IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION ______________________________________________________________________ MID-AMERICA APARTMENTS, L.P., Plaintiff, v. Case No. 2:17-cv-02621-JTF-dkv FLUID DYNAMICS HOLDINGS, LLC; KAISER ROMANELLO, P.A; OLIVE BRANCH CONSULTING, INC.; MITCHELL SILBERBERG & KNUPP LLP; DAVIS, AGNOR, RAPAPORT & SKALNY, LLC; DF 8 FUNDING LLC; CFS 7 FUNDING LLC; GOTTBETTER & PARTNERS, LLP; JERUSAREKA INVESTMENTS, LLC; and GRAYLEGAL PLLC, Defendants. OLIVE BRANCH CONSULTING, INC., Cross-Plaintiff, v. FLUID DYNAMICS HOLDINGS, LLC, Cross-Defendant. OLIVE BRANCH CONSULTING, INC., Counter-Plaintiff, v. MID-AMERICA APARTMENTS, L.P., Counter-Defendant. Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 1 of 15 PageID 899 2 ______________________________________________________________________ OLIVE BRANCH CONSULTING, INC’S RESPONSE TO PLAINTIFF/COUNTER- DEFENDANT MID-AMERICA APARTMENT, L.P.’S MOTION TO STRIKE OR, IN THE ALTERNATIVE, MOTION TO DISMISS COUNTERCLAIM OF OLIVE BRANCH CONSULTING, INC. ______________________________________________________________________ COMES NOW, Defendant/Counter-Plaintiff Olive Branch Consulting, Inc. (hereinafter referred to as “OBC”), by and through undersigned counsel of record, and submits this Response to Plaintiff/Counter-Defendant Mid-America Apartments, L.P.’s (“MAA”) Motion to Strike or, in the Alternative, Motion to Dismiss Counter-Claim of Olive Branch Consulting, Inc., and states to the Court as follows: INTRODUCTION When determining whether to grant a motion to dismiss pursuant to Rule 12 (b)(6), the Court must construe the complaint in the light most favorable to the plaintiff and accept all well-pleaded allegations as true. As a result, the introduction and facts as stated in MAA’s Memorandum in Support of Its Motion to Dismiss are irrelevant to the Court’s legal analysis of whether the Counter-Claim states a cause of action. The Counter-Claim OBC filed sufficiently pleads and timely alleges third-party beneficiary rights under the Master Valve Lease Agreement (“MVLA”) and that MAA is a contractual guarantor of OBC’s saving share under the MVLA which totals $1,126,329.42 plus interest. Accordingly, MAA’s Motion to Dismiss should be denied. FACTUAL BACKGROUND MVLA between MAA and Fluid On or about June 15, 2012, Fluid Holdings Dynamics, LLC (“Fluid”) and Mid- America Apartments, L.P. (“MAA”) entered into a Master Valve Lease Agreement Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 2 of 15 PageID 900 3 (“MVLA”) which was dated December 1, 2011.1 OBC is specifically listed as a third-party beneficiary in the MVLA.2 Pursuant to the MVLA, Fluid was to install its Precision Flow System at various MAA apartment communities, which Fluid represented would reduce MAA’s water bills. To the extent the Precision Flow System resulted in lower water bills, the MVLA provided for a three-way percentage split of these savings.3 Pursuant to the MVLA, MAA was to receive 40%; Fluid was to receive 48%; and OBC was to receive 12%.4 In the MVLA, as alleged in the Counter-Claim, MAA guaranteed that OBC’s savings share “would be distributed” to OBC.5 The Counter-Claim specifically sets forth the allegation that MAA did not distribute OBC’s 12% savings share when MAA interpled Fluid’s 48% share on July 26, 2017.6 This failure by MAA resulted in the breach and created the cause of action embodied in the Counter-Claim. STANDARD OF REVIEW Rule 12(f) of the Federal Rules of Civil Procedure provides that, on motion of a party, the court may strike from a pleading “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”7 “Motions to strike under 12(f) are addressed to the sound discretion of the trial court, but are generally disfavored.”8 Under Fed. R. Civ. P. 12 (b)(6), a defendant may move to dismiss the plaintiff’s complaint for failure to state a claim upon which relief can be granted. In order to survive a Rule 12 (b)(6) motion to dismiss, the complaint must contain allegations supporting all 1 Countercl. ¶ 5, ECF No. 102. 2 Countercl. ¶ 7, ECF No. 102. 