United States District Court, E.D. Tennessee, Greeneville Division
Jordan United States District Judge
matter is before the Court on Plaintiff's Motion for
Summary Judgment [doc. 43], Plaintiff's Brief Supporting
the Motion [doc. 44], Plaintiff's Statement of Material
Facts [doc. 45], Defendant's Responses [docs. 47 &
49], and Plaintiff's Reply [doc. 51]. For the reasons
herein, the Court will deny Plaintiff's motion.
acquiring approximately ten years of experience in the
commercial lighting industry, Defendant Brandon Waldrop
“decided to pursue a dream” of his and
established his own lighting business, Defendant BADW Group,
LLC, in 2014. [Waldrop Aff., doc. 47-2, ¶¶ 2-3].
Mr. Waldrop managed BADW from his home as an ecommerce
business- that is, a business that operates electronically on
the internet. [Waldrop Dep., doc. 52-1, at 20:13-14; Waldrop
Resp., doc. 47-1, at 3; Waldrop Aff. ¶
He was BADW's sole member. [BADW Interrog. Resp., doc.
44-2, at 2]. To finance BADW's start-up, he borrowed $20,
000 from two erstwhile business associates, whom he
eventually paid back in full. [Waldrop Dep. at 20:15-25;
began promoting BADW with Google AdWords, an online marketing
service. [Waldrop Aff. ¶ 7; Waldrop Dep. at 73:5-10;
88:19-24]. According to BADW, Google bills its advertisers on
a “cost-per-click basis, ” which means that it
charges them for each time someone clicks an advertisement,
whether that person does or does not purchase the product.
[Waldrop Aff. ¶ 7]. Mr. Waldrop relied on merchant cash
advances-a type of loan for which BADW's receivables
served as collateral-to pay for this service, as an
investment in BADW's long-term growth. [Waldrop Dep. at
24:8-13; 26:1-7; Waldrop Resp. at 3, 7, 8; Waldrop Aff.
2014, BADW entered into a contractual relationship with
Plaintiff Howard Industries, Inc. [Waldrop Aff. ¶ 4].
BADW did not maintain its own inventory of lighting products,
so once it received a customer's order and payment, it
arranged for Howard Industries to ship the product to the
customer. [Id.; Waldrop Dep. at 18:11-25; 19:1-23;
95:9-25]. In 2014, BADW amassed $127, 903 in gross sales, and
it shared a portion of those proceeds with Howard Industries.
[BADW Interrog. Resp. at 2; Waldrop Aff. ¶ 5]. In 2015
and 2016, BADW's gross sales were higher, totaling $1,
837, 089 and $1, 635, 090, respectively. [BADW Interrog.
Resp. at 2]. BADW also shared this revenue with Howard
Industries. [Waldrop Aff. ¶ 5].
BADW's existence, Mr. Waldrop paid some of his personal
expenses by using funds from BADW's bank account,
[Waldrop Dep. at 74:16-19; Waldrop Resp. at 2, 5; Waldrop
Aff. ¶ 10], and at times he compensated himself with
BADW's funds for the labor he put into building the
company, [Waldrop Dep. at 69:1-16]. For instance, he paid
himself with a portion of BADW's $20, 000 start-up loan,
as compensation for the time he devoted to setting up
BADW's website. [Id.; Waldrop Resp. at 3;
Waldrop Aff. ¶ 10]. He also periodically spent
BADW's funds on gasoline and meals, used them to pay his
phone bills and make purchases at retail stores, and expended
them on his mortgage, lawn-care service, and funerary
expenses for his pet. [BADW Account Statement, doc. 55-1, at
22-23, 27; Waldrop Dep. at 51:17-25; 52:1-6; 54:2-5;
BADW's sales exceeded a million dollars in 2015 and in
2016, BADW began to experience serious financial distress
behind the scenes, which caused it to endure net
losses in those years and soured its relationship
with Howard Industries. [Waldrop Resp. at 4; Waldrop Aff.
¶¶ 6-8, 10]. In 2015, BADW began receiving
complaints of undelivered orders from its customers. [Waldrop
Aff. ¶ 6]. Howard Industries proceeded to mail a letter
to BADW, stating that “unforeseen issues and product
shortage” were resulting in “delays in shipping
[BADW's] purchase orders.” [Delay Letter, doc.
47-3, at 1]. In addition to complaining to BADW, unhappy
customers posted negative online reviews, which hurt
BADW's reputation. [Waldrop Aff. ¶ 6]. Mr. Waldrop
even received threats from some customers. [Waldrop Dep. at
81:12-14]. The unfilled orders became so numerous that
Shopify-an ecommerce platform that BADW used to track
sales-froze its online account. [Waldrop Aff. ¶ 6]. In
an effort to refund BADW's customers for the unfilled
orders, Mr. Waldrop withdrew sums of money from BADW's
bank account and mailed cashier's checks to them.
