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MCMG Capital Advisors Inc. v. Food-N-Fun Inc.

United States District Court, W.D. Louisiana, Lafayette Division

March 8, 2018

MCMG CAPITAL ADVISORS, INC.
v.
FOOD-N-FUN, INC., ET AL

          MEMORANDUM RULING

          PATRICK J. HANNA, UNITED STATES MAGISTRATE JUDGE

         Currently pending is the plaintiff's motion for partial summary judgment. [Rec. Doc. 42]. The motion is opposed and oral argument was held on January 25, 2018. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained below, the plaintiff's motion for partial summary judgment is denied.

         BACKGROUND

         On February 12, 2016, the plaintiff, MCMG Capital Advisors, Inc. (“MCMG”) entered into a Merger & Acquisition Financial Services Agreement (“Agreement”) with Food-N-Fun, Inc. (“Food-N-Fun”) and Todd Street.[1] In the Agreement, MCMG agreed to provide certain financial consulting as well as merger and acquisition advisory services for the sale of the equity and assets of Food-N-Fun. The agreement established that MCMG was required to market Food-N-Fun to Retif Oil & Fuel, LLC (“Retif Oil”) before any other potential buyers unless the potential buyers were approved in advance by Todd Street. In exchange for these services, MCMG would be compensated with a transaction fee if a closing occurred during the term of the Agreement or if a closing occurred within fifteen months of the termination of the Agreement and the buyer was identified or had contact with MCMG, Food-N-Fun, or Todd Street during the term of the Agreement. MCMG alleges that Food-N-Fun breached the Agreement when a closing occurred after the term of the Agreement expired and MCMG was not compensated with a transaction fee.

         The list of services MCMG agreed to provide are established in Section 2 of the Agreement, which include: (1) build and maintain a data room; (2) provide valuation guidance to the Company and Seller; (3) prepare marketing materials for the Company; (4) identify potential Buyers; (5) run a sale marketing process and solicit offers from potential Buyers; (6) interface, communicate and assist in the negotiations with potential Buyers; (7) provide Company and Seller with frequent status reports delineating the progress of conversations with potential Buyers; (8) work with Company and its legal advisors to close the Transaction(s).

         In furtherance of these services, MCMG began to prepare a Confidential Information System (“CIM”) to use as a marketing tool. MCMG employees, Andrew Lopresti and John Underwood, worked with Warren Guidry, the president of Food-N-Fun, to gather financial information to prepare the CIM and an electronic data room. On March 17, 2016, the CIM was reviewed and approved by Warren Guidry on behalf of Todd Street.[2]

         The CIM contained confidential information regarding Food-N-Fun's operations, assets, and financial history. MCMG prepared the CIM by using asset-level earnings before interest, taxes, depreciation and amortization (known as EBITDA), and to remove from the asset-level EBITDA any non-recurring income or expenses so that a purchaser can accurately see the anticipated income for each store.[3]The CIM also contained an employee retention requirement that stated, “it is the strong preference of Todd Street that the sale of the Food-N-Fun includes the retention of all employees, including the corporate staff, for a period of at least two years post-closing.”[4] It is undisputed that Todd Street preferred a local buyer for Food-N-Fun because a local buyer would be more likely to retain Food-N-Fun's employees. However, Todd Street's preference that MCMG only market Food-N-Fun to potential buyers that would retain Food-N-Fun's employees is not contained in the Agreement.

         MCMG used the CIM to market Food-N-Fun to Retif Oil and Gaubert Oil. As a result, Retif Oil signed a letter of intent to purchase Food-N-Fun for twenty million dollars. However, after a meeting between Todd Street and Ryan Retif, vice president of Retif Oil, the sale did not occur. Todd Street testified that he was offended by Retif Oil's offer because he believed Food-N-Fun was worth more than the offer.[5] At the time, it was believed that Food-N-Fun's value was twenty-five million dollars based on MCMG's representation.[6]

         When the sale to Retif did not occur, Todd Street had a meeting with MCMG representatives to discuss whether to expand the marketing of Food-N-Fun to potential national buyers.[7] At the meeting, Todd Street testified that MCMG advised him that one of the consequences of going to a national process was that it was unlikely that Food-N-Fun's employees would be retained.[8] With this knowledge, Todd Street agreed that MCMG could expand their marketing of Food-N-Fun to potential national buyers. As a result, a new CIM was created to market Food-N-Fun nationally. The national CIM did not contain the employee retention requirement.[9]

         MCMG received offers from potential national buyers, including Travelers Centers of America, LLC (“Travel Centers”), but a closing did not occur. Todd Street began discussions with Retif Oil about purchasing Food-N-Fun after several unrelated meetings with their representatives. Todd Street and Warren Guidry testified that MCMG was not part of the negotiations with Retif Oil and that they provided Retif Oil with their own financial information and did not use the CIM.

