United States District Court, E.D. Kentucky, Central Division, Lexington
PAUL R. PLANTE, JR., Plaintiff,
JOHN W. SEANOR, Defendant.
OPINION & ORDER
E. WIER UNITED STATES DISTRICT JUDGE.
suit between two former ArthroDynamic Technologies (ADT)
directors and shareholders, Plaintiff Paul Plante pursues
recovery of half the legal fees and expenses he paid to fund
the parties' joint litigation (including four or more
suits in two states) against other former ADT directors and
affiliates. DE 1-1 (State Court Complaint). Plante claims
Defendant John W. Seanor agreed to repay 50% of the legal
bills out of any recovery he received. After Seanor, despite
being a co-party, covertly settled his claims, Plante sought
reimbursement. Seanor sent some funds but much less than 50%
of Plante's outlay. Ultimately, Plante, in a Fayette
Circuit Court complaint, claimed Seanor's post-settlement
failure to reimburse breached a 2011 oral agreement (and,
alternatively, that Seanor was unjustly enriched by accepting
the settlement proceeds without repayment of legal expenses).
March 28, 2017, Defendant removed this matter and answered
the pending Complaint. DE 1 (Notice of Removal); DE 3
(Answer). Seanor, through discovery, admitted that the
parties had an oral agreement but disputed the terms.
Pl's Ex. 7 at 3. Defendant claimed his promise was only
“to allow Plante to retain any monies set aside or
awarded for legal fees in connection with the lawsuit.”
Id. The Court conducted a two-day bench trial. DE 57
& 59 (Minute Entries). Per the parties' stipulation,
the Court admitted 38 Plantiff's and 10 Defendant's
Exhibits; Plante, Seanor, and their former counsel, Hon.
William Rambicure, testified. The Court heard both opening
statements and closing arguments, the latter being extensive.
considered the full record, the Court FINDS
that the parties' deal was for Plante to advance the
legal expenses and for Seanor to repay half out of any
settlement. Further, the Court finds that Seanor's
failure to recompense Plante for the full 50% breached the
oral agreement. The Court enters a separate Judgment
consistent with the following reasoning and findings.
Jurisdiction & Venue
Court has jurisdiction over the instant dispute pursuant to
28 U.S.C. § 1332. Section 1332(a) grants district courts
original jurisdiction in “all civil actions where the
matter in controversy exceeds the sum or value of $75, 000,
exclusive of interest and costs, and is between . . .
citizens of different States[.]” Plante, a Florida
citizen, claims Seanor, a Georgia citizen, owes him $117,
915.40. See DE 1 at ¶ 3; DE 1-1 at ¶¶
2, 19. Accordingly, the Court has original jurisdiction over
venue is proper in this District pursuant to 28 U.S.C. §
1391(b), which provides that an action may be brought where
“a substantial part of the events or omissions giving
rise to the claim occurred.” Id. The
Court's findings, below, detail the relevant events. For
now, suffice it to say numerous critical events (much of the
underlying litigation, a mediation, etc.) and many of the key
individuals (e.g., majority recipient of the
at-issue fees, Rambicure) trace to this District.
case presents one key question: What were the terms of the
parties' 2011 oral agreement? The parties undoubtedly
reached an accord over the joint pursuit of litigation.
Finding the terms drives the decision here.
Court first describes the events leading to the agreement,
next resolves the dispute over terms, then evaluates breach
timing, and finally assesses the proper measure of damages.
Ultimately, the facts and law compel a result in Plante's
favor. Pursuant to Federal Rule of Civil Procedure 52(a)(1),
the Court makes and memorializes the following findings of
fact and conclusions of law.
FINDINGS & CONCLUSIONS
Seanor, Frank Marcum, and James Conway formed ADT, a Kentucky
corporation, in January 2006. Pl's Ex. 20 at 4. By
February 2006, the shareholder roster expanded to six, with
percentage ownership as follows: Marcum (37.5%), Conway
(37.5%), Marcus Cheney (10%), Foster Northrop (5%), Defendant
Seanor (5%), and Plaintiff Plante (5%). Id. at 8.
Pursuant to the ADT Shareholders Agreement, each of the six
joint-owners possessed equal voting power for purposes of
electing directors and officers. Id. at 10. Through
2010, Marcum served as ADT President & CEO, and Conway
served as Board Chairman. Id. at 11. Beginning in
2008, Conway raised concerns with other shareholders
regarding Marcum's use of company funds and other alleged
improprieties in his role as ADT President. Id. at
11, 29-30. In June 2010, Conway, Cheney, Northrop, Plante,
and Seanor, meeting as the ADT Board, unanimously voted to
remove Marcum from the presidency. Id. at 14.
