United States District Court, E.D. Kentucky, Central Division, Lexington
OPINION AND ORDER
E. Wier, United States Magistrate Judge
many enduring business relationships that culminate in
contentious litigation, First Technology Capital, Inc. (FTC),
and BancTec, Inc. (BancTec), enjoyed a fruitful partnership
for many years-one built on “good faith negotiations
and gentlemen agreements”-but one that ultimately
ended, mired in “controvers[y]” and
“headbutting.” DE #72-13 (Bridges Depo.), at 43
(Depo. p. 168). The parties had long enjoyed a series of
positive sale / leaseback encounters, all under a broad 2006
master lease, with each deal per a sub-schedule. Things
soured in 2015. In March 2016, FTC sued BancTec, asserting
the following general claims:
1. Breach of contract under Schedule 7 (which contains claims
for rent due from 11/1/13 to 12/9/13, plus interest and
“all costs and expenses, ” including reasonable
2. Breach of contract under Schedule 8 (which contains claims
for numerous rental payments, destruction of certain
equipment, plus interest and “all costs and expenses,
” including reasonable attorney fees);
3. Specific enforcement as to the Schedule 8 equipment;
4. Conversion of the Schedule 8 equipment (including a claim
for punitive damages); and
5. Unjust enrichment regarding the Schedule 8 equipment.
DE #26 (Amended Complaint); see also DE #29
a heavily contested period of discovery and resolution of
numerous intervening motions, the parties filed dueling
motions for summary judgment, each of which is fully briefed
and ripe for consideration. See DE ##42, 72, 74, 80,
83, 90, 91, 98, 102, 103, and 107. The Court has laboriously
reviewed every page submitted-indeed, the entire docket-and
carefully wrestled with the issues raised.
following reasons, the Court GRANTS IN PART
and DENIES IN PART each motion (DE ##42, 72,
and 74). There is no genuine dispute of material fact
regarding Schedule 7; the Court quickly dispatches that suite
of claims, largely in BancTec's favor. Genuine disputes
of material fact do, though, pervade the Schedule 8
record-and the Court does consider all relevant
documents-surrounding the parties' intentions, and thus
agreement, concerning Schedule 8. Due to related claims'
interdependency on this foundational issue, the Court (with
but a few exceptions detailed below) denies both sides
summary judgment on the Schedule 8-related topics. A jury
must decide the bulk of the Schedule 8 disputes.
2006, FTC and BancTec entered a Master Lease Agreement (MLA)
in which, generally speaking, FTC agreed to lease BancTec
certain items of equipment “listed on Schedule
‘A' and any supplemental or additional schedule
‘A' attached to and made a part of” the MLA.
See DE #26-1 (MLA). Each Schedule A
“constitute[d] a single lease” under the MLA.
Id.; see also DE #42-4, at 4. The
arrangement was a sale / leaseback, where BancTec sold assets
it already owned to FTC, and FTC leased the equipment,
already in place, back to BancTec. The arrangement assisted
BancTec's cash-flow and EBITDA, and FTC made money on an
initial fee and the interest-rate spread. See DE
##74-2 (Cushman Depo.), at 8 (Depo. p. 23); 72-13 (Bridges
Depo.), at 25 (Depo. p. 94); id. at 70 (Depo. p.
274). Paragraph 2 defined the commencement rent mechanics and
the date of each lease “for the purpose of determining
when the monthly rental charges begin[.]” DE #26-1, at
¶ 2. Over the years, the parties entered into many such
Schedules. The present case concerns Sub-Schedule No. 7
(Schedule 7) and Sub-Schedule No. 8 (Schedule 8) to the MLA.
See DE ##26-3, 26-10.
Schedule 7, BancTec agreed to make 60 rental payments of $76,
765.00 per month to FTC. DE #26-3, at 2. The parties also
“incorporated” all “terms and conditions of
the” MLA into Schedule 7. Id. BancTec accepted
(on paper) the Schedule 7 equipment on October 21, 2008.
Id. at 4; DE #29, at ¶ 21. In Schedule 8,
BancTec agreed to make 60 rental payments of $58, 027.00 per
month to FTC. DE #26-10, at 2. The parties likewise
“incorporated” all “terms and conditions of
the” MLA into Schedule 8. Id. BancTec
“accepted” the Schedule 8 equipment on December
1, 2009. Id. at 3; DE #29, at ¶
54.Further, the MLA provides that “each
Lease”-i.e., each Schedule-is “subject
to the terms and conditions of this Agreement until its
expiration or termination.” DE #26-1, at ¶ 1. As
discussed, following many years of a workable business
relationship, disputes arose, and the parties turned to state
and federal court to hash out their plenteous disagreements.
