February 17, 2004
MEMORANDUM AND ORDER
This matter is before the court on defendants' motion for summary judgment pursuant to Fed.R.Civ.P. 56. Filing No. 6. Plaintiff filed this action alleging breach of contract by the defendants and asking for specific performance, compensation and special damages. Defendants have submitted this summary judgment motion asking the court to grant judgement as a matter of law. I have carefully reviewed the record, briefs in support and in opposition, the indices of evidence, and the relevant case law. I conclude that the motion for summary judgment should be denied. Plaintiff has also requested that defendants' legal counsel be disqualified from representation in this case. Filing No. 23. In view of my findings as set forth in this order, I agree and conclude that the motion to disqualify should be granted.
FACTSPlaintiff is a resident of Tualatin, Oregon. Defendants are residents of Nebraska. On or about February 5, 2003, plaintiffs and defendants, after previous negotiations, entered into and executed an agreement wherein plaintiff would purchase 1,000 shares of stock in the State Bank of Bartley from defendants. Plaintiff agreed to pay defendants $1,055,000 for the stock and deposited $70,000 as an escrow deposit with defendants' attorneys. In addition, plaintiff and defendants also entered into a second agreement to sell an insurance agency business to plaintiff for $15,000.
One of the provisions of the agreement required the plaintiff to obtain regulatory approval. Filing No. 8, Ex. A, ¶ 5.1. Under the agreement, plaintiff had to file the necessary documents within thirty days of the signing of the agreement. Plaintiff notified defendants' attorney that he might be unable to meet that deadline as the agricultural loan information provided by the bank was not up-to-date. Plaintiff states that he indicated to the defendants' attorney that he could file the information that he had been provided, but he would prefer to obtain updated financials on the agricultural loans and then file the regulatory applications. Plaintiff alleges that defense counsel said he saw no problems with that delay, but he would talk with defendant Ann Wells and get back to him if there was a problem. No one ever told plaintiff that the timing was a problem, so he proceeded to work on the deal. Meetings and due diligence continued until May 5, 2003.
On May 5, 2003, plaintiff was informed by defendants that they were terminating the agreement because plaintiff had not filed his application for regulatory approval within the required thirty days. Defendants retained the $70,000 as liquidated damages.
STANDARD OF REVIEWOn a motion for summary judgment, the question before the court is whether the record, when viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(C); Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995). Where unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate. Id.
The burden of establishing the nonexistence of any genuine issue of material fact is on the moving party. Fed.R.Civ.P. 56(c); Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). Therefore, if defendant does not meet its initial burden with respect to an issue, summary judgment must be denied notwithstanding the absence of opposing affidavits or other evidence. Adickes, 398 U.S. at 159-60; Cambee's Furniture, Inc. v. Doughboy Recreational Inc., 825 F.2d 167, 173 (8th Cir. 1987).
Once defendant meets its initial burden of showing there is no genuine issue of material fact, plaintiff may not rest upon the allegations of his or her pleadings but rather must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. See Fed.R.Civ.P. 56(e); Chism v. W.R. Grace Co., 158 F.3d 988, 990 (8th Cir. 1998). The party opposing the motion must do more than simply show that there is some metaphysical doubt as to the material facts; he or she must show there is sufficient evidence to support a jury verdict in his or her favor. Id. Rule 56(c) "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In ruling on a motion for summary judgment, a court must not weigh evidence or make credibility determinations. Kenney v. Swift Transp. Co., 347 F.3d 1041, 1044 (8th Cir. 2003).
Defendants argue that this is a simple commercial transaction and that the regulatory approval had to be received by April 30, 2003. They contend that any change to the agreement had to be in writing and signed by Ann Wells. They argue that neither Wells nor her attorneys agreed orally or in writing to any extension of time. Thus, argue defendants, such failure to perform the terms and conditions of the contract preclude any recovery on the part of the plaintiff. Chadd v. Midwest Franchise Corp., 412 N.W.2d 453, 457 (Neb. 1987).
Plaintiff argues that the closing date for the transaction states:"Date of Closing. The parties agree to close this transaction on the first day of the month following receipt of all necessary regulatory approvals and the expiration of any required waiting period." Filing No. 8, Ex. A, ¶ 6. The agreement, though, was to terminate if the transaction had not been consummated prior to April 30, 2003; however, if the regulatory approval had not been obtained, through no fault of the plaintiff by April 30, 2003, the closing date was to be extended and allowed up to one year from the date of the agreement for closing to occur. Id. at ¶ 18.
