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Plante v. Seanor

United States District Court, E.D. Kentucky, Central Division, Lexington

November 2, 2018

PAUL R. PLANTE, JR., Plaintiff,
JOHN W. SEANOR, Defendant.

          OPINION & ORDER


         In this 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).

         On 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.

         Having 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.


         a. Jurisdiction & Venue

         The 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 this action.[1]

         Further, 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.

         b. Question presented.

         The 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.

         The 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.


         a. Background[2]

         Defendant 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.

         From 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 22.

         Based 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.

         b. The Takeover

         Around 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).[3] Per Plante and Seanor, the Marcum buy-sell contracts were invalid under the ADT Shareholders Agreement. Pl's Ex. 20 at 60-61, 64.

         Ultimately, 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.

         c. The Agreement, the Litigation, and the Settlement

         After 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.

         Seanor 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.

         Plante 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 follows:

[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.

         Plante 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.

         Ultimately, 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.

         Having 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.

         d. Credibility

         First, 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.

         The 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 ...

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