United States District Court, W.D. Tennessee, Western Division
MEMORANDUM OPINION FINDINGS OF FACT AND CONCLUSIONS
H. MAYS, JR., UNITED STATES DISTRICT JUDGE
William C. Adair (“William”) told the members
of B&L Management Group, LLC (“B&L”) that
he owned a large tract of land in western Tennessee and
northern Mississippi. After a rail-yard was built nearby,
William said he was going to develop some of the tract into
an industrial, commercial, and logistics park. In return for
B&L's consulting services on the development project,
William promised to pay B&L fifteen percent of each sale
of land in the park. When B&L eventually demanded
payment, William refused to pay. B&L then learned that
William had never owned the land at issue and had no
authority to sell it. On that basis, B&L brings a claim
for intentional misrepresentation against William.
also brings a civil conspiracy claim against William and
Defendant Jacqueline Adair (“Jacqueline”).
B&L asserts that William and Jacqueline conspired to
defraud B&L by making hundreds of illegitimate financial
transfers among various business entities and individuals.
B&L alleges that those transfers were designed to make
William appear insolvent and to hinder B&L's ability
to collect on a judgment against William.
filed a Complaint against William on March 20, 2017. (ECF No.
1.) B&L filed its Second Amended Complaint against
William and Jacqueline on April 5, 2018. (ECF No. 128.)
B&L seeks compensatory and punitive damages. The Court
held a four-day bench trial beginning on January 22, 2019,
and concluding on January 25, 2019. As required by Rule 52 of
the Federal Rules of Civil Procedure, the Court sets forth
its findings of fact and conclusions of law based on that
following reasons, B&L's claim against William Adair
for intentional misrepresentation is GRANTED. B&L is
entitled to $589, 356.90 in damages from Defendant William
Adair. B&L's claim against William and Jacqueline
Adair for civil conspiracy is DENIED.
Jurisdiction & Choice of Law
Court has diversity jurisdiction under 28 U.S.C. § 1332.
Federal district courts have original jurisdiction of all
civil actions between citizens of different states
“where the matter in controversy exceeds the sum or
value of $75, 000, exclusive of interest and costs.” 28
U.S.C. § 1332(a)(1).
B&L Management Group, LLC is a Tennessee limited
liability company, whose two members reside in Tennessee.
(ECF No. 175 at 933.) See V & M Star, LP v. Centimark
Corp., 596 F.3d 354, 356 (6th Cir. 2010)
(“[L]imited liability companies ‘have the
citizenship of each partner or member.'” (quoting
Delay v. Rosenthal Collins Grp., LLC, 585 F.3d 1003,
1005 (6th Cir. 2009))). B&L is a citizen of Tennessee.
Defendants William Adair and Jacqueline Adair are residents
and citizens of Mississippi. (ECF No. 175 at 933.) The
parties are completely diverse.
alleges that the amount in controversy exceeds $75, 000.
(Id.) “[T]he sum claimed by the plaintiff
controls if the claim is apparently made in good
faith.” St. Paul Mercury Indem. Co. v. Red Cab
Co., 303 U.S. 283, 288 (1938); accord Charvat v.
NMP, LLC, 656 F.3d 440, 447 (6th Cir. 2011). The
requirements of diversity jurisdiction are satisfied.
substantive law applies to state-law claims brought in
federal court. See Erie R.R. Co. v. Tompkins, 304
U.S. 64 (1938). Where, as here, there is no dispute that a
certain state's substantive law applies, the Court will
not conduct a choice-of-law analysis sua sponte.
See GBJ Corp. v. E. Ohio Paving Co., 139 F.3d 1080,
1085 (6th Cir. 1998). The parties assumed at trial and in
their respective memoranda that Tennessee substantive law
applies to B&L's state-law claims and have made their
arguments accordingly. The Court will apply Tennessee
substantive law to B&L's state-law claims.
