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Builders Insulation of Tennessee, LLC v. Southern Energy Solutions

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

September 18, 2019

BUILDERS INSULATION OF TENNESSEE, LLC, Plaintiff,
v.
SOUTHERN ENERGY SOLUTIONS, THOMAS WALKER DAVIS, and TERI LEIGH DAVIS, Defendants.

          ORDER DENYING DEFENDANTS’ FIRST MOTION FOR PARTIAL SUMMARY JUDGMENT

          THOMAS L. PARKER, UNITED STATES DISTRICT JUDGE

         Defendants, Southern Energy Solutions, Thom Davis, and Teri Davis, [1] move for Partial Summary Judgment. (ECF No. 77.) For the reasons below, the Court DENIES the motion.

         BACKGROUND

         I. Procedural History

         This case arises out of Defendant Thom Davis’s employment with Plaintiff Builders Insulation of Tennessee, LLC (“Builders”) and the business relationship between Plaintiff and Defendant Southern Energy Solutions (“Defendant SES” or “SES”). Defendant SES is a Tennessee general partnership, with Defendants Thom and Teri Davis acting as the general partners. (ECF Nos. 1 at PageID 2; 101 at PageID 1434.) In September 2017, Plaintiff sued Defendants claiming conversion, actual fraud/intentional misrepresentation and negligent misrepresentation against the Davises. (See ECF No. 1.) They asserted also breach of employee’s fiduciary duty, tortious interference with business relationships, improper interference with business prospects, breach of the employment contract, unjust enrichment, and violations of the implied duty of good faith and fair dealing against Thom. (Id.) Defendants countersued alleging unjust enrichment, breach of the employment contract, tortious interference with existing business relationships, and promissory estoppel against Plaintiff. (ECF No. 33 at PageID 125–30.) Earlier, the Court dismissed Defendants’ counterclaims for tortious interference with existing business relationships and promissory estoppel under Federal Rule of Civil Procedure 12(b)(6). (ECF No. 61.)

         Defendants then moved for partial summary judgment, (ECF No. 77), to which Plaintiff timely responded, (ECF Nos. 100–01). Plaintiff amended its complaint adding a claim for breach of contract, (ECF No. 103). The Court held the amendment does not moot the earlier-filed motion for summary judgment. (ECF No. 96.) This motion requests that the Court (1) limit Plaintiff’s conversion claim to the value of two laptop computers and two iPhones and (2) dismiss all remaining claims. (ECF No. 77 at PageID 321.)

         II. Statement of Undisputed Facts

         The Court takes these facts from Defendants’ Statement of Undisputed Material Facts, (ECF No. 77-1 at PageID 322–30), Plaintiff’s Response to Defendants’ Statement of Undisputed Material Facts and Statement of Additional Facts Pursuant to LR 56.1(b)(3), (ECF No. 101 at PageID 1425–37), and Defendants’ Response to Plaintiff’s Additional Undisputed Material Facts, (ECF No. 106 at PageID 1557–63).

         Plaintiff is a business serving as the Memphis branch of its parent company, CWI Holdings. (ECF Nos. 77-1 at PageID 323; 77-2 at PageID 341.) Each branch office of Builders is its own separate business entity, all owned by CWI Holdings. (ECF Nos. 77-1 at PageID 322; 77-2 at PageID 336.) David Weber, national sales director of CWI Holdings, hired Thom as the Memphis branch manager in or around August 2015. (ECF Nos. 77-1 at PageID 323; 77-2 at PageID 348.) Plaintiff employed Thom as an at-will employee from September 2015 through July 2017 and there was no written employment contract. (ECF Nos. 77-1 at PageID 322; 77-2 at PageID 333.) Among other things, the branch manager oversees sales, production, employees, inventory, scheduling, billing, and invoicing. (ECF Nos. 77-1 at PageID 323; 77-2 at PageID 350, 352.)

         Weber testified that Memphis was one of the “poorest performing branches, ” and his goal was to organize it and raise its revenue to around $1.2 million in 2016-double the revenue of the branch under its previous manager. (ECF Nos. 77-1 at PageID 323–24; 77-2 at PageID 360, 362.) Weber testified that he viewed Thom’s hiring as a “team approach” by which Thom would act as Plaintiff’s paid employee and Teri would deliver behind–the–scenes support. (ECF Nos. 77-1 at PageID 324; 77-2 at PageID 364–65.) Upon his hiring, Thom acted as both a full-time employee of Builders and the corporate representative of Defendant SES. (ECF Nos. 101 at 1434; 101-6 at PageID 1503.)