The information provided by the defendants concerning the agricultural loans was not updated. Plaintiff states that he needed the agricultural credit information to obtain his bank stock loan from a third-party lender. Filing No. 13, Hansen Declaration, ¶ 15. The information provided to the plaintiff pursuant to paragraph 3.20(i) of the agreement about the agricultural loans was outdated. Plaintiff says he specifically talked to Dean Sladek, President of the State Bank of Bartley, on February 10, 2003, to discuss this problem. Mr. Sladek informed plaintiff that he did not have current information on all of the borrowers. Id. at ¶ 16. Plaintiff then called Robert Routh, attorney for the defendants. Routh, according to plaintiff, agreed to the delay in filing.
Plaintiff met with Mr. Sladek thereafter until the agricultural credits were updated. First Central Bank, the financial institution assisting plaintiff with the financing, had agreed to move forward with the loan approval process on behalf of the plaintiff. Prior to the final decision from First Central Bank, defendant Ann Wells contacted Mr. Moore at First Central Bank and told him that the deal was not going to occur. Filing No. 13, Ex. 5, ¶ 7. No one had notified plaintiff of this decision, and when plaintiff contacted defendants' legal counsel, Mr. Routh, he claimed the deal was still proceeding. However, that turned out not to be the case, and defendants terminated the agreement to sell the bank to the plaintiff.
Plaintiff argues that there is a material fact in dispute, namely, whether Mr. Routh, as agent for the defendant, agreed to the delay in filing the regulatory documents. Further, argues plaintiff, the conduct of the defendants between that time and May 5, 2003, shows an intent to continue with the sale even though the document regulatory filing had been delayed. Plaintiff also argues that the contract provides for termination on April 30, 2003, unless the regulatory approval had not been given through no fault of the plaintiff. Plaintiff had not applied for regulatory approval, because the defendants' attorney had agreed to the delay, and because current financial information regarding the agricultural loans had not been provided to the plaintiff for submission to the regulatory agency. Plaintiff argues that the jury is entitled to determine if defendants, by their acts and omissions, waived and are estopped from arguing that the agreement could not be amended in this regard. See Pearch v. ELIC Corp., 329 N.W.2d 74, 79 (Neb. 1982).
For purposes of this motion, I agree with the plaintiff. From the facts presented, a jury could conclude that the parties agreed that additional information was needed as to the agricultural accounts. The jury could further conclude that the defendants continued to work on the details and negotiations for closing, and that such actions show a waiver or an agreement by the defendants to delay the regulatory filing and thus the closing date. Paragraph 18 of the agreement specifically allows cancellation of the agreement by the defendants one year after the agreement was signed, if closing had failed to occur because regulatory approval had not been received through no fault of the buyer. Filing No. 13, Ex. A, ¶ 18. The jury could conclude that paragraph 18 contemplated a delay in filing with the regulatory approval and would allow an extension of time in that regard. Consequently, I shall deny the motion for summary judgment at this time.
Plaintiff has also filed a motion to disqualify defense counsel in this case. Filing No. 23. Plaintiff contends that attorney Robert J. Routh, who allegedly approved and consented to the delay in filing for regulatory approval, is a member of the Cline, Williams law firm which represents the defendants in this case. Because I have ruled that this issue is central to plaintiff's case, I shall grant the motion to disqualify. See Disciplinary Rule 5-102(A). Mr. Routh will undoubtedly be called or ought to be called to testify in this case on behalf of the defendants as his testimony appears to be crucial. Nolte v. Pearson, 133 F.R.D. 585, 593 (D. Neb. 1990). I conclude that Terry Wittier and the Cline, Williams law firm must withdraw their representation in this case. I shall give defendants sixty days from the date of this order to obtain new counsel.
THEREFORE, IT IS ORDERED:
1. Defendants' motion for summary judgment, Filing No. 6, is denied; and
2. Plaintiff's motion to disqualify counsel, Filing No. 23, is granted. Defendants have sixty days from the date of this order to obtain new counsel and have counsel enter their appearances.