Findings of Fact
William Adair is a “well-known regional
businessman” who formed Direct Insurance Company in
1991. (ECF No. 175 at 959.) William and Jacqueline married in
1994. (Id.) William represented, and several
regional newspapers reported, that he sold Direct Insurance
for more than $600 million in 2007. (Tr. Beydler, ECF No. 181
at 1042, 1168; see Tr. Ex. 20.) More than a dozen
articles published in various regional newspapers between
2007 and 2017 reported that William was “[o]ne of the
Mid-South's wealthiest self-made men” and that he
owned vast tracts of land in western Tennessee and northern
Mississippi. (Tr. Ex. 20.)
settled and funded The William C. Adair, Jr. Trust (the
“Trust”) in 1992. (ECF No. 175 at 959.) The
beneficiaries of the Trust were William's four children
and his grandson. (Tr. Bishop, ECF No. 181 at 1102.)
William's daughters, Tammy Adair and Lacey Adair Bishop,
were the Trust's co-trustees. (Id. at 1103.) The
Trust was dissolved in 2016, and its assets were distributed
to five separate trusts. (Id.) William has never had
the authority to speak for, to bind, or to negotiate on
behalf of the Trust. (Id. at 1083-90; Tr. Exs. 12,
13.) William does not have a close relationship with Tammy
and Lacey, and he has not spoken to them for several years.
(Tr. Ex. 17 at 18-19.)
2007, Jacqueline and the Trust bought the Twin Hills Ranch, a
3, 100-acre tract of land in Fayette County, Tennessee, and
Marshall County, Mississippi. (ECF No. 175 at 959; Tr. Ex. 17
at 28.) The Trust owned an eighty percent undivided interest
in the Twin Hills Ranch property, and Jacqueline owned the
remaining twenty percent undivided interest. (Id.)
The Trust and Jacqueline originally intended to build a
residential subdivision on the property. (Tr. Wm. Adair, ECF
No. 183 at 1524.)
that time, the Norfolk Southern Railroad Company announced
plans to build an intermodal railyard in Fayette County.
(See Tr. Beydler, ECF No. 181 at 1019.) Although
Fayette County leaders supported the proposal, many residents
complained that the planned location would cause excessive
construction, traffic, and noise. (See id. at 1020.)
Beydler, a member of the Fayette County Regional Planning
Commission, learned that the community resistance to the
railyard's planned location was putting the Norfolk
Southern deal in doubt. (Id. at 1019.) Beydler
called Donnie Leggett because “it is well-known that
[Leggett] was basically on top of everything that's going
on in [Fayette] County.” (Id. at 1021.) At
various times, Leggett had served as a County Commissioner in
Fayette County, as the President of the Fayette County
Chamber of Commerce, and as a member of the Fayette County
Industrial Development Board. (Id. at 1451-52.)
and Leggett met to determine whether an alternative location
for the railyard was possible. (Id. at 1021-22.)
They identified a 500-acre tract of land on the Twin Hills
Ranch that they believed belonged to William, based on news
reports and anecdotal statements. (Id. at 1022-23.)
Beydler and Leggett reached out to William and to
representatives at Norfolk Southern and told them that they
had a possible solution. (Id. at 1024, 1026.)
December 17, 2008, Beydler and Leggett met with William and
Norfolk Southern representatives and presented their proposal
to relocate the railyard to what they believed was
William's property. (Id. at 1027.) The proposal
was a success. Norfolk Southern bought the 500-acre tract one
year later. (See Tr. Ex. 28.) During that time,
William told B&L that he owned the Twin Hills Ranch. (Tr.
Beydler, ECF No. 181 at 1023, 1073, 1137.) William never told
Beydler and Leggett that he had no ownership interest in the
land that Norfolk Southern bought. (Tr. Beydler, ECF No. 181
at 1073.) Beydler and Leggett never saw the purchase
agreement with Norfolk Southern that identified the Trust and
Jacqueline as the land's owners. (See id. at
1124.) Newspapers reported at the time that Norfolk Southern
was buying William's land. (Tr. Ex. 20.)
of the success of the Norfolk Southern deal, the focus of
development on the remaining portion of the Twin Hills Ranch
became building an “industrial, commercial, and
logistics park, ” (the “Logistics Park”),
rather than a residential subdivision. (Tr. Wm. Adair, ECF
No. 183 at 1525.) Beydler and Leggett orally promised William
to continue consulting on the project. (Tr. Beydler, ECF No.
