United States District Court, W.D. Kentucky, Paducah
MEMORANDUM OPINION & ORDER
B. Russell, Senior Judge.
matter is before the Court upon two motions to dismiss.
Defendants move the Court to dismiss Count VII of
Plaintiff's Complaint for failure to state a claim upon
which relief can be granted. (DN 25). Plaintiff moves the
Court to dismiss in its entirety the Counterclaim Complaint
filed against him by defendants, D&G Properties, Inc. and
DGW Investments, Inc. (collectively, the
“Companies”). (DN 30). The parties have filed
their responses and replies to these motions with the Court.
Fully briefed, this matter is ripe for adjudication, and for
the reasons stated herein, both motions are DENIED.
factual allegations as set out in the Complaint, (DN 1) and
taken as true are as follows. D&G and DGW (collectively
referred to herein as “Companies”) own and
operate multiple Sonic Drive-In (“Sonic”) and
Taco John's franchises in Missouri, Tennessee, Kentucky,
Indiana, Ohio, and West Virginia. Id. at 5. DGW was
formed by Tom Dunivant, Bruce Grisham, and Daniel Williams.
Id. D&G was formed by Dunivant and Grisham.
1996, Plaintiff met with Defendants in West Plains, Missouri
and discussed his prospective employment with the Companies.
Id. at 6. Defendants offered Plaintiff the job of
controlling the franchises and he accepted the offer shortly
thereafter. Id. As part of his employment agreement,
Plaintiff would receive a 10% ownership interest in all
future franchises purchased by the Companies. Id.
Plaintiff acquired his first 10% ownership interest in a
newly acquired franchise when Plaintiff and a separate
company owned by Dunivant executed an operating agreement to
establish Sonic of Malden, LLC (“The Malden Operating
Agreement”). Id. at 7. Thereafter, Plaintiff
and Defendants established eight additional Limited Liability
Companies to control newly acquired Sonic and Taco John's
franchises (“The McDorman Interest LLCs”).
continued to manage the operations of the McDornam Interest
LLCs, as well as the franchises wholly owned and operated by
D&G and DGW, until March 2016. Id. at 10. In
March 2016, Dunivant was bought out of his ownership interest
by the other shareholders of the Companies. Id. Upon
learning of Dunivant's departure, Plaintiff notified
Defendants of his desire to voluntarily withdraw from the
LLCs. Id. at 11. According to the terms of the
McDorman Interest LLC operating agreements, this notification
triggered a buy-out of Plaintiff's ownership interests.
however, desired to continue their business relationship with
Plaintiff and set up a meeting in order to persuade Plaintiff
to continue his role as Company Controller. Id. at
11-12. At the meeting, Plaintiff agreed to continue his role
as Company Controller for three years (“The Amended
Employment Agreement”). Id. at 12. In exchange
for this commitment, Defendants agreed to purchase 50% of
Plaintiff's ownership interests in the McDorman Interest
LLCs immediately, and then purchase the remainder of
Plaintiff's ownership interest at the conclusion of the
three-year term. Id. On April 12, 2016 Defendants
purchased 50% of Plaintiff's ownership interests in the
McDorman Interest LLCs. Id. at 13.
one-year into the Amended Employment Agreement, Plaintiff
began to sense a lack of communication from the shareholders
of the companies. Id. Because of this perceived lack
of communication, on February 6, 2017, Plaintiff approached
Defendants at the West Plains, Missouri office to express his
frustration. Id. Defendants told Plaintiff that the
shareholders had discussed the need to continue their
business without Plaintiff's services. Id.
next day, February 7, 2017, Plaintiff and Defendants met at
Defendants' office in Paducah, Kentucky. Id. At
this meeting, Defendants offered Plaintiff a severance
agreement (the “Severance Agreement”) and
Plaintiff accepted the offer. Id. at 14. On February
21, 2017 a meeting was held to install Plaintiff's
replacement, Selina Harner, as the new Director of Operations
of the companies. Id. at 15. Sometime after March
14, 2017, Plaintiff received a letter sent by the law firm
Husch Blackwell on behalf of Defendants notifying Plaintiff
that his employment with the Companies was terminated
“effective immediately.” Id.