The merits of the claims are now fully before the Court for
summary judgment consideration.
parties take interesting tacks in approaching the record. FTC
tries to lash BancTec to the fine and specific verbiage of
the MLA, essentially ignoring deal-related and
contemporaneous documentation and the parties' course of
performance over the life of the MLA. BancTec tries to ignore
MLA mechanics and draw the Court into a holistic assessment
sensitive to the economic realities and equities of the
relationship. Each side is right, and each side is wrong. On
Schedule 7, the Court agrees that BancTec properly completed
the purchase and owes, at most, interest on the slight delay
in purchase payment. On Schedule 8, the Court perceives
reasonable and legitimate questions about the parties'
agreement and intent, as to the situation and claims
involved. A jury will sort through most of the Schedule 8
claims, and will have to settle lease term (the 61st month
issue), issues of default, and post-lease obligations,
including the status of and remedies related to the Schedule
“shall grant summary judgment if the movant shows that
there is 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). A reviewing court must construe the
evidence and draw all reasonable inferences from the
underlying facts in favor of the nonmoving party.
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 106 S.Ct. 1348, 1356 (1986); Lindsay v.
Yates, 578 F.3d 407, 414 (6th Cir. 2009). Additionally,
the court may not “weigh the evidence and determine the
truth of the matter” at the summary judgment stage.
Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505,
burden of establishing the absence of a genuine dispute of
material fact initially rests with the moving party.
Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553
(1986) (requiring the moving party to set forth “the
basis for its motion, and identify those portions of
‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, ' which it believes demonstrate an
absence of a genuine issue of material fact”);
Lindsay, 578 F.3d at 414 (“The party moving
for summary judgment bears the initial burden of showing that
there is no material issue in dispute.”). If the moving
party meets its burden, the burden then shifts to the
nonmoving party to produce “specific facts”
showing a “genuine issue” for trial. Celotex
Corp., 106. S.Ct. at 2253; Bass v. Robinson,
167 F.3d 1041, 1044 (6th Cir. 1999). However, “Rule
56(c) mandates the entry of summary judgment . . . against a
party who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial.” Celotex Corp., 106 S.Ct. at 2552.
movant bears the burden of persuasion at trial, “that
party must support its motion with credible evidence-using
any of the materials specified in Rule 56(c)-that would
entitle it to a directed verdict if not controverted at
trial.” Id. at 2557 (Brennan, J., dissenting)
(citation omitted); see also Arnett v. Myers, 281
F.3d 552, 561 (6th Cir. 2002) (noting that, when the movant
also bears the burden of persuasion at trial, the moving
party's initial summary judgment burden is “higher
in that it must show that the record contains evidence
satisfying the burden of persuasion and that the evidence is
so powerful that no reasonable jury would be free to
disbelieve it” (citation and internal quotation marks
omitted)); see also Celotex Corp., 106 S.Ct. at 2557
(Brennan, J., dissenting) (“If the burden of persuasion
at trial would be on the non-moving party, the party
moving for summary judgment may satisfy Rule 56's burden
of production in either of two ways. First, the moving party
may submit affirmative evidence that negates an essential
element of the nonmoving party's claim. Second, the
moving party may demonstrate to the Court that the nonmoving
party's evidence is insufficient to establish an
essential element of the nonmoving party's claim.”
(emphasis in original)).
is “material” if the underlying substantive law
identifies the fact as critical. Anderson, 106 S.Ct.
at 2510. Thus, “[o]nly disputes over facts that might
affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment. Factual
disputes that are irrelevant or unnecessary will not be
counted.” Id. A “genuine” issue
exists if “there is sufficient evidence favoring the
nonmoving party for a jury to return a verdict for that
party.” Id. at 2511; Matsushita Elec.
Indus. Co., 106 S.Ct. at 1356 (“Where the record
taken as a whole could not lead a rational trier of fact to
find for the non-moving party, there is no ‘genuine
issue for trial.'”) (citation omitted). Such
evidence must be suitable for admission into evidence at
trial. Salt Lick Bancorp v. FDIC, 187 F. App'x
428, 444-45 (6th Cir. 2006).
Court confronts the following motions:
1. DE #42: FTC seeks judgment on (1) a claim to Schedule
7-based rent from 11/1/13 to 12/9/13 and accompanying delay
charges; (2) a claim to Schedule 8-based rent from 12/1/14 to
10/1/15 and accompanying charges; (3) the conversion claim;
(4) the specific enforcement claim; and (5) BancTec's
liability for FTC's reasonable attorney fees.
