Albert Gruneisen III v. John Haywood ( 2021 )

RENDERED: JANUARY 22, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2019-CA-1582-MR
ALBERT GRUNEISEN III APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE AUDRA J. ECKERLE, JUDGE
ACTION NO. 18-CI-005276
JOHN HAYWOOD; POLY GROUP, APPELLEES
LLC; ROBERT DOUGLAS
HAMILTON; AND V3 GROUP, LLC
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; GOODWINE AND KRAMER,
JUDGES.
GOODWINE, JUDGE: Albert Gruneisen III (“Gruneisen”) appeals from an order
of the Jefferson Circuit Court dismissing his claims against Appellees. After
careful review and finding no error, we affirm.
BACKGROUND
Gruneisen, John Haywood (“Haywood”), and Robert Douglas
Hamilton (“Hamilton”) were founding members of Poly Group, LLC (“Poly
Group”). The three men also founded V3 Group, LLC (“V3”) and each owned
one-third of the company. Both LLCs are Indiana entities with operating
agreements that require all claims be brought in Indiana and are subject to Indiana
law.
In addition to his status as a member of Poly Group, Gruneisen was
Poly Group’s president from 2010 until 2013. In 2013, Gruneisen was removed
from his position as President. Gruneisen sued, and the parties agreed to settle the
claims by executing the Settlement Agreement and the subsequent
Acknowledgment of Member Dissociation and Transfer of Entire Interest
(“Acknowledgment”).
Under the Settlement Agreement, Gruneisen agreed to (1) relinquish
his interest in V3; (2) release Poly Group from certain claims and causes of action
that could have been raised in the lawsuit; and (3) “cooperate and provide any
proxy necessary to vote to transfer all of his membership interest in V3 to Poly
Group or Poly Group’s designee.” Record (“R.”) at 10. In exchange, Poly Group
agreed to (1) pay Gruneisen $130,000 for his interest in V3; and (2) release
Gruneisen from any claims or causes of action that could have been asserted in the
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underlying lawsuit. Gruneisen and a representative and board member of Poly
Group, Glenn Hancock, signed the Settlement Agreement. Additionally, Haywood
and Hamilton signed the Settlement Agreement in their individual capacities,
acknowledging forgiveness of personal debts Gruneisen owed to them. The
Settlement Agreement contained Kentucky choice of venue and choice of law
provisions.
Following the execution of the Settlement Agreement, Gruneisen
received his payment of $130,000. Thereafter, Gruneisen, Haywood, and
Hamilton executed the Acknowledgment to effectuate the terms of the Settlement
Agreement. The Acknowledgment contained Indiana choice of law and choice of
venue provisions. In pertinent part, the Acknowledgment provides:
(1) Dissociating Member [Gruneisen] hereby transfers
his entire interest in V3, in equal parts, to Remaining
Members [Haywood and Hamilton], such that Remaining
Members shall hold one-half, or 50 percent, of the
interest in V3.
....
(5) Dissociating Member [Gruneisen] acknowledges his
prior agreement to provide any proxy necessary to effect
the transfer of his interest in V3 to Poly Group, LLC, an
Indiana Limited Liability Company, or Poly Group’s
designee. By their signatures below, Remaining
Members [Haywood and Gruneisen] represent that they
have been duly designated by Poly Group, LLC to be the
transferees of Dissociating Member’s interest in V3, and
acknowledge Dissociating Member’s reliance on their
representation. Remaining Members agree to indemnify
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and hold harmless Dissociating Member from any
liability proximately caused by a misrepresentation as to
Poly Group’s designation or their authority to have
effected the same.
(6) This Acknowledgment contains no representations
with respect to the status of any V3 Member’s Capital
Account or Capital Contribution and is not intended to
alter the Operating Agreement of V3 in any way, except,
as to Exhibit A to the Operating Agreement of V3, to
strike “Albert Gruneisen, III” as a listed member (along
with his capital contribution and units), and amend the
number of units held by John Haywood to “15” and
amend the number of units held by Robert Douglas
Hamilton to “15”.
R. at 230-31.
Following execution of the Acknowledgment, Haywood and Hamilton
each became a fifty percent owner of V3 as dictated by paragraph 1. In 2018,
during a deposition in a separate matter, Gruneisen discovered his V3 shares,
which he transferred in 2013, had remained with Haywood and Hamilton, rather
than being transferred or assigned from Haywood and Hamilton to Poly Group.
