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Koshani v. Barton

United States District Court, E.D. Tennessee, Knoxville Division

June 27, 2018

SHAFIQULLAH KOSHANI, Plaintiff,
v.
ERIC WAYNE BARTON and VANQUISH WORLDWIDE LLC, Defendants.

          MEMORANDUM OPINION

          THOMAS W. PHILLIPS UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendants' Motion to Dismiss [doc. 43], Defendants' Brief [doc. 44], Plaintiff's Response [doc. 49], and Defendants' Reply [doc. 50]. For the reasons herein, the Court will grant Defendants' motion in part and deny it in part.

         I. Background

         A citizen and resident of Afghanistan, Plaintiff Shafiqullah Koshani alleges that he and Defendant Eric Barton, a citizen of the United States, established a joint venture in Afghanistan in 2010. [Am. Compl., doc. 41, ¶¶ 2, 7-8]. They documented the terms of their joint venture in a Joint Venture Agreement [doc. 41-1], which entitled Mr. Koshani to receive fifty-one percent of any net profits, [id. at 2]. Mr. Koshani maintains that the parties registered the joint venture with the Afghan government and procured a business license; named their new business Vanquish Worldwide (“Vanquish Afghanistan”); and pursued a contract with the United States Army, which was soliciting bids for a project known as “National Afghan Trucking, ” or “NAT, ” in Afghanistan. [Am. Compl. ¶¶ 2, 14, 20-21]. According to Mr. Koshani, he “invested his own money in efforts to obtain and lay the groundwork for [securing] the NAT prime contract.” [Id. ¶ 27]. Specifically, he provided Vanquish Afghanistan with “equipment, assets, pricing, experience and contacts on the ground in Afghanistan, and approximately 80 percent of the more than $1.3 million in start-up funds.” [Id. ¶ 2].

         Mr. Koshani alleges that Mr. Barton submitted a proposal to the United States in response to the NAT solicitation but that he did not submit it in Vanquish Afghanistan's name. [Id. ¶ 28]. Instead, he allegedly submitted it on behalf of a company with a nearly identical name, Vanquish Worldwide, LLC (“Vanquish United States”)-a company that he allegedly owned in Tennessee-and tabbed Vanquish Afghanistan as a subcontractor that would render services under the contract. [Id. ¶¶ 9, 29]. In addition, Mr. Koshani maintains that Mr. Barton provided the United States with a bank account number that belonged to Vanquish United States. [Id. ¶ 31]. The United States ultimately awarded the NAT contract to Vanquish United States. [Id. ¶ 34].

         Afterwards, Mr. Barton allegedly informed Mr. Koshani that he had secured the NAT contract on Vanquish United States' behalf, instead of on Vanquish Afghanistan's behalf, and asked Mr. Koshani to agree to make Vanquish Afghanistan a subcontractor under the NAT contract. [Id. ¶ 35]. Mr. Koshani claims that he refused to do so because he had agreed to be Mr. Barton's partner, not his subcontractor, and he insisted that they proceed with the terms of the Joint Venture Agreement. [Id. ¶¶ 35-36]. They then entered into a Profit Sharing Agreement [doc. 41-2], in which Mr. Barton acknowledged that he had received Mr. Koshani's “help[]” in building Vanquish Afghanistan and creating the proposal that the United States accepted. [Id. at 1]. In the Profit Sharing Agreement, the parties agreed that Mr. Koshani would be entitled to half of Vanquish United States' net profits from the NAT contract, though they also expressed their simultaneous intention to proceed “as per our agreement.” [Id.]. Mr. Koshani claims that Mr. Barton entered into the Profit Sharing Agreement in his binary capacity as Vanquish Afghanistan's vice president and as Vanquish United States' president. [Am. Compl. ¶ 38].[1]

         Mr. Koshani alleges that, in honoring this new agreement, he provided significant start-up capital to Venture United States so that it could perform its responsibilities under the NAT contract. [Id. ¶¶ 44]. He asserts that this capital included $100, 000 in insurance premiums, more than $450, 000 in equipment, funds for its employees' salaries, and the purchase of uniforms and office supplies. [Id. ¶¶ 44, 48]. In total, he professes that he invested approximately $1.1 million in Vanquish United States between 2011 and 2012, whereas Mr. Barton contributed roughly $250, 000. [Id. ¶¶ 48-49].

         According to Mr. Koshani, when the United States began making payments to Vanquish United States under the NAT contract, Mr. Barton initially allocated shares of those payments to him. [Id. ¶ 50]. But by August 2012, Mr. Barton allegedly stopped providing Mr. Koshani with his share of the profits, and he eventually cut him out of the business altogether. [Id. ¶¶ 51-52]. Mr. Koshani estimates that the United States paid nearly $32 million to Vanquish United States under the NAT contract and that it received net profits under the contract that totaled at least $11 million. [Id. ¶ 57-58]. He believes that the Profit Sharing Agreement entitles him to half of these profits. [Id. ¶ 58].

