Chemico Sys. v. Spencer

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CHEMICO SYSTEMS, INC., Plaintiff/Counter Defendant, v. SAMUEL SPENCER, Defendant/Counter Plaintiff, and MFSS HOLDINGS LLC, GPSI, L.L.C. d/b/a/ GUIDEPOINT SYSTEMS, Defendant, v. LEON RICHARDSON, Counter Defendant.

No. 22-11027

United States District Court, E.D. Michigan, Southern Division

February 14, 2023

OPINION AND ORDER GRANTING CHEMICO AND RICHARDSON'S PARTIAL MOTION TO DISMISS [23], DENYING SPENCER'S MOTION FOR LEAVE TO AMEND THE COUNTER COMPLAINT [35], AND DENYING SPENCER'S MOTION FOR LEAVE TO FILE A SURREPLY [45]

LAURIE J. MICHELSON, DISTRICT JUDGE

This suit follows the total breakdown of the business relationship between Chemico Systems, Inc. and its former CEO, Leon Richardson, on the one hand, and Chemico's former CFO Samuel Spencer, on the other. This opinion considers only one part of the larger dispute.

In particular, the Court considers whether Spencer has a legal basis to seek the 15% equity stake in Chemico that he says he was promised. In an effort to collect on that promise Spencer brings breach-of-contract, promissory-estoppel, and fraud counterclaims. Chemico and Richardson have moved to dismiss these counterclaims, explaining that the equity stake was merely a gratuitous promise of future action rather than a contractual agreement, among other reasons. The Court agrees and will dismiss these claims.

And the Court finds that Spencer's later-filed motions for leave to amend the countercomplaint and for leave to file a surreply to the motion to dismiss fail to correct the legal deficiencies with the counterclaims. So it will deny the motions.

I. Background

Because Chemico and Richardson seek dismissal under Federal Rule of Civil Procedure 12(b)(6), the Court accepts the factual allegations in Spencer's countercomplaint as true and draws reasonable inferences from those allegations in his favor. See Waskul v. Washtenaw Cnty. Cmty. Mental Health, 979 F.3d 426, 440 (6th Cir. 2020).

A.

In early 2017, Spencer was recruited to work at Chemico-first as a consultant and soon thereafter as Chief Financial Officer and Head of Mergers and Acquisitions. (ECF No. 20, PageID.399.) He worked under Richardson, Chemico's President and Chief Executive Officer. (Id.) Among other things, Spencer was responsible for the finance and accounting departments, and his “directive” was to “fill the role as the successor for Richardson[.]” (Id.)

Upon joining the company as CFO, Spencer signed an employment agreement. The agreement stated that-in exchange for compensation, benefits, and bonuses- Spencer would “serve as CFO . . . and in such other position[s] . . . as are consistent with [his] position as CFO[.]” (ECF No. 20-1, PageID.413.) And it stated that Spencer “shall have such duties and responsibilities as are assigned” by the CEO (then, Richardson). (Id.) And, importantly, it contained a merger clause: “This agreement . . . contain[s] all of the terms of [Spencer's] employment with the company. The employment terms in this Agreement supersede any other agreements or promises made to [Spencer] by anyone . . . concerning [Spencer's] employment terms.” (Id. at PageID.415.)

Despite these terms, Spencer says that his salary, benefits, and bonuses “did not accurately reflect the multiple management roles Spencer had at Chemico and the overall responsibility he had within the organization.” (ECF No. 20, PageID.399.) As a result, says Spencer, Richardson promised him that Chemico would offer him “additional benefits and compensation in the future[,]” including equity in the company. (Id.) But “Richardson advised Spencer that in order for the equity agreement ‘to work' the Parties would need to ‘trust each other.'” (Id. at PageID.400.)

In August 2017, Spencer thought these promises would be fulfilled. He says that during a meeting, “Richardson, on behalf of Chemico, offered Spencer a 15% equity share in Chemico.” (ECF No. 20, PageID.400.) Spencer accepted the offer, and Richardson apparently acknowledged the arrangement at various times thereafter. (Id.) Afterwards, Richardson “reinforced” that Spencer's “equity would be paid out in a transaction with Chemico or Chemico's chemical management group.” (Id. at PageID.401.)

Spencer believed that the equity was intended to compensate him for his-and by extension Chemico's-superior performance. (ECF No. 20, PageID.401.) Indeed, Spencer was also named Chief Procurement Officer in 2018 and then received a salary increase in early 2019. (Id. at PageID.402.) And Spencer received performance bonuses in 2019, 2020, and 2021. (Id. at PageID.403.) During this time, “Richardson also reiterated that Spencer's equity realization will be in the transaction with Chemico[.]” (Id.)

