Homestar Prop. Solutions, LLC v. Safeguard Props., LLC
Homestar Prop. Solutions, LLC v. Safeguard Props., LLC
Opinion of the Court
SUSAN RICHARD NELSON, United States District Judge *1023As the Court noted in its recent Order addressing this same case, this is a complicated commercial litigation matter between two businesses that "preserve properties" on behalf of banks while those properties are in foreclosure: Plaintiff Homestar Property Solutions LLC (hereinafter "Homestar") and Defendant Safeguard Properties LLC (hereinafter "Safeguard"). (See also Feb. 6, 2019 Counterclaim Order [Doc. No. 254] ("Counterclaim Order").)
After years of on-and-off again discovery, punctuated by a final settlement and judgment that was later vacated (see generally Doc Nos. 127-54), Safeguard moved for summary judgment on the following claims: (1) Homestar's breach of contract claim; (2) Homestar's unjust enrichment claim; (3) Homestar's promissory estoppel claim; (4) Homestar's account stated claim; and (5) Safeguard's breach of contract counterclaim against Homestar. (See Safeguard's Br. in Support of Summ. J. [Doc. No. 163] ("Safeguard Primary Br."); Safeguard's Br. in Support of Summ. J. on its Counterclaim [Doc. No. 168] ("Safeguard Counterclaim Br.").) In addition, Bank of America, also represented by Safeguard's counsel, per an indemnification agreement between the two companies, moved for summary judgment on (6) Homestar's solo unjust enrichment claim against it. (See Bank of America's Summ. J. Br. [Doc. No. 173] ("BANA Br."); see id. at n.7 (noting this indemnification agreement).) Homestar opposed all of these motions. (See Homestar's Br. in Opp. to Summ. J. [Doc. No. 189] ("Homestar Primary Opp. Br."); Homestar's Br. in Opp. to Counterclaim Summ. J. [Doc. No. 207] ("Homestar Counterclaim Opp. Br."); Homestar's Br. in Opp. to Bank of America Summ. J. [Doc. No. 209] ("Homestar BANA Opp. Br.").)
On September 20, 2018, following an extensive oral argument on Safeguard's *1024primary summary judgment motion (i.e. , counts 1-4 listed above), the Court denied summary judgment from the bench. (See Sept. 20, 2018 Minute Entry [Doc. No. 223].) The Court then took Safeguard's counterclaim summary judgment motion and Bank of America's unjust enrichment summary judgment motion under advisement (i.e. , counts 5-6 listed above), to be decided on the papers. (Id. )
On February 6, 2019 the Court granted in part Safeguard's counterclaim summary judgment motion and granted in full Bank of America's summary judgment motion. (See Counterclaim Order.) The Court will now render its written decision as to Safeguard's primary summary judgment motion. Although the Court orally denied this motion from the bench with limited explanation, the Court will now take this opportunity to clarify that it is granting Safeguard's motion in part and denying it in part. The Court hopes this ruling clarifies, for both parties, what issues remain in play for trial.
I. BACKGROUND
This case centers around arguably hundreds of disputed work orders, fees, and account statements, and to what extent those disputes cumulatively led Homestar to incur lost profits and other consequential damages. Although both sides agree that the Safeguard-Homestar relationship was governed by a series of written contracts (see Compl. [Doc. No. 1] ¶ 81; Am. Answer [Doc. No. 17] ¶ 81), they do not agree if Safeguard properly paid Homestar for all the work Homestar did on Safeguard's behalf between 2012 and 2014 pursuant to those written contracts. Specifically, Homestar produced an "Accounts Receivable" spreadsheet during discovery (the "AR Spreadsheet") that detailed 578 allegedly unpaid and/or underpaid work orders, totaling $ 1,752,435.40 in direct damages. (See Safeguard Ex. A-1 [Doc. No. 164-2] ("AR Spreadsheet").) The work orders detailed in this spreadsheet lie at the heart of this dispute.