2. DE #74: FTC seeks judgment on (1) a claim concerning
unauthorized and unnoticed destruction of certain Schedule 8
equipment, and (2) BancTec's liability for FTC's
reasonable attorney fees.
3. DE #72: BancTec seeks entry of judgment in its favor on
previously indicated, each motion is fully briefed and ripe
for consideration. See DE ##80, 83, 90, 91, 98, 102,
103, and 107.
parties principally dispute the meaning / interpretation of
their agreement- including consideration of the MLA,
Schedules 7 and 8, and the applicability and import of other
related documents. Agreement interpretation / construction,
where the contract is clear, is purely an issue of law.
Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94
S.W.3d 381, 385 (Ky. Ct. App. 2002) (citing
cases). “To prove a breach of contract,
[FTC] must 2001). Indeed, “the making of such
inherently contradictory claims does not constitute an
agreement that if one is rejected the other is necessarily
justified or that the losing party waives judicial
consideration and determination whether genuine issues of
material fact exist.” Id. (quoting 10A Wright,
Miller & Kane, Federal Practice & Procedure
§ 2720 (3d ed. 1998)). establish three things: 1)
existence of a contract; 2) breach of that contract; and 3)
damages flowing from the breach of contract.” Metro
Louisville/Jefferson Cnty. Gov't v. Abma, 326 S.W.3d
1, 8 (Ky. Ct. App. 2009); see also, e.g., Omni
USA, Inc. v. Parker-Hannifin Corp., 964 F.Supp.2d 805,
813, 840 (S.D. Tex. 2013) (applying traditional contract
breach elements to a UCC case).
as to Schedule 7, to the Court, is that the MLA lease term
had expired with no effective BancTec purchase election.
See DE ##42-1, at 25 (FTC so admitting); 26, at
¶ 28 (noting expiration “on October 31,
2013”). In the Court's assessment, this
unequivocally pushes the scenario into MLA ¶ 5(B)
territory, which provides that the lease continues on a
month-to-month basis until, as relevant here, BancTec's
“total month-to-month rent payments equal” fair
market value. Thus, at the point of expiration, BancTec had
floated a document exploring purchase, the July 2013 letter
(DE #26-6, at 3), but had not formally elected purchase. To
quote FTC's own unambiguous view of the status:
The July 11, 2013 Letter was not an “unqualified,
absolute, unconditional unequivocal, unambiguous (Civic
Plaza, 401 F.2d at 197) election by BancTec to exercise
the “Fair Market Value” purchase option contained
in ¶ 4(A). . . . Ultimately, the FTC and BancTec found
common ground at $58, 002.35 after the term of the lease of
the Schedule 7 Equipment expired on October 31, 2013.
DE #42-1, at 25 (citing DE #42-2 (Carpenter Aff.), at
¶¶ 28, 50-52). Per ¶ 5(B), at lease
expiration, BancTec had “not elected to renew the Lease
[or], purchase or return the Equipment.” MLA ¶ 5;
see also DE #42-2, at ¶ 103. FTC does not
contend default existed, as to Schedule A, at that point.
With no default,
the Lease will be extended for each subject item of Equipment
on a month-to-month basis until either [termination by
Lessee] or: a) Lessee's total month-to-month rent
payments equal the greater of the fair market value or
Stipulated purchase Value of the Equipment, at which time
Lessor shall transfer title to Lessee[.]
MLA ¶ 5(B). BancTec and FTC actively negotiated the
purchase post-expiration, see DE 42-9 through 42-12
(negotiating emails), ultimately reaching agreement in the
latter part of November. Tellingly, in none of the offers
does FTC suggest it is seeking a buy-out plus
additional rent. Indeed, the parties simply negotiated out
the value, agreed on a price, and FTC invoiced BancTec. The
obvious arms' length negotiations produced eventual
agreement, the essence of fair market value. MLA ¶ 4(A);
see also DE ##42-19, at 2-22; 42-20; 42-21; 42-22
(Schedule 8 post-expiration negotiations directly referencing
FMV, by both parties, at multiple points).
long and short is that BancTec did owe a continuing rental
obligation, but it owed that obligation, per ¶ 5(B),
only until the payments reached the greater of fair market or
stipulated purchase value. Fair market value-the parties'
negotiated price- caps the obligation once reached via rent
payments. Here, the parties agreed to that number, and
BancTec paid it by December 9, 2013. The Court ...