2005-2010, Conway was employed by Bioniche Animal Health USA,
Inc. Id. at 20. Bioniche, in 2005, contracted with
ADT for supply, manufacture, sales, marketing, and
distribution services related to its
“POLYGLYCAN®” equine joint treatment
products. Id. at 16. In February 2010, ADT entered
into a written Letter of Intent with Dechra Veterinary
Products, Inc., for Dechra's purchase of ADT's
equine-related assets. Id. at 17. The LOI envisioned
an $11, 000, 000 cash payment along with certain royalty
payments and contingent payments for future products
developed under the ADT patents' coverage. Id.
Bioniche, via prior agreements, possessed a right of first
refusal and opportunity to match the Dechra offer.
Id. Bioniche's proposal fell short of the $11,
000, 000 Dechra offer. Id. at 19. Nonetheless,
Conway pushed for a new deal with Bioniche and, ultimately,
secured the support of Cheney and Northrop. Id. at
on these events (and others), four ADT Board members (and
minority shareholders), Northrop, Cheney, Seanor, and Plante,
voted, in March 2011, to sue Marcum and Conway for
misappropriations of corporate funds, breaches of fiduciary
duties, and conflicts of interest. Id. at 39.
August 2011, Marcum began negotiating with Conway, Northrop,
and/or Cheney to “grab complete dominion and control
over ADT.” Id. at 56. In August, September,
and October of 2011, Marcum in fact purchased ADT shares from
Conway (Pl's Ex. 32 at 54), Northrop (id. at
62), and Cheney (id. at 40). As part of the
agreements, Marcum agreed to pay a set price per share ($60,
000 for Conway; $70, 000 for Cheney & Northrop) as well
as a royalty calculated as a percentage of adjusted gross
sales (4.5% for Conway & .06% for Cheney & Northrop).
Id. at 42 (Cheney), 56 (Conway), 64 (Northrop).
Cheney & Northrop also assigned Marcum the exclusive
right to vote their shares. Id. at 50 (Cheney), 73
(Northrop). Per Plante and Seanor, the Marcum buy-sell
contracts were invalid under the ADT Shareholders Agreement.
Pl's Ex. 20 at 60-61, 64.
at an October 31, 2011, ADT Board meeting-over Plante and
Seanor's objections-Marcum, Conway and Cheney voted
Seanor out of ADT's presidency. Id. at 69-70.
Marcum then resumed control of ADT and, on the Company's
behalf, instructed ADT's counsel in the suits against
himself, Conway, and Bioniche to stand down. Id. at
70-71. A November 26, 2011, vote officially terminated
Seanor's compensation, health insurance and other
benefits. Id. at 72.
The Agreement, the Litigation, and the Settlement
Seanor's removal, Plante and Seanor (no later than
November 1, 2011, see Pl's Ex. 15 at 3) began
and/or continued discussions with counsel in Kentucky and
Florida. The talks concerned strategy for filing lawsuits
against Marcum and the other ADT shareholders based on the
takeover. At this time (early November 2011), Plante and
Seanor made the oral agreement at the core of this suit.
Neither side disputes the existence of a verbal
agreement with respect to litigation freight-see,
e.g., Pl's Ex. 7 at 3 (Seanor Interrogatory
Response)-and both sides acknowledge that Plante's end of
the bargain was to front all of the legal fees and expenses
for the Plante-Seanor litigation. See, e.g.,
id.; Pl's Ex. 2 (Seanor 12/12/11 e-mail:
“Paul was to be solely responsible for the fees. . . .
My agreement with Paul is that I will settle up with him when
we settle with Marcum and/or ADT.”). [After all, Seanor
had just lost his job and could not afford to fund the
litigation.] However, the parties' versions diverge
regarding the details of Seanor's obligations.
contends that his only agreed repayment duty was to give
Plante “any portion of a verdict or settlement
agreement that was awarded for attorney fees[.]”
Pl's Ex. 7 at 3. Thus, per Seanor, because he did not
receive legal fees, he owed Plante nothing. Plante, for his
part, insists that Seanor agreed to repay 50% of the fees out
of any recovery Defendant received from Marcum and/or ADT.
The proof, as detailed below, clearly and convincingly
supports Plante's version.
credibly testified to the existence of the agreement on the
terms described above. The Plante terms are corroborated by
and consistent with both parties' communications during
the relevant period. See, e.g., Pl's Ex. 2
(Seanor 12/12/11 e-mail: “Paul was to be solely
responsible for the fees. . . . My agreement with Paul is
that I will settle up with him when we settle with Marcum
and/or ADT.”). Rambicure testified that he believed
Seanor and Plante “made separate arrangements”
for repayment. Seanor's own correspondence (in August of
2012) implicitly recognized his duty to pay an equal share of
attorney fees. Following a formal mediation, Seanor described
the implications of a hypothetical settlement scenario in
which Plante and Seanor receive 20, 000 units of Polyglycan
as part of their deal, with separate recovery of
“[a]ttorney fees off of the table[, ]” as
[A]t an average net cash value to us of $40 = $800, 000
($400, 000.00 each). From that, we will have
to pay income taxes . . . and pay attorney
fees leaving us a net of less than $200K each.