         Weber knew of SES and that it was in the business of energy efficiency and testing. (ECF Nos. 77-1 at PageID 324; 77-2 at PageID 367–68.) Builders often performed insulation work on projects with Defendant SES. (ECF Nos. 101 at PageID 1435; 77-4 at PageID 500.) From their agreement, Weber also understood that Builders would provide insulation services, and that Defendant SES would provide energy certification services. (ECF Nos. 77-1 at PageID 325; 77-2 at PageID 386–87.) Weber testified that bundling services with Defendant SES would allow them to bring in new customers and drum up additional business. (ECF Nos. 77-1 at PageID 325; 77-2 at PageID 393.)

         Defendant SES discounted its own services to sell the bundled services. (ECF Nos. 77-1 at PageID 325; 77-2 at PageID 403–05.) Sometimes Defendant SES embedded its services in the final price quoted to customers. (ECF Nos. 77-1 at PageID 326; 77-2 at PageID 409–10.) As part of their agreement, Plaintiff was to receive 100% of the payment for all insulation services, and if Plaintiff marked up Defendant SES’ invoices, Plaintiff would be due the amount of that markup. (ECF Nos. 77-1 at PageID 329; 77-3 at PageID 474–77.) They only agreed to “add-on” services Plaintiff did not already offer-energy audits, blower door tests, and HERS ratings. (ECF Nos 77-1 at PageID 329; 77-3 at PageID 479–82.) Defendant SES made a profit from its jobs with Builders. (ECF Nos. 101 at PageID 1435; ECF No. 100-4 at PageID 1407.)

         To keep its business records like proposals, projects, scheduling, and invoicing, Builders uses a Microsoft Access database hosted on CITRIX. (ECF Nos. 77-1 at PageID 324; 77-2 at PageID 374.) Weber knew that Defendant SES was a customer in CITRIX, although the parties dispute when Weber learned this. (ECF Nos. 77-1 at PageID 324; 77-2 at PageID 378.) Weber testified that he believed jobs on a statement to Defendant SES were binding contracts between Builders and Defendant SES. (ECF Nos. 77-1 at PageID 326; 77-3 at PageID 420–21, 423–30.) Thom, as branch manager, was responsible for keeping the books and records, and recording all labor records into CITRIX. (ECF Nos. 101 at PageID 1434; 101-3 at PageID 1459–62.) He testified that he did not give any written bid proposals from Builders to Defendant SES. (ECF Nos. 101 at PageID 1434; 76-2 at PageID 286–88.) In fact, Thom testified that Teri orally negotiated all business dealings between Builders and Defendant SES. (ECF Nos. 101 at PageID 1434; ECF No. 101-4 at PageID 1482–1482.)

         Plaintiff fired Thom around July 26, 2017. (ECF Nos. 77-1 at PageID 328; 77-3 at PageID 458.) The Memphis branch continued to operate for a short time. But Plaintiff closed the office in early 2018 because it was more profitable to focus in other markets. (ECF Nos. 77-1 at PageID 327–28; 77-2 at PageID 453, 455–56.) Plaintiff makes many claims against Defendants based on Thom’s and Defendant SES’ business relationship with Plaintiff.

         For example, Plaintiff issued two Dell laptops and two iPhones to Thom. Thom did not return these items upon his termination. (ECF Nos. 77-1 at PageID 328; 77-3 at PageID 460; 101 at PageID 1435; 101-1 at PageID 1439.) According to the Davises, they put one of the laptops in a closet in their home and their son later used it and replaced the hard drive. (ECF Nos. 101 at PageID 1436; 76-2 at PageID 285.) But they cannot find the other laptop. (Id.) Thom used personal computers for conducting business. (ECF Nos. 101 at PageID 1436; 101-4 at PageID 1467; 101-5 at PageID 1492.)