181 at 1012.) In return, William orally promised to pay
Beydler and Leggett a portion of the land sales that closed
on the property. (See id.) Beydler and Leggett
established Plaintiff B&L Management Group, LLC on August
19, 2009. (ECF No. 175 at 959.) Beydler and Leggett are
B&L's sole members. (Id. at 1007.) William
was B&L's only client. (Id. at 1112.)
December 31, 2009, shortly after the Norfolk Southern deal
closed, the William C. Adair Development Company, LLC wrote
B&L a check for $25, 000.00. (Tr. Ex. 9.) Although
Beydler and Leggett had not discussed compensation in that
amount with William, B&L accepted the check. (Tr.
Beydler, ECF No. 181 at 1037.) William told Beydler that the
check was “recognition for the work that [Beydler and
Leggett had] done with Norfolk Southern.”
(Id.) Beydler, Leggett, and William discussed
memorializing the terms of their oral agreement, but the
parties did not agree on a written contract until 2011.
(Id.) William told Beydler and Leggett “many
times” that William was “going to make [them]
millionaires.” (Id. at 1037-38.)
2009 and 2011, Beydler and Leggett continued to work for
William and encouraged him to memorialize their oral contract
in writing. (Tr. Beydler, ECF No. 181 at 1012-13.) On
February 15, 2011, an attorney representing William sent
William a first draft of the document that would become the
written contract memorializing the parties' oral
agreement. (Tr. Ex. 24.) This first iteration of the contract
between the parties purported to be an agreement among WCA
Development Company, Tammy Adair as trustee of the Trust,
Jacqueline Adair, and B&L Management Group, LLC. (Tr. Ex.
24.) This first iteration says that the 746 acres comprising
the Logistics Park is owned jointly by the Trust and
made handwritten notes on this document, directing his
attorney to include an additional paragraph, reading:
“This contract is solely between WCA Dev. & B&L
Mgmt. In the event WCA Dev Co. should lose its marketing
agreement with owners, this contract will terminate at that
time.” (Tr. Ex. 25.) An undated subsequent iteration of
the contract incorporated William's handwritten changes.
(See Tr. Ex. 26.) This iteration also removed any
reference to the Trust and Jacqueline and did not indicate
who owns the Logistics Park. William testified that he
removed the names of the true owners from the agreement. (Tr.
Wm. Adair, ECF No. 182 at 1269.) The parties are identified
as WCA Development Company, LLC and B&L Management Group,
LLC. (See Tr. Ex. 26.) This iteration also says that
WCA Development Company, LLC has an agreement to market the
Logistics Park. (See id. ¶ 1.) At trial,
William testified that he never had a marketing agreement for
any of the land. (Tr. Wm. Adair, ECF No. 182 at 1265.)
2011, William presented B&L with the final iteration of
the proposed contract. (Tr. Ex. 1.) The document was titled
“B&L Management Group, LLC Consulting Fee Agreement
with WCA Development Company, LLC.” (Tr. Ex. 1.) This
document (the “Contract”) names “William C.
Adair, dba, WCA Development Company, LLC” and
“B&L Management Group LLC” as the parties to
the agreement. (Id.) “WCA Development Company,
LLC” has never been a registered limited liability
company in Tennessee or Mississippi. (ECF No. 175 at 959.)
The third recital says that William desires to continue to
use the “economic development and site selection
consulting services” of B&L. (Tr. Ex. 1.) The
Contract does not refer to a marketing agreement. The
Contract says that:
WCA Development Company, LLC agrees to use and B&L
Management Group, LLC agrees to provide economic development
and site selection referral consulting services to develop
and build facilities within the commercial, industrial and
logistics development of WCA Development Company, LLC located
on approximately 426 acres in the City of Rossville, in the
County of Fayette, Tennessee and approximately 320 acres
located in Marshall County, Mississippi.
(Id. ¶ 1.).