Following this purported discovery, Gruneisen sent Haywood and Hamilton a
demand letter, complaining they did not transfer his shares in V3 to Poly Group
among other things. When they did not respond, Gruneisen filed the underlying
lawsuit.
On September 11, 2018, Gruneisen filed the underlying complaint in
the Jefferson Circuit Court. The action arose due to Gruneisen’s interpretation of
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the Settlement Agreement provision requiring “transfer of all his membership and
interest in V3 to Poly Group or Poly Group’s designee.” R. at 10. Gruneisen
interpreted this provision to require Haywood and Hamilton to transfer
Gruneisen’s one-third share of V3 to Poly Group even though neither the
Settlement Agreement or the Acknowledgment contain language to that effect.
The Defendants/Appellees moved to dismiss the complaint, and
Gruneisen responded by moving to disqualify Defendants’ counsel, alleging a
conflict of interest. To resolve the issue, each of the Defendants retained separate
counsel. Gruneisen then filed a verified amended complaint, attempting to cure the
defects described in Defendants’ motion to dismiss. In his amended complaint,
Gruneisen raised claims for breach of contract, conversion, fraudulent
misappropriation, tortious interference, and derivative claims on behalf of Poly
Group. The Defendants responded by filing separate motions to dismiss.
On August 15, 2019, the circuit court entered an opinion and order,
granting in full each of the Defendants’ motions to dismiss. The circuit court
found: (1) the Settlement Agreement was not breached because all obligations had
been fulfilled; (2) to the extent the claims arose from the Settlement Agreement,
Gruneisen’s conversion, fraud, and tortious interference claims were not valid
because the Settlement Agreement had not been breached; and (3) his purported
derivative claims were not valid because he had not made a demand on the Board
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as required, and even if he had made a proper demand, the claims related to acts
that occurred after the Settlement Agreement had been fulfilled, so the proper
venue would have been Indiana.
Gruneisen then moved the circuit court to reconsider, arguing the
circuit court, after dismissing his claim for breach of the Settlement Agreement,
should not have considered the merits in dismissing his other claims. Instead,
Gruneisen argues the circuit court should have only dismissed those claims for
improper venue. The circuit court denied Gruneisen’s motion, finding he failed to
state grounds for reconsideration and the opinion and order required no
clarification. This appeal followed.
On appeal, Gruneisen argues the (1) circuit court erred in dismissing
the breach of contract claim; and (2) if it was error for the circuit court to dismiss
his breach of contract claim, then his remaining claims should not have been
dismissed. Alternatively, he argues if the circuit court did not err in dismissing the
breach of contract claim, the remaining claims should have been dismissed
immediately for improper venue.
STANDARD OF REVIEW
Our standard of review of an order granting a motion to dismiss is as
follows:
A motion to dismiss for failure to state a claim upon
which relief may be granted admits as true the material
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facts of the complaint. So a court should not grant such a
motion unless it appears the pleading party would not be
entitled to relief under any set of facts which could be
proved. . . . Accordingly, the pleadings should be
liberally construed in the light most favorable to the
plaintiff, all allegations being taken as true. This
exacting standard of review eliminates any need by the
trial court to make findings of fact; rather, the question is
purely a matter of law. Stated another way, the court
must ask if the facts alleged in the complaint can be
proved, would the plaintiff be entitled to relief? Since a
motion to dismiss for failure to state a claim upon which
relief may be granted is a pure question of law, a
reviewing court owes no deference to a trial court’s
determination; instead, an appellate court reviews the
issue de novo.
Fox v. Grayson, 317 S.W.3d 1, 7 (Ky. 2010) (internal quotation marks and
citations omitted). Likewise, “the interpretation of a contract, including
determining whether a contract is ambiguous, is a question of law for the courts
and is subject to de novo review.” 3D Enterprises Contracting Corp. v. Louisville
and Jefferson County Metropolitan Sewer Dist., 174 S.W.3d 440, 448 (Ky. 2005)
(citation omitted).