In support of its summary judgment motion, Safeguard, by way of its Assistant Vice President of High Risk and Investor Compliance, Steve Meyer, reviewed the AR Spreadsheet alongside Safeguard's relevant internal records and produced a countervailing, detailed spreadsheet. Safeguard's spreadsheet alleges that, in fact, Safeguard only owes Homestar $ 129,123.86, arising out of 89 work orders. (See Safeguard Ex. A-2 [Doc. Nos. 164-4 to 164-9] ("Safeguard AR Analysis").) Safeguard does not contractually owe Homestar money for the other 489 work orders, Safeguard argues, because either (a) it paid Homestar's invoice in full (145 work orders); (b) Safeguard properly applied "chargebacks" to Homestar's invoices "based on Homestar's failure to comply with Safeguard's policies, procedures, and guidelines, including failing to provide photographs showing work was completed, failing to complete the approved scope of work, and/or Safeguard application of a bill penalty due to Homestar's failure to timely complete the repairs" (85 work orders); (c)
*1025Safeguard adjusted Homestar's invoices to reflect "reasonable pricing standards," in accordance with the contract (22 work orders); (d) the invoice listed on the AR Spreadsheet was duplicative of another invoice on the Spreadsheet (74 work orders); (e) Safeguard approved payment of certain work orders but ultimately did not pay those work orders because of "uncollected and outstanding chargebacks applied to Homestar's account" (11 work orders); or (f) "other" reasons justified Safeguard not paying the invoice (152 work orders). (See Safeguard Primary Br. at 13-14 (describing categories detailed in Safeguard AR Analysis).)
Homestar, in turn, agrees that Safeguard owes it money for the aforementioned 89 work orders, and also concedes that it cannot contest either the 145 work orders that Safeguard contended it had "paid in full" (i.e. , $ 349,120.07 in claimed direct contract damages, per Mr. Meyer's analysis), or 19 of the 74 work orders Safeguard listed as "duplicative" (i.e. , approximately $ 17,365 in claimed direct contract damages, per the Court's analysis of Mr. Meyer's "duplicates spreadsheet" [Doc. No. 164-10] ). (See Homestar Primary Opp. Br. at 19.) However, Homestar does contest Safeguard's accounting for a substantial number of the remaining 325 work orders. As such, with respect to direct contract damages, Homestar appears to allege approximately $ 1,256,826.47 in payments owing, in comparison to Safeguard's proposed $ 129,123.86.
In particular, Homestar argues that (a) Safeguard's penalties for lack of photographic documentation are factually wrong, either because Homestar did in fact upload the photo documentation actually required by the contract, or, if it did not, that was because "Safeguard's own website often malfunctioned" (69 work orders); (b) Safeguard had no right to assess penalties for alleged untimeliness, either because the overarching contract (see Safeguard Ex. E [Doc. No. 164-15] ("Safeguard Policy Manuals") ) did not describe such penalties, or because a Safeguard employee, Paul Dinehart, allegedly agreed with Homestar's co-owner, Michael Breese, to withhold those penalties (see Breese Aff. [Doc. No. 208] ¶ 12) (28 work orders); (c) Safeguard inappropriately reduced Homestar's invoices for being "in excess of industry standards" without any support for that determination, and in contradiction to Mr. Dinehart's alleged 2014 representation to Mr. Breese that Homestar was Safeguard's "least expensive contractor" (id. ¶ 13) (70 work orders); (d) Safeguard incorrectly asserted that Homestar's work was "not authorized, not actually performed, or not documented," when, in fact, "all work billed by Homestar was directed by Safeguard, or, in a few instances, performed in the interest of safety and [making] homes [HUD-complaint]" (id. ¶ 14) (102 work orders); (e) Safeguard failed to establish a basis for the "chargebacks" it assessed on the eleven work orders listed in category "e" of Safeguard's analysis above, and, indeed, contradicted Mr. Dinehart's alleged representation to Mr. Breese that "Safeguard would refrain from taking chargebacks, and that Safeguard would repay Homestar for any chargebacks it had taken in the past" (id. ¶ 22) (11 work orders); (f) Safeguard inaccurately reduced certain "special projects" payments based on an "reconciliation meeting" in summer 2014 that, according to Homestar employee Keegan Wallace, did not result in the reductions Safeguard listed (see Wallace Aff. [Doc. No. 205] ¶ 3) (90 work orders); and (g) 55 of the work orders Safeguard claims are "duplicates," are not, in fact, duplicates because "they have different work order numbers, invoice numbers, and/or billed amounts"
*1026(Homestar Primary Opp. Br. at 19) (55 work orders).
Importantly, though, Homestar also asserts two other forms of "contractual" damages. First, Homestar argues that Safeguard owes it consequential and/or "reputational" damages because, Homestar alleges, Safeguard's "slow paying" caused Homestar to default on its credit obligations, which in turn "ruined Homestar's reputation in the industry," "fractured [Homestar's] relationships with its subcontractors," and "took Homestar from being a company worth more than $ 16,000,000 (based on an offer to purchase Homestar received in 2013) to being an insolvent entity." (Breese Aff. ¶ 21; accord Compl. Prayer for Relief (requesting damages for harm done to Homestar's "business reputation").) However, in contrast to the specific work orders it cited in support of its direct damages claim, Homestar does not introduce any specific evidence of Safeguard's "slow paying," nor does it point to a contractual provision Safeguard breached by "slow paying." (See also Safeguard Reply Br. at 4 n.3 (noting that Homestar's invoices "did not contain a payment due date or payment deadline," and citing examples).)