         To recover them, he filed suit in this Court against Mr. Koshani and Vanquish United States (“Defendants”), bringing multiple claims. They include breach of contract, breach of fiduciary duty, conversion, unjust enrichment, equitable accounting, breach of duty of care, breach of duty of loyalty, breach of duty of trust, usurpation of corporate opportunities, breach of the covenant of good faith and fair dealing, an accounting, and a request for punitive damages. [Id. at 13-26]. Defendants now move for dismissal of all these claims under Federal Rule of Civil Procedure 12(b)(6). [Defs.' Mot. at 1].

         II. Legal Standard

         Under Federal Rule of Civil Procedure 8(a)(2), “[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.” In determining whether to dismiss a complaint under Rule 12(b)(6), a court accepts the factual allegations in the complaint as true and construes them in a light most favorable to the non-moving party. Mixon v. Ohio, 193 F.3d 389, 400 (6th Cir. 1999). “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions, ” however, and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). In addition, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         III. Analysis

         Defendants raise manifold arguments for the dismissal of Mr. Koshani's claims, ranging from contractual interpretation to the statute of limitations. The Court will now proceed with these arguments on a claim-by-claim basis, as Defendants have done in their legal brief. [Defs.' Br. at 3-25].

         A. Count One: Breach of the Joint Venture Agreement

         In Count One, Mr. Koshani alleges that Mr. Barton breached the Joint Venture Agreement in several ways, including by failing to provide Mr. Koshani with fifty-one percent of Vanquish United States' net profits and by failing to permit Mr. Koshani to inspect Vanquish United States' records, statements, and accounts:

65. Defendant Barton breached the Joint Venture Agreement by: . . . .
b. Failing to pay to Plaintiff 51 percent of the net profits of the business operations in Afghanistan of Vanquish [United States], which were subject to his joint venture partnership with Plaintiff; and
c. Failing to make open for inspection and examination by Plaintiff or his agents the records, statements and accounts of the business operations in Afghanistan of Vanquish [United States], which were subject to his joint venture partnership with Plaintiff[.]

[Am. Compl. at 13]. Mr. Barton, however, argues that dismissal of these allegations is proper because the Joint Venture Agreement's plain terms do not entitle Mr. Koshani to receive net profits from Vanquish United States or to inspect Vanquish United States' records or other documents. [Defs.' Br. at 3-4]. In response, Mr. Koshani highlights portions of the Joint Venture Agreement. [Pl.'s Resp. at 8]. He notes that Section Five provides that “[t]he net profits earned by the joint venture . . . shall be divided among the parties as follows: Eric Barton shall receive 49 percent (49%), and [Mr. Koshani] shall receive 51 percent (51%).” [J.V. Agreement at 2]. He also notes that Section Seven states that “Eric Barton shall maintain . . . records, statements, and accounts concerning the total operation of the joint venture” and that “[a]ll the books will be open at all times for inspection and examination by [Mr. Koshani].” [Id. at 3].

         In the Joint Venture Agreement, the parties define “joint venture” as an enterprise that “shall be conducted under the name of Vanquish [Afghanistan] from a place of business at . . . City of Kabul, State of Afghanistan.” [Id. at 1].[2] This plain language could not be any more transparent. The parties unmistakably intended their legal obligations under the Joint Venture Agreement-including under Section Five and Section Seven- to extend to and flow from Vanquish Afghanistan. See Bokor v. Holder, 722 S.W.2d 676, 679 (Tenn. Ct. App. 1986) (stating that courts cannot look beyond a contract's terms unless they are ambiguous); Pylant v. Spivey, 174 S.W.3d 143, 152 (Tenn. Ct. App. 2003) (noting that a contract's terms are ambiguous only when they are “susceptible to more than one reasonable interpretation” (citation omitted)). Simply, the Joint Venture Agreement does not state that Mr. Barton must share Vanquish United States' profits with Mr. Koshani or permit Mr. Koshani to inspect Vanquish United States' records. The parties do not even mention Vanquish United States in the Joint Venture Agreement.[3] The Court cannot possibly interpret the Joint Venture Agreement-by itself-as governing anything other than the parties' relationship vis-à-vis Vanquish Afghanistan. The Court will dismiss paragraphs 65(b) and 65(c) of the Amended Complaint.

         B. Count One: Breach of the Profit Sharing Agreement

         Mr. Koshani also alleges that Mr. Barton breached the Profit Sharing Agreement in numerous ways, including by failing to pay him half of Vanquish United ...


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