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Universal Technologies, Inc. v. Cleek

United States District Court, M.D. Tennessee, Nashville Division

June 2, 2015

UNIVERSAL TECHNOLOGIES, INC. and JESSE E. ROGERS, Plaintiffs,
v.
FAYE CLEEK, et al., Defendants.

MEMORANDUM

KEVIN H. SHARP, District Judge.

Before the Court is Plaintiffs' Universal Technologies, Inc.'s ("UTI's") and Jesse E. Rogers's ("Rogers's") "Motion to Dismiss Counterclaims of Faye Cleek" (Docket No. 40) to which Defendant Faye Cleek ("Cleek") has responded in opposition. For the following reasons, Plaintiffs' Motion to Dismiss will be granted in part and denied in part.

I. BACKGROUND

In addition to answering Plaintiffs' Complaint, Cleek filed three counterclaims (Docket No. 22). Count I alleges breach of contract, Count II alleges breach of fiduciary duty, and Count III is a derivative action claim. Plaintiffs move for dismissal of all these counterclaims on the grounds that they fail to state a claim upon which relief may be granted (Docket No. 40).

Cleek bases her breach of contract counterclaim on a pair of corporate minute book entries dated 1998, which indicate that 25 percent of the stock in UTI would be transferred to her (Docket No. 22). Defendant alleges breach of contract because Plaintiffs never transferred the ownership interest to her, and they refuse to recognize her status as a shareholder in UTI (Docket No. 22).

Cleek's breach of fiduciary duty and derivative action counterclaims are premised on her being a shareholder in UTI, as per the contract alleged in the first counterclaim (Docket No. 22). She alleges that Plaintiff Rogers paid "excessive compensation to himself and to other members of his family" using UTI funds (Docket No. 22).

With respect to the breach of contract counterclaim, Plaintiffs maintain that no contract was ever formed to transfer any ownership interest to Cleek, and that the minute book entries were forged by her (Docket No. 41). Furthermore, Plaintiffs contend that even if the minute book entries constituted a valid contract to transfer 25 percent of the stock in UTI to Cleek, the breach of contract claim is time barred by the applicable statute of limitations (Docket No. 41).

With respect to the breach of fiduciary duty and derivative action counterclaims, Plaintiffs argue for dismissal on the grounds that Cleek lacks standing to bring these claims against UTI (Docket No. 41). This is because Plaintiffs maintain that Cleek is not a shareholder in UTI, as required for standing to bring such claims under Tennessee law (Docket No. 41).

II. LEGAL ANALYSIS

A. Standard of Review

When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "all well-pleaded material allegations of the pleadings" must be assumed true. Fritz v. Charter Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010). However, a court is not compelled to accept "legal conclusions or unwarranted factual inferences." Hunter v. Sec'y of U.S. Army, 565 F.3d 986, 992 (6th Cir. 2009). Plaintiff must plead "sufficient factual matter" for the claim to be "plausible, i.e., more than merely possible." Ashcroft v. Iqbal, 556 U.S. 662, 129 (2009). A "formulaic recitation of the elements of a cause of action" is insufficient to meet this standard. Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007). Likewise, the plausibility standard is not met when only "supported by mere conclusory statements." Iqbal, 556 U.S. at 129. "In addition to the allegations in the complaint, the court may also consider other materials that are integral to the complaint, are public records, or are otherwise appropriate for the taking of judicial notice." Wyser-Pratte Mgmt. Co., Inc. v. Telxon Corp., 413 F.3d 553, 560 (6th Cir. 2005).

B. Breach of Contract Claim

In their memorandum in support of the Motion to Dismiss (Docket No. 41), Plaintiffs argue that Cleek's breach of contract counterclaim is barred by the six-year statute of limitations codified in Tenn. Code Ann. ยง 28-3-109(a)(3). They contend the corporate minute book entries upon which her claim is based are dated 1998, sixteen years before the claim was made, and that Defendant has "slept" on her rights since that time (Docket No. 41).

In response, Cleek argues that the cause of action for breach of contract accrues at the time the contracting party first knows or should know that the contract is or will be breached (Docket No. 42). Accordingly, Cleek contends that her breach of contract counterclaim is not time barred because she only recently became ...


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