Second, Homestar argues that, regardless of whether it can prove its direct contractual damages of $ 1,256,826.47, Safeguard owes it $ 1,700,000 (i.e. , approximately the amount listed on the AR Spreadsheet), under a "promissory estoppel" theory. (See Homestar Primary Opp. Br. at 22-23.) This is so because, in summer of 2014, Safeguard, through Mr. Dinehart, allegedly promised to pay Homestar that amount "in satisfaction of" Safeguard's contractual obligations. (See Breese Aff. ¶¶ 18-19; but cf. Safeguard Reply Br. at 24-26 (noting that Mr. Breese's deposition testimony directly contradicts his affidavit); Safeguard Primary Br. at 22 (noting that, in his affidavit, Mr. Dinehart flatly denied that such a promise was ever made).)
II. DISCUSSION
A. Standard of Review
A court may grant a party summary judgment if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). A party opposing summary judgment " 'must set forth specific facts showing that there is a genuine issue for trial,' and 'must present affirmative evidence in order to defeat a properly supported motion for summary judgment.' " Ingrassia v. Schafer ,
*1027B. Breach of Contract
To prevail on a breach of contract claim under Minnesota law, a plaintiff must show: "(1) formation of a contract, (2) performance by plaintiff of any conditions precedent to his right to demand performance by the defendant, and (3) breach of the contract by defendant." Lyon Fin. Servs., Inc. v. Ill. Paper & Copier Co. ,
Here, with respect to Homestar's breach of contract claim, there are clear, material factual disputes as to Homestar's performance and Safeguard's breach on dozens of work orders. Although Safeguard argues that Mr. Breese's affidavit and accompanying documentation are not specific enough to rebut Mr. Meyer's detailed accounting, the Court finds that such arguments merely go to Mr. Breese's credibility. See Anderson ,
*1028("[T]he interpretation of an ambiguous contract is a question of fact for the jury.").)
However, the Court also finds that Homestar has not raised a genuine dispute of material fact with respect to its alternative argument that Safeguard's pattern of "slow paying" caused Homestar to suffer lost profits and reputational damage. (See supra at 1026.) As the Court noted above, Homestar adduced no evidence in support of this argument; indeed, it does not even point to to a contractual provision that Safeguard conceivably could have breached with respect to payment timing. As such, because there is no material evidence of an underlying breach with respect to Safeguard's "slow payments," Homestar cannot ask the jury to award it damages for "lost profits," "consequential damages," or "business reputation losses" "flowing ... from" that conduct. In re RFC & ResCap Liquidating Trust Action ,
Accordingly, with the exception of the aforementioned limitation, the Court denies Safeguard's motion for summary judgment as to Homestar's breach of contract claim.
C. Promissory Estoppel
To prevail on a promissory estoppel claim under Minnesota law, a plaintiff must show that "(1) a clear and definite promise was made, (2) the promisor intended to induce reliance and the promisee in fact relied to his or her detriment, and (3) the promise must be enforced to prevent injustice." Martens v. Minn. Mining & Mfg. Co. ,
Here, both parties acknowledge that a series of written contracts governs the work orders Homestar is seeking damages for. (See Compl. ¶ 81; Am. Answer ¶ 81.) As such, there is no need to keep a freestanding promissory estoppel claim available as an alternative argument in case the jury rules that a contract does not, in fact, exist. See, e.g., Krutchen v. Zayo Bandwidth NE, LLC ,
The Court disagrees. Homestar's promissory estoppel claim is inseparable from its breach of contract claim; they are simply two different ways of arguing to the jury that Safeguard owes it money for the allegedly unpaid and/or underpaid work orders listed on the AR Spreadsheet. Indeed, to allow Homestar to argue to the jury that Safeguard owes it $ 1.7 million in promissory estoppel damages based on the word of Mr. Breese alone would be to allow Homestar to evade its obligation of proving its breach of contract case. This is especially concerning given Homestar's concession in its opposition brief that it cannot even prove breach and damages on almost $ 370,000 of the $ 1.7 million it claims Safeguard owes it. (See supra at 1025.) As Judge Frank of this Court noted when addressing an analogous set of facts, "[p]romissory estoppel does not provide a means to evade the fact that the claimant failed to establish breach of the contract; rather, it provides an equitable basis for recovery of a promised benefit where the requirements for the formation of an enforceable contract cannot be met." Reisdorf ,
Accordingly, the Court grants Safeguard summary judgment as to Homestar's promissory estoppel claim.