ANALYSIS
First, Gruneisen argues the circuit court erred in dismissing his claim
for breach of the Settlement Agreement. “To prove a breach of contract, the
complainant must establish three things: 1) existence of a contract; 2) breach of
that contract; and 3) damages flowing from the breach of contract.” Metro
Louisville/Jefferson County Government v. Abma, 326 S.W.3d 1, 8 (Ky. App.
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2009) (citing Barnett v. Mercy Health Partners-Lourdes, Inc., 233 S.W.3d 723,
727 (Ky. App. 2007). Here, the parties do not dispute that the Settlement
Agreement is a valid contract. Gruneisen argues the Settlement Agreement was
breached when Haywood and Hamilton failed to meet both explicit and implicit
obligations in the Settlement Agreement. The Settlement Agreement explicitly
required Gruneisen to transfer his V3 units “to Poly Group or Poly Group’s
designee” in exchange for $130,000 from Poly Group. R. at 10. Gruneisen argues
the Settlement Agreement also implicitly required Poly Group to receive and take
possession of the transferred V3 units. Haywood and Hamilton retained
Gruneisen’s units of V3, so Gruneisen argues Poly Group breached the Settlement
Agreement by failing to take possession of the units. As such, Gruneisen argues he
was damaged because he expected to benefit, as a member of Poly Group, from
Poly Group’s acceptance of the units worth approximately $1,329,800.
To reach the conclusion that Poly Group breached the Settlement
Agreement, Gruneisen argues the word “designee”1 should be given its plain
meaning, which denotes duty, office, and purpose. In this instance, he argues, the
designee had a duty and purpose to either transfer the V3 units to Poly Group or
1
Designee is defined as “[s]omeone who has been designated to perform some duty or carry out
some specific role.” Designee, BLACK’S LAW DICTIONARY (11th ed. 2019).
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hold them for Poly Group. Alternatively, Gruneisen argues the proper
interpretation is at least ambiguous.
The circuit court rejected these arguments, finding:
Despite Gruneisen’s contentions, neither the Settlement
Agreement nor the Acknowledgment contain any terms
or reference any agreement for the V3 shares to
ultimately be transferred from Haywood and Hamilton to
Poly Group at any point. All parties in this litigation are
sophisticated entities and business people who executed
both the Settlement Agreement and Acknowledgment
with assistance of counsel. The Court cannot read terms
into either the Settlement Agreement or
Acknowledgment that are neither expressly present, nor
even implied.
R. at 374-75.
We apply the following principles when interpreting a contract:
“When no ambiguity exists in the contract, we look only
as far as the four corners of the document to determine
the parties’ intentions.” 3D Enterprises Contracting
Corporation v. Louisville and Jefferson County
Metropolitan Sewer District, 174 S.W.3d 440, 448 (Ky.
2005) (citation omitted). If the language is ambiguous,
the court’s primary objective is to effectuate the
intentions of the parties. Cantrell Supply, Inc. v. Liberty
Mutual Insurance Company, 94 S.W.3d 381, 384 (Ky.
App. 2002). “The fact that one party may have intended
different results, however, is insufficient to construe a
contract at variance with its plain and unambiguous
terms.” Abney v. Nationwide Mutual Insurance
Company, 215 S.W.3d 699, 703 (Ky. 2006) (quoting
Cantrell, 94 S.W.3d at 385).
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Kentucky Shakespeare Festival, Inc. v. Dunaway, 490 S.W.3d 691, 695 (Ky.
2016). Furthermore, “an otherwise unambiguous contract does not become
ambiguous when a party asserts—especially post hoc, and after detrimental
reliance by another party—that the terms of the agreement fail to state what it
intended.” Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 107 (Ky. 2003)
Gruneisen’s argument is unsupported by the plain language of the
Settlement Agreement and Acknowledgment. The Settlement Agreement requires
Gruneisen to transfer his V3 units “to Poly Group or Poly Group’s designee.” R. at
10. The Acknowledgment expressly states that Haywood and Hamilton would
each hold fifty percent of the interest in V3 upon Gruneisen’s transfer of his
interest. Although the definition of designee includes performing a duty, neither of
the two contracts specify that the designee’s duty is to transfer Gruneisen’s interest
in V3 to Poly Group. The Acknowledgment makes clear that Haywood and
Hamilton would each retain fifty percent ownership of V3. The record makes clear
that all obligations in the Settlement Agreement and Acknowledgment were
satisfied. We will not read an alleged implicit requirement into the contracts or
find an ambiguity simply because Gruneisen argues one exists. As such, the circuit
court correctly concluded that there was no breach of contract.