         It is undisputed that the Agreement expired by its own terms on or about November 11, 2016 and Food-N-Fun was sold to Retif Oil, a buyer that the parties to the Agreement had contact with during the terms of the Agreement, on or about March 17, 2017. As a result, MCMG filed a complaint against Food-N-Fun and Todd Street for breach of contract, recovery of contractual attorney's fees, and to revoke the transfer of the proceeds of the sale of Food-N-Fun's assets to Todd Street. In response, the defendants filed an answer that asserted affirmative defenses based on failure to state a claim upon which relief can be granted and MCMG's alleged breach of fiduciary duties and obligations under the Agreement.

         In the present motion for partial summary judgment, MCMG contends that Food-N-Fun's affirmative defenses do not establish a defense to MCMG's breach of contract claim.

         ANALYSIS

         A. The Summary Judgment Standard

         Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is appropriate when there is no genuine dispute as to any material fact, and the moving party is entitled to judgment as a matter of law. A fact is material if proof of its existence or nonexistence might affect the outcome of the lawsuit under the applicable governing law.[10] A genuine issue of material fact exists if a reasonable jury could render a verdict for the nonmoving party.[11]

         The party seeking summary judgment has the initial responsibility of informing the court of the basis for its motion and identifying those parts of the record that demonstrate the absence of genuine issues of material fact.[12] If the moving party carries its initial burden, the burden shifts to the nonmoving party to demonstrate the existence of a genuine issue of a material fact.[13] All facts and inferences are construed in the light most favorable to the nonmoving party.[14]

         If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by pointing out that there is insufficient proof concerning an essential element of the nonmoving party's claim.[15] The motion should be granted if the nonmoving party cannot produce evidence to support an essential element of its claim.[16]

         When both parties have submitted evidence of contradictory facts, a court is bound to draw all reasonable inferences in favor of the nonmoving party.[17] The court cannot make credibility determinations or weigh the evidence, and the nonmovant cannot meet his burden with unsubstantiated assertions, conclusory allegations, or a scintilla of evidence.[18] “When all of the summary judgment evidence presented by both parties could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial and summary judgment is proper.”[19]

         B. MCMG'S Objections

         MCMG's contends in their reply memorandum that portions of Food-N-Fun's opposition should be stricken. This Court will construe MCMG's argument as an objection based on Fed.R.Civ.P.56(c). When material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence, a party may object to the materials offered.[20] Specifically, MCMG objects to: (1) portions of Food-N-Fun's opposition on pages 1-2, and 6 that contains alleged facts that are unsupported by evidence; (2) the affidavit of Warren Guidry because it contains hearsay; and (3) and the hand-written notes that are attached to the opposition because the notes were not produced in discovery and do not have sufficient evidentiary foundation to be admissible.

         1. Warren Guidry's Affidavit

         “An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that affiant or declarant is competent to testify on the matters stated.”[21] MCMG contends that Warren Guidry's affidavit contains hearsay, but does not specifically identify the portions that they seek to strike. After a review of the affidavit, Warren Guidry's statement regarding what Kent Oil's attorney allegedly indicated is hearsay and there is no applicable exception that can be determined from the record. Accordingly, paragraph 15 of Warren Guidry's affidavit will not be considered as part of the summary judgment evidence.

         2. Handwritten Notes

         MCMG objects to certain documents that are attached as exhibits to Food-N-Fun's opposition and Warren Guidry's affidavit because they contain handwritten notes. There are five pages attached to Warren Guidry's affidavit. The first page consists of an email from John Underwood to Warren Guidry with handwritten notes and the second page is a continuation of the handwritten notes. The same documents are also attached to Food-N-Fun's opposition as an exhibit.[22] In the affidavit, Warren Guidry avers that the email was forwarded to him from John Underwood regarding the retention of Food-N-Fun's employees by a perspective purchaser, Travel Centers of America. Warren Guidry further avers that he received the ...


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