3 Countercl. ¶ 8, ECF No. 102. 4 See the MVLA, ECF No. 102-1. 5 Countercl. ¶ 6, ECF No. 102. 6 Countercl. ¶¶ 28, 29, 30, & 32, ECF No. 102. 7 Fed. R. Civ. P. 12(f). 8 Graves v. Mahoning Cty., No. 4:10-cv-2821, 2011 WL 3703950, at *2. (N.D. Ohio Aug. 23, 2011). Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 3 of 15 PageID 901 4 material elements of the claims.9 A plaintiff must provide a short and plain statement of the claim showing an entitlement to relief and the grounds upon which it rests.10 When determining whether to grant a motion to dismiss pursuant to Rule 12 (b)(6), the Court must construe the complaint in the light most favorable to the plaintiff and accept all well-pleaded allegations as true.11 Detailed factual allegations are not required. However, a party must provide more than labels and conclusions.12 A complaint must contain sufficient facts “to state a claim to relief that is plausible on its face” to survive a motion to dismiss.13 ARGUMENT 1. OBC’s Filed Amended Answer, Cross-Claim, and Counter-Claim Should Not Be Stricken Fed. R. Civ. P. 12(f) standards compel denial of MAA’s Motion to Strike OBC’s filed Amended Answer, Cross-Claim, and Counter-Claim. Although Rule 12(f) authorizes district courts to strike “any redundant, immaterial, impertinent, or scandalous matter” from a pleading, the striking of pleadings is a drastic remedy “to be used sparingly and only when the purpose of justice so requires.”14 The Sixth Circuit Court of Appeals has opined that a “motion to strike should be granted only when the pleading to be stricken has no possible relation to the controversy.”15 MAA fails to argue that OBC’s pleading contains redundant, immaterial, impertinent, or scandalous matters or that it is unrelated to the controversy. Rather, MAA 9 Bishop v. Lucent Techs, Inc., 520 F.3d 516, 519 (6th Cir. 2008). 10 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). 11 League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007). 12 Twombly, 550 U.S. at 555. 13 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 14 Graves v. Mahoning Cty., No. 4:10-cv-2821, 2011 WL 3703950, at *2. (citing Brown & Williamson Tobacco Corp. v. United States, 201 F.3d 819, 822 (6th Cir. 1953). 15 Brown & Williamson Tobacco Corp. v. United States, 201 F.3d 819, 822 (6th Cir. 1953). Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 4 of 15 PageID 902 5 cites Graves v. Mahoning16 and Livonia Diagnostic Ctr., P.C. v. Neurometrix, Inc. 17 to argue that this Court should strike OBC’s pleading because it contains new or different matters than in the proposed amended pleading. Both cases are inapposite, factually distinguishable, and dissimilar from the instant case. For instance, in Graves, the plaintiffs filed a 33-page complaint seeking declaratory relief and injunctive relief against the defendants.18 All but one of the defendants filed a motion to dismiss the complaint.19 However, one defendant filed an answer to the complaint.20 Before the court ruled on the defendants’ motion to dismiss, the plaintiffs filed a motion to amend their complaint.21 The plaintiffs represented to the Court that they intended to amend their complaint to flesh out a constitutional claim and assured the court that the amended complaint did not change the material allegations in the complaint.22 The plaintiffs attached a 35-page draft amended complaint to the motion to amend.23 This draft pleading named the same defendants that were parties to the original complaint, and added no new claims.24 Ultimately, the court granted plaintiffs’ motion to amend.25 However, after two requests for extension of time, plaintiffs filed an amended complaint which added twelve (12) new plaintiffs, twenty (20) new defendants, and an entirely new claim.26 The defendants, in response, justifiably filed a motion to strike the 16 Graves, 2011 WL 3703950 (N.D. Ohio Aug. 23, 2011). 17 Livonia Diagnostic Ctr., P.C. v. Neurometrix, Inc., No. 11-15208, 2012 WL 2324920 (E.D. Mich. June 19, 2012). 18 Graves, 2011 WL 3703950, at *1 (N.D. Ohio Aug. 23, 2011). 