Starting in 2020, the company's financial outlook soured. (ECF No. 20, PageID.403.) But Spencer helped the company navigate these difficulties. (Id. at PageID.403-404.) Accordingly, Spencer was awarded an additional bonus and made a member of the Board. (Id.)

Despite Spencer's efforts, Chemico's prospects grew worse still in 2021. (ECF No. 20, PageID.404.) Soon, “Richardson began asking Spencer how he was going to raise equity to buy into Chemico.” (Id.) Spencer was apparently shocked. (Id.) So he inquired into Richardson's “wrongful acts and attempt[s] to improperly divert him of his equity entitlement.” (Id.)

Spencer was abruptly fired on October 4, 2021. (ECF No. 20, PageID.404.) Spencer claims he was never paid the severance owed under the employment agreement and that he was wrongfully denied his equity stake in Chemico. (Id.)

B.

In time, Chemico sued Spencer in Michigan state court, alleging breaches of the employment agreement and other claims. (ECF No. 1-2, PageID.10.) Spencer removed the case to this Court based on diversity of citizenship and then filed a countercomplaint against Chemico and a third-party complaint against Richardson. (ECF Nos. 1, 20.) He brings four claims: (1) breach of the employment agreement against Chemico for failing to pay him severance; (2) breach of the “separate” contract for equity against Chemico; or, in the alternative, (3) promissory estoppel against Chemico for failing to honor promise of equity; and finally, (4) fraud against both Chemico and Richardson. (See generally ECF No. 20.)

Believing most of the counterclaims to be without merit, Chemico and Richardson filed a motion to dismiss the last three claims. (See ECF No. 23.)

After that motion was fully briefed, Spencer filed a motion for leave to file a second amended complaint, which Chemico and Richardson oppose. (ECF Nos. 35, 38.) And after that motion was fully briefed, Spencer filed another motion-this time moving for leave to file a surreply in opposition to the pending motion to dismiss. (ECF No. 45.) This motion is opposed as well. (ECF No. 46.)

All three motions are now before the Court. Given the adequate briefing, the Court considers them without further argument. See E.D. Mich. LR 7.1(f).

II. Motion to Dismiss

In deciding a motion to dismiss under Rule 12(b)(6), the Court “construes the complaint in the light most favorable” to Spencer and determines whether his “[counter]complaint ‘contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” See Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 403 (6th Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Detailed factual allegations are not required to survive a motion to dismiss, HDC, LLC v. City of Ann Arbor, 675 F.3d 608, 614 (6th Cir. 2012), but the allegations must “raise a right to relief above the speculative level,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). What is plausible is “a context-specific task” requiring this Court “to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

The Court will consider the counterclaims in turn.

A.

Spencer first alleges that the oral promise to transfer a 15% equity interest in Chemico to him “created a binding, enforceable contract, supported by consideration.” (ECF No. 20, PageID.406.)^[1] But Chemico and Richardson say that “agreement” was nothing more than a gratuitous promise. (ECF No. 23, PageID.447.)

To proceed with a breach of contract claim under Michigan law, Spencer must first “show the existence of an enforceable contract.” See Bhan v. Battle Creek Health Sys., 579 Fed.Appx. 438, 448 (6th Cir. 2014). And “consideration is an essential element of any contract.” See Romero v. Buhimschi, 396 Fed.Appx. 224, 233 (6th Cir. 2010) (citing Yerkovich v. AAA, 610 N.W.2d 542, 546 (Mich. 2000)). Consideration exists where there is “a ‘bargained-for exchange' as opposed to a gift or gratuity.” See Stackpole Int'l Engineered Prod., Ltd. v. Angstrom Auto. Grp., LLC, 52 F.4th 274, 280 (6th Cir. 2022) (quoting Gen. Motors Corp. v. Dep't of Treas., Revenue Div., 644 N.W.2d 734, 738 (Mich. 2002)). In other words, there must be “a benefit on one side, or a detriment suffered, or service done on the other.” Gen. Motors Corp., 644 N.W.2d at 738. But, under the preexisting-duty rule, “a contract fails for lack of consideration where the party promises something that he is already legally bound to do.” Romero, 396 Fed.Appx. at 233 (collecting cases). And “[t]his rule bars the modification of an existing contractual relationship when the purported consideration for the modification consists of the performance or promise to perform that which one party was already required to do under the terms of the existing agreement.” Yerkovich, 610 N.W.2d at 546.

The preexisting-duty rule dooms Spencer's breach-of-contract claim. Though he repeatedly says that the contract for 15% equity in Chemico was “separate and apart from his employment relationship,” he never identifies any...