[Waldrop Dep. at 72:6-18; 81:11-14].
this same time, Mr. Waldrop also learned from his bank that
Google had recently been billing BADW tens of thousands of
dollars-and sometimes hundreds of thousands of dollars-per
month for its AdWords service. [Waldrop ¶ 8]. On some
days, the charges eclipsed $13, 000. [Waldrop Dep. at
73:5-8]. Mr. Waldrop concluded that a possible competitor had
tried to sabotage BADW by continually clicking on BADW's
ads to cause the charges to skyrocket. [Waldrop Aff. ¶
8]. As BADW's operating costs multiplied, sales revenue
dropped, and customers clamored for refunds, Mr. Waldrop
borrowed over a hundred thousand dollars in merchant cash
advances. [Waldrop Dep. at 85:3:1-18; 85:24-25; 86:1-11].
Although he notified Howard Industries of BADW's problem
with Google and requested the relaxation of their contract
while he attempted to resolve this problem, Howard Industries
declined his request. [Waldrop Aff. ¶ 8]. He ultimately
determined that BADW could not recover financially, and he
decided to shutter the company. [Id. ¶ 9].
Industries has now brought suit in this Court against Mr.
Waldrop and BADW, alleging claims for (1) an unpaid sworn
account of $384, 314.88 in lighting products, (2) breach of
contract, and (3) misconduct on Mr. Waldrop's part that
entitles it to pierce BADW's corporate veil, [Am. Compl,
doc. 25, at 3-4]. Howard Industries now moves for summary
judgment only on the third claim, piercing the corporate
veil. [Pl.'s Mot. Summ. J. at 1, 3]. Howard Industries
asserts that this claim is the only remaining matter that
requires resolution in this case, [id. at 1], and it
bases this assertion on an order in which Magistrate Judge
Corker recognized that “it appears the only remaining
issue in this case is whether piercing the corporate veil is
appropriate, ” [Order, doc. 24, at 3]. But in the
Pretrial Order [doc. 57]-which, by the parties' own
terms, amends and supplants the pleadings-Mr. Waldrop
disputes Howard Industries' right to hold him personally
liable. [Id. ¶ D.12]. The Pretrial Order
governs the parties' positions at this stage in the
litigation-not the original Complaint [doc. 1], which was the
active pleading of record at the time Judge Corker issued his
order. See Permasteelisa CS Corp. v. Airolite Co.,
No. 2:06-cv-569, 2008 WL 2491747, at *3 (S.D. Ohio June 18,
2008) (observing that “[t]he purpose of a Final
Pretrial Order is to conclusively fix the issues that remain
to be litigated”). Besides, the Court has neither
granted any dispositive motion nor received a notice of
settlement concerning any of the claims. If this case does
progress to trial, the parties will therefore litigate the
range of issues relevant to all the claims, not merely the
lone issue of whether the corporate veil is pregnable, which
the Court will now address in relation to summary judgment.
judgment is proper when the moving party shows, or
“point[s] out to the district court, ”
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986),
that the record-the admissions, affidavits, answers to
interrogatories, declarations, depositions, or other
materials-is without a genuine issue of material fact and
that the moving party is entitled to judgment as a matter of
law, Fed.R.Civ.P. 56(a), (c). The moving party has the
initial burden of identifying the basis for summary judgment
and the portions of the record that lack genuine issues of
material fact. Celotex, 477 U.S. at 323. The moving
party discharges that burden by showing “an absence of
evidence to support the nonmoving party's” claim or
defense, id. at 325, at which point the nonmoving
party, to survive summary judgment, must identify facts in
the record that create a genuine issue of material fact,
id. at 324.
just any factual dispute will defeat a motion for summary
judgment-the requirement is “that there be no
genuine issue of material fact.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A fact is “material” if it may affect the
outcome of the case under the applicable substantive law,
id., and an issue is “genuine” if the
evidence is “such that a reasonable jury could return a
verdict for the nonmoving party.” Id. In
short, the inquiry is whether the record contains evidence
that “presents a sufficient disagreement to require
submission to the jury or whether it is so one-sided that one
party must prevail as a matter of law.” Id. at
251-52. When ruling on a motion for summary judgment, a court
must view the facts and draw all reasonable inferences in the
light most favorable to the nonmoving party. Scott v.
Harris, 550 U.S. 372, 378 (2007). “[T]he
judge's function is not himself to weigh the evidence and
determine the truth of the matter but to determine whether
there is a genuine issue for trial.” Anderson,
477 U.S. at 249. A court may also resolve pure questions of
law on a motion for summary judgment. See Hill v.
Homeward Residential, Inc., 799 F.3d 544, 550 (6th Cir.