19 Id. 20 Id. 21 Id. 22 Id. 23 Graves, 2011 WL 3703950, at *1 (N.D. Ohio Aug. 23, 2011). 24 Id. 25 Id. 26 Id. Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 5 of 15 PageID 903 6 amended complaint because the plaintiffs’ amended complaint did not comport with the representations to the court. The court granted defendants’ motion to strike because plaintiffs’ amended complaint exceeded the scope of leave granted.27 The court further reasoned that allowing the amended complaint to stand would severely prejudice the defendants because the original defendants did not have an opportunity to oppose an amendment of this scope, and all defendants would suffer delay while the newly-added defendants formulated motions or responses to the amended complaint.28 In Livonia Diagnostic Center, P.C., the plaintiff filed a motion to amend its complaint more than four months after defendants had filed their motion to dismiss. 29 The plaintiff attached a different proposed amended complaint to an improperly filed reply brief.30 The court issued an order striking plaintiff’s reply brief, but allowed plaintiff to refile a reply brief comporting with the court rules.31 The court’s order stated that “Plaintiff may not attach a new proposed complaint as an exhibit to its Reply Brief because doing so deprives the opposing party the opportunity to voice its arguments in opposition to the operative proposed complaint.”32 Pursuant to Fed. R. Civ. P. 1 and its mandate for efficiency, OBC upon receiving discovery deleted superfluous language and instead filed a pleading that reflected the most accurate facts available to OBC at the time of its filing. Importantly, OBC, unlike the plaintiffs in Graves and Livonia Diagnostic Center, P.C., did not add any new claims, 27 Id. 28 Id. 29 Livonia Diagnostic Ctr., 2012 WL 2324920, at *1. 30 Id. at *2. 31 Id. 32 Id. Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 6 of 15 PageID 904 7 and did not add any new parties. As such, MAA has not been prejudiced by the filing because no new claims were added to which it did not have the opportunity to respond. Accordingly, MAA’s Motion to Strike is without merit and should be denied. 2. OBC is a Third-Party Beneficiary under Delaware Law OBC is a third-party beneficiary to the MVLA under Delaware law33, and the Counter-Claim against MAA sets forth the factual basis supporting this position. To qualify as a third-party beneficiary of a contract under Delaware law, a party must demonstrate the following: (a) the contracting parties must have intended that the third party beneficiary benefit from the contract, (b) the benefit must have been intended as a gift or in satisfaction of a pre-existing obligation to that person, and (c) the intent to benefit the third party must be a material part of the parties’ purpose in entering into the contract.34 First, with respect to each of these three (3) elements, the Counter-Claim sets forth a factual basis demonstrating the existence of each, and at this stage of the proceedings, the Court must view the Complaint in the light most favorable to OBC. Specifically, the Counter-Claim filed by OBC alleges the following: 39. OBC is a third-party beneficiary to the MVLA. 40. OBC is specifically identified in the MVLA as the firm for minority participation. 41. OBC’s participation was a material part of the parties’ purpose in entering into the MVLA as MAA wanted to grow its minority partnerships. 42. MAA and Fluid intended that OBC benefit from the MVLA and specifically identified OBC in paragraph 25 of the MVLA. 33 The MVLA is governed by Delaware law. 34 E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 196 (3d Cir. 2001) (citing Guardian Constr. Co. v. Tetra Tech Richardson, Inc., 583 A.2d 1378, 1386 (Del. Super. Ct. 1990)) (internal citations omitted). Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 7 of 15 PageID 905 8 43. MAA and Fluid intended that OBC benefit from the MVLA and included OBC in the Savings Sharing Schedule. 44. The MVLA does not contain any duties or responsibilities for OBC to perform. 