         To illustrate, Thom used an ASUS laptop to conduct business but testified that he threw that laptop against a wall. (ECF Nos. 101 at PageID 1436; 101-4 at PageID 1467.) None of the other personal computers Thom purportedly used to conduct business currently contain any relevant data because he deleted all Builders records in his possession after his termination. (ECF Nos. 101 at PageID 1436; 101-4 at PageID 1467; 101-5 at PageID 1492.)

         What is more, Defendants switched domain hosting and later lost electronic access for accounts ending in “bldrs-insul.com” and “southernenergy.com.” (ECF Nos. 101 at PageID 1436; 101-5 at PageID 1490–91.) And so there are no SES business records and bank account deposit records that currently exist. (ECF Nos. 101 at PageID 1436; 76-3 at PageID 305.) Defendant SES maintains a bank account at Independent Bank ending in #6560, but Plaintiff has been unable to obtain deposit records throughout discovery. (ECF Nos. 101 at PageID 1436; 101-5 at PageID 1487.) Any SES tax returns and financial records that may exist are purportedly located on an ASUS laptop in Defendants’ attorney’s possession. (ECF Nos. 101 at PageID 1436–37; 101-4 at PageID 1469.) Yet Thom testified that he did not save any documents or data before turning over that laptop. (Id.)

         Plaintiff claims also that Defendants owe $90, 414 in outstanding bills for jobs Defendant SES performed. (ECF Nos. 77-1 at PageID 328–29; 77-3 at PageID 471–72.) Plaintiff also alleges that Defendants engaged in self-dealing by improperly marking up invoices for monetary gain. (ECF Nos. 77-1 at PageID 328; 100-3 at PageID 1396; 100-4 at PageID 1407.) For example, Plaintiff points to an SES bid proposal for the “McKenzie Residence” quoting $5, 839.74 for labor and materials which included no invoice. SES then sent an invoice for this job to Builders for $4, 995. (ECF Nos. 101 at PageID 1435; 100-7 at PageID 1418–19.)

         Finally, Plaintiff claims also that the Davises defrauded Plaintiff by inventing a fictional employee by the name of “Tom Walker, ” who purportedly worked around 633.75 hours between January 6, 2017 and July 7, 2017 and Plaintiff paid about $18, 524.09 in gross wages. (ECF Nos. 77-1 at PageID 329–30; 77-3 at PageID 492.) Thom alleges that he discovered “Tom Walker” was his son, Chris Davis, after submitting a work order for employee payment. (ECF Nos. 101 at PageID 1434; 101-4 at PageID 1472–73, 1476.) But he allowed “Tom Walker” to remain on Plaintiff’s payroll. (Id.)

         STANDARD OF REVIEW

         The Court begins its analysis of this motion by consulting Federal Rule of Civil Procedure 56. “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A fact is material for purposes of summary judgment if proof of that fact would establish or refute an essential element of the cause of action or defense.” Bruederle v. Louisville Metro Gov’t, 687 F.3d 771, 776 (6th Cir. 2012) (internal quotation marks omitted). “The moving party bears the initial burden of demonstrating the absence of any genuine issue of material fact.Mosholder v. Barnhardt, 679 F.3d 443, 448 (6th Cir. 2012) (citing Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986)). “Mere conclusory and unsupported allegations, rooted in speculation, do not meet [the] burden.” Bell v. Ohio State Univ., 351 F.3d 240, 253 (6th Cir. 2003). “Once the moving party satisfies its initial burden, the burden shifts to the nonmoving party to set forth specific facts showing a triable issue of material fact.” Mosholder, 679 F.3d at 448–49 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

         In response, the non-moving party “may not rest upon its mere allegations.” Great West Cas. Co. v. Flandrich, 605 F.Supp.2d 955, 960 (S.D. Ohio 2009). The non-moving party “must produce evidence that results in a conflict of material fact to be resolved by a jury[, ]” and the Court “must afford all reasonable inferences, and construe the evidence, in the light most favorable to the non-moving party.” Cox v. Ky. Dept of Transp., 53 F.3d 146, 150 (6th Cir. 1995). “The non-moving party must present ‘significant probative evidence’ to show that there is more than ‘some metaphysical doubt as to the material facts.’” Id. (quoting Moore v. Philip Morris Co., 8 F.3d 335, 339–40 (6th Cir. 1993)). “When the non-moving party fails to make a sufficient showing of an essential element of his case on which ...


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