alleges that the Companies have not fulfilled their
obligations under the terms of the Severance Agreement,
Amended Employment Agreement, and operating agreements of the
McDorman Interest LLCs. Id. at 17-22. Plaintiff
further alleges that Defendants have breached their fiduciary
duties. Id. at 22-24. Plaintiff also claims that he
was fraudulently induced to continue his employment with the
companies after he expressed his desire to retire and sell
his interests in the LLCs. Id. at 24-25.
their answer, the Companies bring counterclaims for fraud and
breach of fiduciary duty. The factual allegations as set out
in the Counterclaim Complaint (DN 24) and taken as true are
as follows. Plaintiff began his employment with the Companies
in 1996. Id. at 20. Plaintiff's job duties
included the management of finances and preparation of
financial information for the Companies. Id. The
Companies placed trust and confidence in Plaintiff to manage
the finances of the companies. Id. Part of
Plaintiff's compensation came from bonuses he received
based upon the net profits of the franchises operated by the
Companies. Id. The Companies claim that Plaintiff
committed fraud and breached his fiduciary duties by creating
inflated profit and loss statements for the franchises and
paying himself monthly bonuses based on the inflated figures.
Id. at 20 - 22.
Federal Rules of Civil Procedure require that pleadings,
including complaints, contain a “short and plain
statement of the claim showing that the pleader is entitled
to relief.” Fed.R.Civ.P. 8(a)(2). A complaint may be
attacked for failure “to state a claim upon which
relief can be granted.” Fed.R.Civ.P. 12(b)(6). When
considering a Rule 12(b)(6) motion to dismiss, the court will
presume that all the factual allegations in the complaint are
true and will draw all reasonable inferences in favor of the
nonmoving party. Total Benefits Planning Agency v. Anthem
Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th
Cir.2008) (citing Great Lakes Steel v. Deggendorf,
716 F.2d 1101, 1105 (6th Cir.1983)). “The court need
not, however, accept unwarranted factual inferences.”
Id. (citing Morgan v. Church's Fried
Chicken, 829 F.2d 10, 12 (6th Cir.1987)).
though a “complaint attacked by a Rule 12(b)(6) motion
to dismiss does not need detailed factual allegations, a
plaintiff's obligation to provide the grounds of his
entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007) (citations omitted). Instead, the plaintiff's
“[f]actual allegations must be enough to raise a right
to relief above the speculative level on the assumption that
all the allegations in the complaint are true (even if
doubtful in fact).” Id. (citations omitted).
That is, a complaint must contain enough facts “to
state a claim to relief that is plausible on its face.”
Id. at 570, 127 S.Ct. 1955. A claim becomes
plausible “when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at
556, 127 S.Ct. 1955). If, from the well-pleaded facts, the
court cannot “infer more than the mere possibility of
misconduct, the complaint has alleged-but has not
‘show[n]'-‘that the pleader is entitled to
relief.' ” Id. at 679, 129 S.Ct. 1937
(quoting Fed.R.Civ.P. 8(a)(2)). “[O]nly a complaint
that states a plausible claim for relief survives a motion to
the Rules require a plaintiff alleging fraud to “state
with particularity the circumstances constituting fraud or
mistake.” Fed.R.Civ.P. 9(b). “The Sixth Circuit
interprets Rule 9(b) as requiring plaintiffs to ‘allege
the time, place, and content of the alleged misrepresentation
on which he or she relies; the fraudulent scheme; the
fraudulent intent of the defendants; and the injury resulting
from the fraud.' ” Yuhasz v. Brush Wellman,
Inc.,341 F.3d 559, 563 (6th Cir.2003) (quoting
Coffey v. Foamex L.P.,2 F.3d 157, 161-62 (6th
Cir.1993)). In other words, the “complaint must
‘(1) specify the statements that the plaintiff contends
were fraudulent, (2) identify the speaker, (3) state where
and when the statements were made, and (4) explain why the
statements were fraudulent.' ” Frank v. Dana
Corp.,547 F.3d 564, 570 (6th Cir.2008) (quoting
Gupta v. Terra Nitrogen Corp.,10 F.Supp.2d 879, 883
(N.D.Ohio 1998)). Rule 9(b)'s heightened pleading
standard is “designed to prevent ‘fishing
expeditions,' to protect defendants' reputations from
allegations of fraud, and to narrow potentially ...