45. As a result of OBC providing know how, expertise, and being available to MAA as a subject matter expert such that MAA was able to become educated about the precision flow system and to negotiate and enter into a contract with Fluid to take advantage of the savings opportunity, MAA included OBC as the minority participant in the Savings Sharing Schedule. 46. Pursuant to paragraph 25 of the MVLA, MAA guaranteed that the 12% savings set forth in the Savings Sharing Schedule would be distributed to OBC. 47. Pursuant to paragraph 25 of the MVLA, MAA is the guarantor of OBC’s 12% savings share. Second, the MVLA, on its face, clearly and unambiguously provides that OBC was an intended beneficiary of the contract. In fact, the MVLA provides as follows: Lessee (MAA) guarantees that they will partner with a minority firm such that the percentage split set forth in the below chart will be distributed to a minority firm. For this agreement, that minority firm is: … Olive Branch Consulting.35 Third, the MVLA does not contain any performance obligation regarding OBC. This is clearly consistent with a gift or in satisfaction of a pre-existing obligation. Fourth, the MVLA unambiguously states that one of its essential purposes is to create and to provide for minority participation. Therefore, it is clear with respect to each of the elements required under the applicable, OBC is a third-party beneficiary to the MVLA. 35 See ¶ 25 of the MVLA, ECF No. 102-1. Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 8 of 15 PageID 906 9 3. OBC’s Counterclaim for Breach of Contract is Timely Under Delaware law “no action based on a promise … shall be brought after the expiration of 3 years from the accruing of the cause of such action.”36 Delaware law further provides that the statute of limitations beings to run when the cause of action accrues, or when the injury occurs.37 MAA correctly states the law as it applies to third- party beneficiaries - a third-party beneficiary is as much subject to the statute of limitations as the promisee to the contract which created the rights of the beneficiary. However, MAA conflates two (2) separate issues. The issues MAA conflates and attempts to merge as one are (i) the statute of limitations and (ii) the accrual date when the injury occurs. These two concepts are not the same. MAA’s failure to fulfill its contractual obligation to Fluid is separate and distinct from MAA’s failure to fulfill its guarantee to OBC. With respect to the accrual date of OBC’s claim, MAA’s wrongful act to OBC did not occur until MAA failed to distribute OBC’s savings share because, under the MVLA, MAA’s guarantee to distribute OBC’s 12% share does not arise until MAA makes a savings share distribution to Fluid. In this case, the distribution from MAA to Fluid occurred pursuant to the Final Award when MAA interpled Fluid’s 48% share into the Registry of the Chancery Clerk of Court on July 26, 2017.38 This payment triggered MAA’s guarantee obligations under the MVLA. OBC’s claim against MAA for failing to distribute OBC’s 12% share was timely as it was made a mere five (5) months after 36 Del. Code Ann. § 10-8106(a). 37 See Sunrise Ventures, LLC v. Rehoboth Canal Ventures, LLC, No. CIV.A. 4119-VCS, 2010 WL 363845, at *6 (Del. Ch. Jan. 27, 2010); Coleman v. Pricewaterhousecoopers, LLC, 854 A.2d 838, 842 (Del. 2004). 38 See Countercl. ¶¶ 28, 29, 30, & 32, ECF No. 102. Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 9 of 15 PageID 907 10 MAA’s non-performance of its guarantee. Therefore, OBC’s claim against MAA has been timely asserted. MAA cites the Court to several cases that are obviously inapposite to a proper legal analysis applicable to OBC’s Counter-Claim. MAA cites Bioveris Corp. v. Meso Scale Diagnostics, LLC, No. CV 8692-VCMR, 2017 WL 5035530, at *10 for the proposition that it totally breached the MVLA as to Fluid in 2012, and therefore, the three (3) year statute of limitations bars OBC’s claim. This is an absurd position. First, Bioveris involves a breach between parties to a contract. In the instant