United States District Court, M.D. Tennessee, Nashville Division
MEMORANDUM AND ORDER
A. Trauger, United States District Judge
before the court is a Motion for Summary Judgment (Docket No.
29), filed by the defendant, Southern Recycling, LLC
(“Southern”), to which the plaintiff, PSC M s,
Inc. (“PSC”), has filed a Response in Opposition
(Docket No. 73), and Southern has filed a Reply (Docket No.
82). For the reasons discussed herein, Southern's Motion
for Summary Judgment will be denied.
Southern are scrap m recycling companies with substantial
operations in Nashville, Tennessee. On December 9, 2015, they
entered into a Confidentiality and NonDisclosure Agreement as
part of discussions regarding PSC's potential purchase of
Southern's Nashville assets and business operations.
(Docket No. 9-1.) On January 20, 2017, the parties entered
into a letter of intent (“LOI”). (Docket No.
9-2.) Although non-binding with regard to the terms and
structure of the potential acquisition, the LOI included a
binding exclusivity provision that granted PSC exclusive
negotiating rights with Southern. The exclusivity provision
states in relevant part:
The Company [Southern] and its member shall agree that for a
period of thirty (30) days from the date they accept this
letter (the “Initial Exclusivity Period”),
neither the Company nor its member will,
without the prior written consent of PSC, solicit or
engage in any discussions or negotiations
regarding (a) the sale or transfer of all or
substantially all or any material portion of the Nashville
assets used in the Company's business . . . .
(Id. at 4) (emphasis added). In addition to the
initial thirty-day exclusivity period, the LOI provided for
three additional, subsequent thirty-day periods, contingent
upon certain conditions being met by the end of each. PSC met
these conditions, and thus the total exclusivity period, as
extended, ran through May 20, 2017. The non-binding terms of
the LOI included a $28 million purchase price for PSC's
acquisition of Southern's Nashville assets, and a
corresponding $1 million purchase price for Southern's
acquisition of PSC's Bowling Green assets, leaving a
total sales price of $27 million.
March 9, 2017, Southern's president, John Felloneau,
received an inquiry regarding Southern's Nashville assets
and business operations from an interested third party,
Ferrous Processing and Trading (“FPT”). Like
Southern and PSC, FPT is a scrap m recycling company in the
Nashville area. The inquiry came via telephone from William
Sulak, FPT's Southeast Regional Director. Sulak and
Fellonneau conducted business regularly, and the March 9
phone call was not the first time Sulak broached the
possibility of FPT's buying Southern's Nashville
assets. (Docket No. 75-3, p. 24) (Deposition of William
Sulak) (“I probably first mentioned it, you know, maybe
a year or so - - I'm sorry, maybe a couple of years ago.
Maybe when we first started talking about, you know, just the
regular transactional business.”). Sulak's impetus
for the March 9 phone call was an overheard conversation at
an industry event in St. Louis, in which a PSC employee,
Andre Pujadas, boasted that PSC was “going to take away
all of [FPT's] business in the Nashville area and that
[Pujadas] was going after Southern Recycling.”
(Id. at 31.) That boast, combined with rumors Sulak
had heard “in the trade, ” prompted Sulak on
March 7, 2017, to consult FPT's president, Dave Dobronos,
about reaching out to Southern. (Id.) Two days
later, Sulak called Fellonneau and asked whether Southern was
selling to PSC and, if so, whether FPT could potentially
purchase Southern's Nashville assets. (Id. at
33.) Fellonneau denied that Southern was negotiating with PSC
and told Sulak that, while Southern was not interested in
selling, Sulak would be the first person he would call should
that change. (Id.) Southern promptly brought the
inquiries to PSC's attention, and negotiations continued
pursuant to the terms of the LOI. On April 20, 2017, PSC
provided a draft Asset Purchase Agreement (“APA”)
following the March 9 call, Sulak arranged a meeting for
himself, Fellonneau, and Dobronos, to take place during an
April industry convention in New Orleans. Dobronos and
Fellonneau had never met, and Sulak has claimed that the
purpose of the meeting was to introduce the pair, in order to
facilitate future business between FPT and Southern.
(Id. at 40.) Sulak also intended to use the meeting
to advance discussions about an FPT acquisition of
Southern's Nashville assets, but he did not communicate
that intention to Fellonneau. (Id.) Fellonneau was
twice asked in deposition about the meeting's purpose,
Q: Okay. And what was your understanding of the purpose of
A: He wanted to introduce me to the new president of Ferrous
Processing and Trading.
Q: Okay. Any other purpose?
A: Not that was expressed to me at that time, no.
later in the deposition, Fellonneau's account changed:
Q: Did you know that Mr. Dobronos was going to be at the
Q: When did you learn that Mr. Dobronos was at the meeting or
going to be at the meeting?
A: When I walked into the meeting.
Q: Did you know him ...