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Sigmon v. Appalachian Coal Properties

September 15, 2008


The opinion of the court was delivered by: Thomas W. Phillips United States District Judge


James A. Sigmon initiated this declaratory judgment action brought under the district court's diversity jurisdiction, seeking a determination that he is not obligated under an Agency Agreement with Appalachian Coal Properties, LLC, to pay commissions claimed in the amount of $9 million for a proposed sale of Sigmon's coal properties. Defendant Appalachian says that it presented the plaintiff with a ready, willing and able buyer, but that Sigmon, for no valid reason, refused to proceed with the sale. The defendant asserts that, under Tennessee law, it should be paid the commission it would have received if the plaintiff had followed through with the sale. Sigmon has moved for summary judgment [Doc. 19] and Appalachian has responded in opposition [Doc. 34]. For the reasons which follow, Sigmon's motion will be granted and this action dismissed.

Factual Background

James A. Sigmon is the principal of various business entities that are involved in the coal industry. These entities include Sigmon Coal Company, Inc.; Sigmon West Irrevocable Trust; Dale Co., LLC; Jacobe Co., LLC; J. Hoke Co., LLC; Jericol Mining Inc.; Marion Energy, LLC; Moretz Energy, LLC; and Hobcaw Coal Co, Inc. Sigmon originally contacted William "Ned" Connolly about providing broker services in connection with the sale of the Sigmon entities. On March 17, 2004, Connally and two other principals formed Appalachian for the purpose of brokering a sale of the Sigmon entities on Sigmon's behalf. In August 2004, Sigmon and Appalachian entered into an Agency Agreement whereby Appalachian agreed to provide broker services in connection with the sale of the Sigmon entities. In exchange, Sigmon agreed to pay a commission based upon the sale price.

Appalachian subsequently began contacting persons interested in buying the Sigmon entities, including (but not limited to) KST Consulting Acquisition Company, LLC. On or about September 29, 2004, as permitted by its terms, Sigmon sent a letter to Appalachian announcing that the Agency Agreement was cancelled.

On or about October 5, 2004, two of Appalachian's principals, Ned Connolly and Joe Ison, met with Sigmon to discuss reinstating the Agency Agreement. According to Connally, Sigmon agreed that Appalachian would continue to negotiate with KST and other parties that had previously expressed an interest in buying the Sigmon entities. Appalachian would negotiate with new buyers, but only with Sigmon's prior authorization. For purposes of summary judgment only, Sigmon admits that the Agency Agreement was modified and reinstated, and that the parties negotiated a revised commission structure for the Agency Agreement in January 2005.

Appalachian arranged a meeting between Sigmon and KST on March 9, 2005 to negotiate the sale of the Sigmon entities. Appalachian contends that the parties reached an agreement on all essential terms of a sale. These terms included (1) a sale price of $70 million, (2) a refundable payment of $2 million into escrow,(3) a shortened due diligence, (4) confidentiality of Sigmon's records, (5) an agreement to cooperate and use commercially reasonable efforts to close on the deal within a certain period of time, and (6) revision of the draft letter of intent and other documents to reflect the terms. Sigmon denies that any agreement was reached on March 9, 2005. Among other things, Sigmon alleges that KST refused to pay $2 million in nonrefundable "hard money."

After the meeting, KST attorneys forwarded to Sigmon a Letter of Intent, Escrow Agreement, and Confidentiality Agreement. The draft letter of intent sent by KST to Sigmon provided:

Unless and until a definitive asset purchase agreement (the "Definitive Agreement") is signed and except as otherwise expressly provided in this letter, neither KST nor Sellers shall be obligated to complete the transactions contemplated by this letter, and it is not intended to constitute and shall not create a binding contract upon any party, a commitment letter, or an agreement to agree.

Sigmon never signed the letter of intent, and to date, has not sold the Sigmon entities to KST or anyone else. On March 16, 2005, Sigmon sent a letter to KST announcing that he was terminating the negotiations with KST.

Sigmon filed the instant action when Appalachian asserted that Sigmon was liable to Appalachian under the Agency Agreement or on a theory of unjust enrichment for a $9 million commission because Sigmon refused to honor an alleged agreement to sell the Sigmon entities to KST. That claim is the basis of Sigmon's request for a declaratory judgment and Appalachian's counterclaim.


Rule 56(c), Federal Rules of Civil Procedure, provides that summary judgment will be granted by the court only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. The burden is on the moving party to conclusively show that no genuine issue of material fact exists. The court must view the facts and all inferences to be drawn therefrom in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co., v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Morris to Crete Carrier Corp., 105 F.3d 279, 280-81 (6th Cir. 1987); White v. Turfway Park Racing Ass'n, Inc., 909 F.2d 941, 943 (6th Cir. 1990); 60 Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir. 1987). Once the moving party presents evidence sufficient to support a motion under Rule 56, Federal Rules of Civil Procedure, the non-moving party is not entitled to a trial simply on the basis of allegations. The non-moving party is required to come forward with some significant probative evidence which makes it necessary to resolve the factual dispute at trial. Celotex Corp. v. Catrett, 477 U.S. 317 (1986); White, 909 F.2d at 943-44. The moving party is entitled to summary judgment if the non-moving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof. Celotex, 477 U.S. at 323; Collyer v. Darling, 98 F.3d 220 (6th Cir. 1996).

Sigmon argues that he is entitled to summary judgment on the following grounds: (1) Appalachian has no claim for unjust enrichment because he has not been enriched and because the parties had a contract; and (2) he has no liability for a commission on a sale that did not occur ...

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