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PSC M S, Inc. v. Southern Recycling, LLC

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

March 29, 2018

PSC M S, INC., Plaintiff,


          Aleta A. Trauger, United States District Judge

         Pending 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.


         PSC and 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.

         On 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”) to Southern.

         Sometime 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, first explaining:

Q: Okay. And what was your understanding of the purpose of that meeting?
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.

         But later in the deposition, Fellonneau's account changed:

Q: Did you know that Mr. Dobronos was going to be at the meeting?
A: No.
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 ...

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