Contract provides that “WCA Development Company, LLC,
will compensate B&L Management Group, LLC, for all
economic development consulting and site selection referral
consulting services rendered before and after the date of
this agreement.” (Id. ¶ 2.) It provides
that B&L will receive a consulting fee for all services
provided to the WCA Development Company, LLC in the amount of
fifteen percent of the sales price of any land sold within
the acreage described in the Contract. (Id.) The
Contract specifically says that:
WCA Development Company, LLC shall add 15% to the Sales Price
. . . [and] [t]his 15% shall be paid to B&L Management .
. .; B&L Management will pay the following expenses from
the proceeds received from WCA Development Company, LLC:
1) Commissions due to Real Estate Agents or Developers as
mutually agreed to by WCA and B&L,
2) B&L will be responsible for its own expenses related
to marketing and consulting.
(Id. ¶ 2(a)-(b).)
parties never “mutually agreed” to pay any
commissions to real estate agents or developers.
(See Tr. Ex. 23 ¶ 9.) On June 22, 2011, Beydler
and Leggett signed the Contract on behalf of B&L. (Tr.
Ex. at 5.) William signed the Contract on August 1, 2011,
under the heading “The WCA Development Company, LLC,
” and above the title “Owner.”
continued consulting for William until 2016. (See
Tr. Beydler, ECF No. 181 at 113.) At trial, B&L produced
more than 3, 000 pages of research that it had prepared for
William. (Tr. Ex. 10.) Beydler said that this production
reflected only a small amount of the research that B&L
did for William. (Tr. Beydler, ECF No. 181 at 1045.) B&L
provided William with consulting services on matters
including the economic needs of Fayette County, the biomass
industry, water and wastewater treatment authorities, design
guidelines for residential and commercial developments,
energy efficiency and environmental issues in logistics
parks, foreign trade zone status, public-private
partnerships, and large-scale development grants.
(Id. at 1044-66.)
testified that he met with William weekly to discuss
B&L's work on the Logistics Park. (Tr. Leggett, ECF
No. 183 at 1457-65.) Sometimes, Beydler came to the meetings.
(Id.) In addition to his consulting work, Leggett
met with Fayette County government officials on William's
behalf. (Id. at 1457-65.) William never told B&L
to stop working or that their services were no longer needed.
(ECF No. 175 at 960.) Between 2009 and 2016, no land sold in
the park and William did not pay B&L for any of its
consulting services. (See Tr. Beydler, ECF No. 181
at 1068-69.) When asked why he would continue working for
William for so long without being paid, Beydler said that:
“From the beginning . . . we knew based on what
[William] said that he had to sell the land and that he would
be able to pay us when the land was sold. We believed him. We
believed him enough, and we believed in Fayette County. . .
We knew the land would sell. So, we look[ed] at it in terms
of an investment in our future, in our retirement
basically.” (Id. at 1069.)
2016, Beydler and Leggett learned that Tire and Battery
Company had bought land in the Logistics Park. (Tr. Leggett,
ECF No. 183 at 1502.) Beydler and Leggett went to
William's office and asked William to pay B&L fifteen
percent of the proceeds from that sale in accordance with the
Contract. (Tr. Beydler, ECF No. 181 at 1068.) William gave
Leggett a $6, 946.00 check payable to B&L. (Id.
at 1070; Tr. Ex. 11.) Beydler said that he and Leggett were
“stunned” that the amount was so low, but they
accepted the check and left William's office. (Tr.
Beydler, EF No. 181 at 1071.) William testified that the
check was intended as “a token” to compensate
Leggett for persuading Fayette County to lower the building
permit fees that Tire and Battery Company had to pay. (Tr.
Wm. Adair, ECF No. 183 at 1545, 1588; Tr. Ex. 17 at 192.)
William could not explain how he calculated the precise
amount. (Id. at 1588.) When Leggett later confronted
William and asked why William had not paid B&L fifteen
percent of the land sale proceeds as the Contract required,
William told him: “I cannot honor this contract. Why
would I -- why in the hell would I sign something like
this?” (Tr. Leggett, ECF No. 183 at 1470.)
visited William again to address B&L's compensation
from the sale to Tire and Battery Company. (Id.)