D. Unjust Enrichment
"Unjust enrichment is an equitable doctrine that allows a plaintiff to recover a benefit conferred upon a defendant when retention of the benefit is not legally justifiable." Caldas v. Affordable Granite & Stone, Inc. ,
Here, because a written contract governs the relevant subject matter, and because Homestar does not point to any facts distinguishing its unjust enrichment claim from its breach of contract claim, Homestar's claim fails as a matter of law. accord City Center Realty Partners ,
Accordingly, the Court grants Safeguard summary judgment as to Homestar's unjust enrichment claim.
E. Account Stated
"An account stated is 'a manifestation of assent by a debtor and creditor to a stated sum as an accurate computation of an amount due the creditor.' " Mountain Peaks Fin. Servs. v. Roth-Steffen ,
Just as with the prior two claims, the undisputed existence of a written contract bars Homestar's account stated claim as a matter of law. Indeed, in its opposition brief, Homestar does not offer any particularized evidence in support of this claim, and only asserts that the Court should not dismiss this claim because Homestar "has the right to plead in the alternative, even if it is not permitted to recover the same damages under multiple claims." (Homestar Primary Opp. Br. at *103124.) However, as the Court noted with respect to Homestar's unjust enrichment claim, that argument is inapposite under the circumstances.
Accordingly, the Court grants Safeguard summary judgment as to Homestar's account stated claim.
III. ORDER
Based on the submissions and the entire file and proceedings herein, Defendant Safeguard Properties' Motion for Summary Judgment on Homestar's Claims [Doc. No. 161] is GRANTED IN PART AND DENIED IN PART . Homestar's promissory estoppel, unjust enrichment, and accounted stated claims are DISMISSED WITH PREJUDICE .
This Counterclaim Order may also be found at Homestar Prop. Sols., LLC v. Safeguard Props., LLC ,
Safeguard and Bank of America also filed reply briefs. (See Safeguard Primary Reply Br. [Doc. No. 215]; Safeguard Counterclaim Reply Br. [Doc. No. 217]; BANA Reply Br. [Doc. No. 219].)
The Court has since set this case for trial on its August 19, 2019 trial calendar. (See Second Amended Trial Notice [Doc. No. 268].)
The Court also acknowledges Safeguard's November 15, 2018 "emergency motion in limine" to exclude approximately 1,500 belated, "unauthenticated" "Homestar accounting documents, profit and loss statements, and income statements." (See Doc. Nos. 229-231.) In light of the Magistrate Judge's recent ruling on Safeguard's closely-related "emergency motion for sanctions" (see Feb. 27, 2019 Order Denying Motion for Sanctions [Doc. No. 277] ), the Court will defer ruling on Safeguard's November 15 motion in limine until a date closer to trial.
Together, Homestar noted 425 work orders in its opposition brief, which, when Homestar's concessions are taken into account, is 100 work orders higher than the highest possible number of disputed work orders (325). However, because Homestar listed many work orders in multiple categories, the actual number of directly disputed work orders is approximately 273 (out of 325). As such, it does not appear that Homestar is attempting to collect the full $ 1,256,826.47 it claims in direct contract damages.
Although Safeguard correctly points out in its reply brief that "[i]n general, extra-contractual damages, including those for emotional distress, are not recoverable for breach of contract except in those rare cases where the breach is accompanied by an independent tort," Lickteig v. Alderson, Ondov, Leonard & Sween, P.A. ,
The Court acknowledges the two, unpublished Northern District of Ohio opinions cited by Safeguard, in which the District Court granted Safeguard summary judgment based on a nearly-identical analysis to the one Mr. Meyer performed here. See Moni 2, Inc. v. Safeguard Props., LLC , No. 15-cv-307 (CAB),
Reference
- Full Case Name
- HOMESTAR PROPERTY SOLUTIONS, LLC v. SAFEGUARD PROPERTIES, LLC, and Bank of America, N.A., and Safeguard Properties, LLC, Counterclaim v. HomeStar Property Solutions, LLC, Counterclaim
- Cited By
- 15 cases
- Status
- Published