case, OBC is not a party to the MVLA, but is instead a third-party beneficiary to the MVLA. Second, because OBC is not a party to the MVLA, in neither 2012 nor any time since did OBC have a cause of action against MAA for breach of the MVLA by MAA’s wrongful removal of the Precision Flow System. The placement or the removal of the Precision Flow System is irrelevant to OBC’s claim. Most assuredly, Fluid had a cause of action for the removal of the Precision Flow System by MAA in 2012; however, no other party was injured or damaged by such removal. It cannot be disputed that OBC is not a signatory to the MVLA. It also cannot be disputed that OBC did not suffer an injury as a result of the removal of the Precision Flow System. OBC’s rights under the MVLA are triggered by one thing and one thing only - the payment of the savings shares. MAA’s motion also contains the following quote from Mobil Oil Expl. & Producing Serv., Inc. v. Untied States, 530 U.S. 604, 608 (2000) - A “total breach’ is a breach that ‘so substantially impairs the value of the contract to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 10 of 15 PageID 908 11 his remaining rights to performance.’” Mobile Oil has nothing to do with the accrual date of a cause action as it merely stands for the proposition that an injured party can sue for all of its damages under a contract once breached. In fact, Mobile Oil is a case that was decided against the breaching party (the United States) and does not provide any rights to the breaching party (MAA). MAA’s misguided attempt to turn an obviously inapposite case upon which a breaching party’s liability for damages was found to be expansive and inclusive of future damages, has absolutely nothing to do with the accrual date of a cause of action. As to OBC’s Counter-Claim, there was no breach of MAA’s guarantee obligation in 2012 (when the Precision Flow System was wrongfully removed), because MAA did not make a payment to Fluid in 2012 - nor did MAA make any such payment in 2013, 2014, 2015, or 2016. To suggest that there was a total breach as to OBC during any of these years when MAA’s guarantee obligation had not yet been triggered or arisen is ludicrous. MAA’s breach of its guarantee obligation to OBC occurred in 2017 and suit was brought shortly thereafter. 4. OBC states a Claim for Breach of Contract MAA makes the specious argument that OBC fails to state a claim for Breach of Contract. Notwithstanding the clear and unambiguous language in the MVLA whereby MAA acts as a guarantor and specifically guarantees that when it distributes a savings share to Fluid that OBC will also be distributed its savings share, MAA argues that the MVLA does not obligate MAA to pay OBC a 12% savings share. Paragraph 25 of the MVLA provides as follows: Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 11 of 15 PageID 909 12 Minority Participation: Lessee [MAA] guarantees that they will partner with a minority firm such that the percentage split set forth in the below chart will be distributed to a minority firm. For this agreement, that minority firm is: Firm Name: Olive Branch Consulting Address: Phone: Email: Owner: Eddie Moore Minority Designation: African-American Although the Savings Sharing Schedule in the MVLA states that Fluid would pay OBC, the plain language of the MVLA clearly states that MAA guarantees that OBC’s percentage split would be distributed to OBC. Consequently, MAA is contractually obligated under the MVLA (1) to ensure that OBC’s percentage split is distributed to OBC by Fluid if it delivers to Fluid OBC’s savings share or (2) to distribute OBC’s 12% savings share directly to OBC. The MVLA guarantor obligation has no allowance for non- performance by MAA of its guarantee arising on distribution of the savings shares. MAA attempts to use the Manufacturer’s Representative Agreement to support its position that the MVLA did not impose a payment obligation on MAA. However, the MVLA makes no mention of and does not reference the Manufacturer’s Representative Agreement. Contractually, there is no connection between these agreements. Paragraph 20 of the MVLA provides that it is a: “full and complete agreement. All prior agreements, covenants, representations or warranties, express or implied, oral or written, have either been merged into this Agreement of have been intentionally omitted from this Agreement and this Agreement supersedes any and all prior agreements.” Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 12 of 15 PageID 910 13 Further, MAA concedes that the MVLA is unambiguous.39 Nevertheless, MAA impermissibly attempts to persuade this Court with parol evidence. The parol evidence rule prevents the introduction of prior or contemporaneous negotiations and agreements that contradict, modify, or vary the contractual terms of a written contract when the written contract is intended to be a complete and final expression of the parties’ agreement.40 Nonetheless, even if this Court finds that the contractual language of the MVLA is ambiguous, the Court must resolve all ambiguities in the contract in favor of the plaintiff when ruling on a motion to dismiss.41 On a motion to dismiss, a trial court cannot choose between two different reasonable interpretation of an ambiguous document. Where ambiguity exists, “dismissal is proper only if the defendants’ interpretation is the only reasonable construction as a matter of law.”42 Finally, OBC does not dispute that MAA had the right to interplead the Final Award. However, the existence of this right does not relieve MAA of its contractual responsibilities, duties, and obligations owed to OBC. 5. Permitting OBC to proceed against MAA would not allow OBC to circumvent a priority determination to the interpleaded funds MAA argues that permitting OBC to proceed against MAA would allow OBC to circumvent a priority determination to the Interpleaded funds. This argument is totally without merit and ignores what this Court and OBC learned from other parties in this proceeding regarding the Interpled funds. Other parties to this proceeding first advised 39 See MAA’s Motion to Dismiss, ECF No. 109-1 at 18 (stating that the language of the MVLA is unambiguous). 40 See Scott-Douglass Corp. v. Greyhound Corp., 304 A.2d 309, 315 (Del. Super. Ct. 1973). 41 See Hamilton Partners, L.P. v. Highland Capital Mgmt., L.P., 2012 WL 2053329 (Del. Ch. May 25, 2012). 42 Appriva S’holder Litig. Co. v. EV3, Inc., 937 A.2d 1275, 1289 (Del. 2007) (quoting Vanderbilt Income & Growth Assoc. v. Arvida/JMB Managers, Inc., 691 A.2d 609, 613 (Del. 1996) (internal quotation marks omitted). Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 13 of 15 PageID 911 14 OBC and the Court through affirmative defense of the fact that MAA had failed to tender to the Court OBC’s 12% savings share in the Interpled funds. To the extent this fact is proven by the proof adduced in this cause of action, OBC’s claim will be against MAA and will have nothing to do with the priority determination of the Interpled funds. Notably, MAA provides no authority to support its position, and the plain language of the MVLA does not preclude or prohibit OBC from seeking its guaranteed savings share from MAA. CONCLUSION For the foregoing reasons, MAA’s Motion to Strike or, in the Alternative, Motion to Dismiss should be denied. Respectfully Submitted, THE SPENCE LAW FIRM, PLLC By: /s/ Robert L. J. Spence, Jr. Robert L. J. Spence, Jr. (BPR #12256) Jerrick D. Murrell (BPR #34368) Brinkley Plaza 80 Monroe Avenue, Garden Suite One Memphis, Tennessee 38103 Telephone: 901.312.9160 Facsimile: 901.521.9550 rspence@spence-lawfirm.com jmurrell@spence-lawfirm.com Attorneys for Olive Branch Consulting, Inc. Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 14 of 15 PageID 912 15 CERTIFICATE OF SERVICE I hereby certify that on February 16, 2018, I electronically filed the foregoing document with the Clerk of Court by using the Court’s electronic filing system, which sent notification of filing to all counsel of record. /s/ Robert L. J. Spence, Jr. Case 2:17-cv-02621-JTF-dkv Document 139 Filed 02/16/18 Page 15 of 15 PageID 913