William told Leggett that “[w]e'll just let a judge
decide this, ” and berated Leggett with foul language.
(Id. at 1471.) The next day, William called Leggett
to apologize for his conduct and invited Leggett to write a
memorandum explaining how much money William owed B&L
under the Contract. (Id. at 1472.) Leggett did so
and delivered the memorandum to Mike Medling
(“Medling”), William's office manager.
(Id.) William reviewed Leggett's proposal and
then called Leggett to give him “a royal
cussing.” (Id.) William told Leg-gett:
“You know, well, I'll just file bankruptcy.
Y'all won't get a GD thing. You know, I'm not
paying you SOBs nothing, much less that bogus partner of
yours.” (Id. at 1472-73.)
stopped providing consulting services to William at this
time. (See Tr. Beydler, ECF No. 181 at 113.) Beydler
and Leggett decided to begin litigation against William and
hired an attorney. (Id. at 1072.) Beydler researched
the ownership of the 746 acres described in the Contract and
learned that William did not own any of the land comprising
the Logistics Park. (Id.) Beydler and Leggett
discovered that the land belonged to the Trust and
Jacqueline. William never owned any land on the Twin Hills
Ranch property, including the Logistics Park, and he has not
owned any real property “for quite a few years.”
(Tr. Wm. Adair, ECF No. 182 at 1242, 1253-54.)
William represented, and newspapers reported, that he was one
of the wealthiest men in Tennessee, William adopted his
deposition testimony that he lives on the income from his
401k and social security. (Id. at 1276.) William
also adopted his testimony that he withdrew money from the
William C. Adair Development Company, LLC to cover his living
expenses, but that the LLC had held no assets since at least
2017 and that it had since been dissolved. (See id.
at 1276-78; Tr. Ex. 18.)
has been the sole member of several single-member LLCs. They
include the William C. Adair Development Company, LLC, the
Piperton Supply Company, LLC, the Piperton Hills Phase 1,
LLC, and the Rossville Supply Company, LLC. William also owns
Grandview Plantation, a cattle operation, as a sole
proprietorship. (Tr. Wm. Adair, ECF No. 183 at 1559.) By
2017, William had sold all of the cattle he had owned. (Tr.
Wm. Adair, ECF No. 183 at 1714.) Jacqueline acted as
bookkeeper for all of William's entities. (ECF No. 175 at
961; Tr. J. Adair, ECF No. 182 at 1409; Tr. Wm. Adair, ECF
No. 183 at 1527.) Her training in accounting consists of
“some college classes” and an internship she
completed in 1980. (Tr. J. Adair, ECF No. 182 at 1410.)
Jacqueline and Medling had the authority to write checks on
William's corporate bank accounts for these entities.
(ECF No. 175 at 961; Tr. Medling, ECF No. 182 at 1212.)
2010 and 2017, Jacqueline and Medling wrote hundreds of
checks transferring millions of dollars among William's
various entities. (ECF No. 175 at 961; see Tr. Ex.
32.) Most of the transactions involved the transfer of funds
from one of William's single-member LLCs to another of
William's single-member LLCs. (See Tr. Ex. 32.)
When she was asked about instances in which she transferred
funds among William's entities, Jacqueline said that she
would do so whenever one of the entities was
under-capitalized and needed to pay bills. (Tr. J. Adair, ECF
No. 183-1 at 1762- 63.) Medling gave the same testimony. (Tr.
Medling, ECF No. 182 at 1213.) When asked about certain
transfers lacking any discernible purpose, Jacqueline said
that she could not recall the circumstances of each transfer,
but that certain transfers were likely to be accounting
mistakes. (Tr. J. Adair, ECF No. 183 at 1413.)
was specifically asked about the purpose of forty-three
checks that she had signed and that B&L's counsel
asked its expert witness to review. (Tr. J. Adair, ECF No.
