had been executed by Coomes. Plaintiffs describe the SPA as having particularly unfavorable terms. For example, although the Letter of Intent originally called for an amortized payment for the remaining 51% of stock to start in 2015, the SPA required a balloon payment of $1.1 million by August 31, 2012. [Second Am. Compl., DN 77, at ¶ 70]. In addition to an altered payment schedule, the SPA provided a stock buy-back provision which allowed Coomes to "unilaterally" determine that Boodram failed to actively participate in Philmo and to repurchase the stock from Boodram at half the price it was sold to him. Id. at ¶ 71.

Plaintiffs surmise that Coomes signed and notarized the SPA at some point after April 13, 2011, not on March 31, 2011 as indicated on the document sent to them in October of 2011. Further, Plaintiffs contend that Coomes was aware that Boodram had closed his company in June of 2011 and that his creditors were pressuring him to close on the Philmo deal. As a result, "Coomes and Crabtree conspired to sign and notarize this SPA to limit Coomes' liability and/or extract a more favorable settlement from Mike Boodram." Id. at ¶ 67.

Plaintiffs filed suit on April 27, 2012 against Defendants Coomes and Philmo. [DN1]. On November 20, 2014, Plaintiffs filed their Second Amended Complaint joining Crabtree as a defendant. [DN 77]. Since the filing of their suit, Plaintiffs note that Defendants have continued to ...

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