Pl's Ex. 34 at Plante-0425 & 0426 (emphasis added).
Thus, just months after the litigation launched, Seanor's
hypothetical strongly demonstrates a shared endeavor, where
Plante and Seanor would split the expense burden and end in
the same net position, under equal terms, as part of a
settlement. Indeed, in this voluminous record, the only proof
directly contrary to Plante's averred terms is
Seanor's description of the agreement. Seanor's
version, first raised 5 years after the events in question
and only when faced with the instant litigation, is mostly
(almost entirely) founded on Seanor's word. The Court,
based on a multitude of factors and as detailed below (§
d.), finds Seanor's testimony regarding the
agreement's terms incredible.
and Seanor filed (or joined) suits against Marcum, Conway and
others in Florida and Kentucky. Until May of 2013, Seanor was
an active participant in, indeed a driving force behind, the
litigation. He sent reams of e-mails to the parties'
counsel and accountants. See generally Pl's Exs.
22, 24, and 25. Rambicure testified that Seanor was an active
party and frequently directed him to keep the pressure on
Marcum and ADT. Rambicure, at Plante's expense, defended
a counterclaim brought solely against Defendant. Seanor
participated in two mediations, but did not settle, and by
all appearances intended to move forward with the suits.
However, on May 6, 2013, Seanor abruptly notified Plante and
Rambicure that he had accepted a buy-sell offer from Marcum;
he settled his claims for a $700, 000 cash payment and .06%
royalty on ADT-patented product sales. Nonetheless, Plante
also funded Seanor's (disputed) exit from the litigation.
That is, Seanor settled on his own, shrouded from his lawyer
and co-party, but he then looked to Rambicure, on
Plante's dime, to effect his removal from the suit.
Pl's Ex. 29. That took several months' worth of
effort by Rambicure.
on July 11, 2013, Plante e-mailed Seanor a detailed
accounting of the legal costs paid and outstanding-Plante
requested 50% reimbursement. Pl's Ex. 9. Seanor did not
challenge his duty to repay or the accounting (in fact, he
remarked that he did not doubt the statement's accuracy,
Pl's Ex. 18 at Plante-0125) at the time, or in response
to any of Plante's repeated follow-up requests. See
generally id. Yet, Seanor ultimately only paid $35, 000,
less than 1/3 of the 50% repayment ($119, 800.11) Plante
requested in July 2013.
set the stage with the preceding general summary, the Court
addresses its concerns regarding Seanor's credibility.
For the reasons discussed below, the Court rejects
Seanor's claim that his repayment duty was contingent
upon an attorney fee recovery. That testimony, specifically,
conflicts with all credible record proof. Documentary
evidence also belies much of Seanor's other testimony.
Further, the trial exhibits contain other examples that
impeach Seanor. The Court finds Seanor not credible as a
witness in this case.
the same Seanor communications that support Plante's
theory (discussed above) obviously refute Seanor's
testimony regarding the agreement's terms. Also vital are
Seanor's responses to (or, often as not, silence
following) Plante's post-settlement requests for payment.
Exemplary, and perhaps the weightiest evidence in the record,
are two July 2013 e-mails. On July 11, Plante sent Seanor the
detailed accounting mentioned above-an attached worksheet
explicitly broke the costs down pursuant to the
Plante-proposed terms (50/50 split). Pl's Ex. 9. Plante
reminded Seanor that his litigation outlays allowed Seanor to
settle on terms comparable to Northrop and asked Seanor to
“arrange payment” for the 50% reimbursement.
Id.. Seanor's response, the very next morning,
speaks volumes: “I wasn't sure where was best to
send the check for legal fees - do you want it to go to your
office or home . . . [p]lease e-mail me the correct
address.” Pl's Ex. 18 at Plante-0120. Seanor's
2013 conduct is simply inconsistent with his trial testimony
and strongly indicative of a 50/50 deal.
record is replete with similar Plante requests for a 50%
repayment. See generally Pl's Ex. 18 & 19.
Tellingly, Seanor never opposed such requests, much less
argued that his failure to obtain a fee award or recovery
obviated the repayment duty. Rather, Seanor sent Plante $25,
000 and $10, 000 checks, respectively, for “Legal Fees
Seanor et al v. Marcum et al” and
“ADT/Rambicure[.]” Pl's Ex. 10. [Seanor's
claim, at trial, that he had no hand in creating the
checks' subject lines further damaged his credibility.
Suffice it to say the Court strongly doubts that Seanor's
counsel (and appointed agent) would send funds held on a
client's behalf to a ...