183-1 at 1727- 34.) Jacqueline provided legitimate
explanations for each of the transactions or said that she
could not remember the purpose of the check. (See
accounting expert, Dr. Zabihollah Rezaee, examined the
transfers and described them as “red flags”
constituting “a pattern of irregularities” that
suggested fraud. (Tr. Rezaee, ECF No. 182 at 1336.) Rezaee
testified that the transactions among William's entities
were so complex and poorly recorded that he could not make
sense of them. (Id. at 1344-45.) Rezaee ultimately
concluded, however, that he could not “prove with the
evidence put in front of [him] that fraud occurred . . .
.” (Id. at 1351.)
filed this suit on March 20, 2017. (Compl., ECF No. 1.) It
filed a Second Amended Complaint on April 5, 2018. (ECF No.
128.) B&L brings two claims: (1) an intentional
misrepresentation claim against William; and (2) a civil
conspiracy claim against William and Jacqueline. B&L
pursues both claims under Tennessee common law. It seeks
compensatory and punitive damages.
Conclusions of Law
William's Personal Liability
parties dispute whether William can be held personally
liable. B&L argues that he can, and Defendants contend
that only William's LLC can be liable. The dispute arises
from inconsistent language in the Contract. It refers to
B&L's contractual counterpart in three different
the Contract's title identifies the parties as
“B&L Management Group, LLC” and “WCA
Development Company, LLC.” (Contract, Tr. Ex. 1.)
William has never registered an entity named “WCA
Development Company, LLC.” (Tr. Wm. Adair, ECF No. 182
at 1544.) An entity named “William C. Adair Development
Company, LLC” was a registered LLC in Tennessee when
the Contract was signed. (Tr. Ex. 23 at ¶ 23; Tr. Ex.
18.) Second, the first paragraph of the Contract refers to
the first party to the agreement as “William C. Adair,
dba, WCA Development Company, LLC.” (Contract, Tr. Ex.
1.) Third, William signed the Contract as “Owner”
of “The WCA Development Company, LLC.”
(Id.) William dated the document August 1, 2011, and
made an illegible handwritten note next to the date. (See
id. at 3.) He testified that the note reads
“Pres”, an abbreviation for
“President.” (Tr. Wm. Adair, ECF No. 182 at
argue that William signed the Contract on behalf of William
C. Adair Development Company, LLC and that he cannot be
personally liable for damages under the Contract. B&L
responds that William purported to sign on behalf of WCA
Development Company, LLC, a nonexistent entity, and therefore
William is personally liable. B&L also argues that the
abbreviation “dba” in “William C. Adair,
dba, WCA Development Company, LLC” shows William's
intent to be personally bound under the Contract. Defendants
respond that the use of “WCA” as an abbreviation
for “William C. Adair” does not mean that William
was attempting to contract on behalf of a nonexistent entity.
Court need not address the parties' arguments. A member
of an LLC “is an agent of the LLC for the purpose of
its business, and the act of every member, including the
execution in the LLC name of any instrument . . . binds the
LLC . . . .” Tenn. Code Ann. § 48-238-103; see
also Lascassas Land Co., LLC v. Allen, 2018 WL 1733449,
at *6 (Tenn. Ct. App. Apr. 10, 2018). Ordinarily, an agent is
not personally liable on a contract he makes in the name of
his disclosed principal. ICG Link, Inc., v. Steen,
363 S.W.3d 533, 550 (Tenn. Ct. App. 2011). An agent who signs
a contract on behalf of a fictitious or nonexistent principal
may be held personally liable for damages under the contract.
Co. Stores Dev. Corp. v. Pottery Warehouse, Inc.,
733 S.W.2d 886, 888 (Tenn. Ct. App. 1987); Fed. Deposit
Ins. Corp. v. Morrison, 816 F.2d 679, n.3 (6th Cir.
1987); see also Restatement (Third) of Agency,
§ 6.04 (2006).
status is not a shield against personal liability for the
agent's torts, including fraud and misrepresentation.
Gross v. McKenna, 2007 WL 3171155, at *4 (Tenn. Ct.
App. Oct. 30, 2007); Brungard v. Caprice Records,
Inc., 608 S.W.2d 585, 590-91 (Tenn. Ct. App. 1980);
see also Tenn. Code Ann. § 48-217-101(a)(3). An
actor is subject to personal liability for fraud ...