Second, Gruneisen argues if the circuit court erred in dismissing his
breach of contract claim, then his remaining claims should not have been
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dismissed. As we held there was no breach of contract, we need not address this
argument.
Alternatively, Gruneisen argues if the circuit court properly dismissed
his breach of contract claim, then all remaining claims should have been dismissed
solely for improper venue instead of addressing the merits of each claim. The
circuit court made the following findings in dismissing Gruneisen’s claims for
conversion, fraudulent misappropriation, and tortious interference:
[T]he Court finds Defendants’ arguments regarding the
claims of conversion, fraudulent misappropriation, and
tortious interference in the Verified Amended Complaint
persuasive. As Gruneisen has not properly supported his
breach of contract claim, he has also not properly
supported his conversion, fraud, and tortious interference
claims. The Exhibits attached to Gruneisen’s own
Verified Amended Complaint indicate that the
transactions were completed as contemplated by the
Settlement Agreement and Acknowledgment. With no
terms, explicit or implied, indicating that Haywood and
Hamilton were to later transfer the V3 shares they
received, the remaining claims are not viable in this
Court.
Though Gruneisen has attempted to rely on the
indemnification clause in the Acknowledgment as a basis
for his claims, the clause, by its plain language, intended
to protect Gruneisen from liability against any suit
arising from Haywood and Hamilton’s representation
that they were duly designated by Poly Group as
transferees. No such claims have been made against
Gruneisen, as contemplated by the Acknowledgment.
Rather, Gruneisen himself is trying to create a cause of
action based on that provision. The Court does not find
such a claim to be proper, especially considering that the
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Acknowledgment expressly contains a provision
indicating that V3’s Operating Agreement, with an
Indiana choice of venue provision, and Indiana law are to
govern that agreement.
R. at 375-76.
In sum, to the extent that Gruneisen’s conversion, fraud, and tortious
interference claims arose out of the Settlement Agreement, the circuit court found
that because there was no breach of contract, these additional claims had no merit.
To the extent these claims arose out of the Acknowledgment, the circuit court
declined to address the merits as Indiana was the proper venue.
Additionally, the circuit court made the following findings in
dismissing Gruneisen’s derivative claims:
Gruneisen has not demonstrated that he did make a
proper demand on the [Poly Group] Board for a
derivative action.
Nonetheless, as Gruneisen’s other claims of action
have not been properly supported, even if Gruneisen had
made a proper demand on the Board, such action is
subject to the choice of venue and choice of law
provisions of Poly Group’s Operating Agreement. That
Operating Agreement makes it clear that such actions are
to be brought in Indiana and are subject to Indiana law.
R. at 377. In conclusion, the circuit court stated, “Gruneisen has failed to plead
any claims to which he is entitled to relief in Jefferson County, Kentucky, and any
viable claims he may have are not properly before this Court.” Id.-12-
Haywood, Hamilton, and Poly Group argue the circuit court correctly
declined to make a preemptive determination that Gruneisen’s other claims were
barred by res judicata. Although the circuit court opined as to the probable
outcome on the merits of Gruneisen’s claims for conversion, fraud, tortious
interference, and derivative claims, ultimately the circuit court found these claims
were not properly before it because the proper venue was Indiana. As such, the
circuit court ultimately dismissed for lack of venue and did not err in doing so.
CONCLUSION
For the foregoing reasons, we affirm the judgment of the Jefferson
Circuit Court.
ALL CONCUR.
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BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE
POLY GROUP, LLC:
Donald L. Cox
Louisville, Kentucky Michael E. Gregory
Paul Hershberg
Louisville, Kentucky
BRIEF FOR APPELLEES
JOHN HAYWOOD AND
ROBERT DOUGLAS HAMILTON:
Melissa M. Bauer
Louisville, Kentucky
Zachary F. Stewart
Jeffersonville, Indiana
BRIEF FOR APPELLEE
V-3 GROUP, LLC:
L. Stanley Chauvin, III
Louisville, Kentucky
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