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The Porter Casino Resort, Inc. v. Georgia Gaming Investment, LLC

United States District Court, W.D. Tennessee, Western Division

July 30, 2019

THE PORTER CASINO RESORT, INC., Plaintiff,
v.
GEORGIA GAMING INVESTMENT, LLC; and TENNESSEE HOLDING INVESTMENTS, LLC, Defendants and Third-Party Plaintiffs,
v.
CHICAGO TITLE AND TRUST COMPANY; and M. COLE PORTER, Third-Party Defendants.

          ORDER

          SAMUEL H. MAYS, JR. UNITED STATES DISTRICT JUDGE

         This action arises from a planned venture to buy a casino in Tunica, Mississippi. (Compl. ECF No. 1-1 at 9.) Plaintiff The Porter Casino Resort, Inc. (“Porter Casino”) sought to buy and operate a casino with money invested by Defendants Georgia Gaming Investment, LLC (“Georgia Gaming”) and Tennessee Holding Investments, LLC (“Tennessee Holding”) (collectively “Defendants”). Defendants transferred some of their capital investment into an escrow account held by Third-Party Defendant Chicago Title and Trust Company (“Chicago Title”). Chicago Title was to release the funds on the satisfaction of certain conditions leading to a final deal to buy the casino. The relationship between Defendants and Porter Casino deteriorated and various disputes about financing and alleged misrepresentations arose. Defendants and Porter Casino decided to terminate their agreement. Porter Casino continued negotiating with other partners to buy the casino and ultimately obtained possession of the escrow deposit from Chicago Title.

         Porter Casino sues Defendants, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and tortious interference with a business relationship. (ECF No. 50 ¶¶ 18-43.) Defendants countersue claiming breach of contract, fraud, conversion, trover, and misappropriation. (ECF No. 40 ¶¶ 30-58.) Defendants have impleaded Chicago Title and M. Cole Porter, the president and CEO of Porter Casino. (See id.) Defendants bring a breach of contract claim against Chicago Title on the ground that Chicago Title improperly disbursed the escrow funds to Porter Casino. (Id. ¶¶ 30-38.) Before the Court is Chicago Title's February 22, 2019 motion to dismiss. (ECF No. 53.) Chicago Title argues that impleader is improper under Federal Rule of Civil Procedure 14. Defendants responded on April 23, 2019. (ECF No. 65.) Chicago Title replied on May 2, 2019. (ECF No. 67.)

         For the following reasons, Chicago Title's motion to dismiss is GRANTED. Defendants' breach of contract claim against Chicago Title is DISMISSED without prejudice.

         I. Background

         For purposes of Chicago Title's motion to dismiss, the facts are taken from Defendants' Third-Party Complaint.

         In 2017, Porter Casino approached Defendants about an opportunity to buy the Fitzgerald Casino & Hotel (the “Casino”) in Tunica, Mississippi. (ECF No. 40 ¶ 3-4.) At all times relevant to this suit, and continuing to the present, The Majestic Star Casino, LLC and Majestic Mississippi, LLC (collectively “Majestic Star”) have owned the Casino. (Id. ¶ 5.)

         On August 29, 2017, Porter Casino and Georgia Gaming executed an Investment Agreement. (Id.) The same day, Porter Casino and Tennessee Holding executed an identical Investment Agreement. (Id.) The Investment Agreements “evidenced [Defendants'] intent” to make equity investments totaling $3 million before the purchase of the Casino and to provide additional funds to operate the Casino. (Id. ¶ 7-8.) In return, Porter Casino agreed to transfer shares of stock in Porter Casino to Defendants and to provide seats on Porter Casino's Board of Directors to Defendants. (Id. ¶ 7.) Porter Casino also agreed to restructure its management and organization. (Id.)

         During the negotiation process, Porter Casino “repeatedly assured” Defendants that it had secured all necessary funding to buy the Casino. (Id. ¶ 11.) On behalf of Porter Casino, Defendants deposited $1.5 million into an escrow account held by Chicago Title for the purchase of the Casino. (Id. ¶ 13.) Chicago Title knew that Defendants were funding the escrow account as investors in Porter Casino and as putative shareholders in Porter Casino. (Id. ¶ 14.) After the deposit was made, Porter Casino, Chicago Title, and Majestic Star executed an agreement governing the holding and disbursement of funds from the escrow account (the “Escrow Agreement”). (Id. ¶ 15.)

         Under Porter Casino's agreement with Defendants, all but a small portion of the escrow deposit was refundable to Defendants prior to the execution of a formal, binding agreement between Porter Casino and Majestic Star to buy the Casino. (Id. ¶ 17.) Despite Porter Casino's assurances that it had secured all of the necessary funding, Defendants obtained information that gave them “grave concerns” about Porter Casino's ability to close the deal. (Id. ¶ 18.) Porter Casino never issued stock to Defendants, never elected Defendants' representatives to its board of directors, and never undertook the agreed restructuring. (Id. ¶ 19.)

         Defendants refused to invest more money in Porter Casino and refused to consent to a binding purchase agreement between Porter Casino and Majestic Star until Defendants' concerns about Porter Casino's finances were resolved. (Id. ¶ 20.) Ultimately, Defendants determined that Porter Casino had not secured the funding to buy the Casino and sought a refund of the escrow deposit. (Id. ¶ 21.) Porter Casino agreed to Defendants' request. (Id. ¶ 22.)

         On November 30, 2017, Defendants and Porter Casino executed an agreement that: (1) terminated the Investment Agreements; (2) required Porter Casino to refund Defendants' $1.5 million escrow deposit; and (3) precluded Porter Casino from entering a purchase agreement with Majestic Star, which would potentially subject the escrow deposit to forfeiture, until after the refund had been paid to Defendants. (Id.)

         Porter Casino has not refunded the escrow deposit to Defendants. (Id. ¶ 23.) On February 9, 2018, Defendants sent a letter to Chicago Title demanding that Chicago Title refund the escrow deposit. (Id. ¶ 24.) Defendants did not receive a refund. (Id. ¶ 25.) Defendants then learned that Porter Casino was continuing to deal with Majestic Star and Chicago Title to “execut[e] the necessary documents and agreements . . . to obtain possession of the Escrow Deposit . . . .” (Id. ¶ 27.) On February 20, 2018, Porter Casino took possession of the escrow deposit from Chicago Title. (Id.) Porter Casino has not transferred the escrow deposit to Defendants. (Id. ¶ 29.)

         On February 27, 2018, Porter Casino filed a complaint against Defendants in the Tennessee Chancery Court for the Thirtieth Judicial District at Memphis. (ECF No. 1 at 9.) Porter Casino alleges that Defendants demanded the return of their investment but continued to insist on their right to receive shares of stock. (ECF No. 50 ¶ 14.) Porter Casino alleges that it refused Defendants' demands and that Defendants then took various actions to wrongfully obstruct the purchase of the Casino. (Id.) Porter Casino brings claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and two counts of tortious interference with a business relationship, and seeks a declaratory judgment. (Id. ...


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