ERMC LLC v. Millertown Pavilion, LLC

MEMORANDUM OPINION

Debra C. Poplin United States Magistrate Judge

These cases are before the undersigned pursuant to 28 U.S.C. § 636(c), Rule 73(b) of the Federal Rules of Civil Procedure, and the consent of the parties, for all further proceedings, including entry of judgment [Doc. 15].

These consolidated matters came before the Court on March 16, 2021, for a bench trial conducted via videoconference. After the bench trial, both parties filed their Proposed Findings of Fact and Conclusions of Law [Docs. 63 and 64], which the Court has considered. Accordingly, for the reasons further explained below, the Court FINDS that judgment will be granted in favor of Plaintiff ERMC, LLC, in the amount of $439, 746.63, and in favor of Plaintiff SecurAmerica in the amount of $503, 907.27, in addition to reasonable attorney's fees.

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I. BACKGROUND

The Complaints in these consolidated matters allege that Defendant breached certain service contracts with Plaintiffs by failing to pay the amounts due thereunder.^[1] Plaintiffs seek to recover money damages allegedly owed to them pursuant to two contracts for services, which were assigned to them by non-party TriState Security of America, LLC (“TriState”) with the consent of Defendant. [Doc. 51 at 2].

The Court found that there were genuine issues of material fact which precluded Plaintiffs' Joint Motion for Summary Judgment [Doc. 51], and as mentioned above, the case proceeded as a bench trial on March 16, 2021, via videoconference. The Court will summarize the testimony below.

II. EVIDENCE

The Court will summarize Plaintiffs' evidence and then turn to Defendant's evidence.

A. Plaintiffs' Evidence

Plaintiffs presented the live testimony of John Maynord (“Maynord”), Chief Financial Officer (“CFO”) for ERMC, LLC[Doc. 59 at 10]. ERMC, LLC (“ERMC”) is a series of companies, which are a part of the Argenbright Group. [Id.]. Maynord explained that Plaintiffs ERMC and SecurAmerica, LLC (“SecurAmerica”; together “Plaintiffs”) are sister entities under the Argenbright umbrella. [Id. at 11]. Maynord testified that he was hired into the ERMC family of companies as CFO in 2014 when he joined the legacy ERMC business-TriState. [Id. 11-12]. Maynord detailed that ERMC and SecurAmerica are facility services companies, with

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SecurAmerica being strictly a security guard provider of service while ERMC provides facility services consisting of custodial maintenance and landscape services. [Id. at 12].

As CFO, Maynord testified that he was familiar with the companies' payroll, billing, and contractual-based processes, including that of TriState when it was a member of the ERMC family. [Id.]. He explained that Knoxville Partners, LLC and TriState entered into a facilities agreement (“Facilities Agreement”) for janitorial and maintenance services for the Knoxville Center Mall (“Mall”) on October 7, 2016. [Id. at 13; Exh. 1]. In exchange for services rendered pursuant to the Facilities Agreement, Defendant agreed to pay TriState $300, 830.25 per year for janitorial services and $121, 344.26 for maintenance services. [Id. at 16; Exh. 1 at ¶ 2; Exh. 1-A]. Under the agreement, Defendant was expected to pay monthly following a statement or invoice. [Id. at 17].

Maynord further explained that pursuant to paragraph 10 of the Facilities Agreement, the property owner had certain remedies in the event of the contractor's failure to perform including, (1) notify contractor of any deficiency in contractor's performance and provide reasonable time for correction, (2) obtain an alternative contractor to perform the services or remedy contractor's deficiency, or (3) terminate the agreement effective immediately upon notice to contractor. [Id. at 18]. He testified that since 2014, he has not been aware of any instances in which TriState or ERMC were provided notice of deficiency or of instances in which Defendant employed an alternative contractor to perform the janitorial and maintenance services under the Facilities Agreement. [Id.]. He also stated that he was unaware of any instance in which Defendant provided any notices of termination of the Facilities Agreement to either TriState or ERMC. [Id. at 19].

In terms of other provisions appearing in the Facilities Agreement, Maynord testified that there is an attorney's fee provision in paragraph 18(d) providing that the losing party in any action

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or proceeding commenced in connection with the agreement shall reimburse the prevailing party for the reasonable attorney's fees and expenses incurred in prosecuting or defending the action. [Id. at 19-20]. In addition, there is a provision providing that any modifications to the agreement are required to be in writing signed by all parties or successors. [Id. at 20].

Turning to the Exhibits to the Facilities Agreement, Maynord explained that Exhibit A not only set out amounts to be paid annually by Defendant, but also included categories of amounts allowed to be charged to Defendant, including supplies and fuel. [Id. at 20]. He stated that the terms for those charges were cost plus 10% and that they applied to both janitorial and maintenance services. [Id.]. Maynord detailed that Exhibit B established the scope of service for janitorial services to be provided under the agreement, while Exhibit C established the scope of service for maintenance services. [Id. at 21]. He noted that he was not aware of any signed writing modifying either Exhibit B or C. [Id.]. Lastly, Maynord reviewed Revised Exhibit A, ^[2] dated November 4, 2016, which he explained revised the original Exhibit A to increase the amount of the billing for the janitorial services and increased the number of hours, with maintenance remaining unchanged. [Id. at 21-22].

Maynord then reviewed the security service contract between Knoxville Partners, LLC and TriState (“Security Agreement”), which was entered into on October 7, 2016, along with the Facilities Agreement.^[3] [Id. at 23; Exh. 2]. Maynord testified that aside from describing different services, the Facilities Agreement and the Security Agreement were very similar with respect to the terms and conditions of the contractual provisions. [Id. at 24]. Paragraph 1 outlined that

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security services were to be provided. [Id.]. Paragraph 2 addressed compensation, referencing that sums to be paid are set forth in Exhibit A to the Security Agreement. [Id. at 25]. Reviewing Exhibit A, Maynord identified that $341, 653.03 per year was to be paid annually for the security services. [Id.]. He also confirmed that in the event of a deficiency, paragraph 10 of the Security Agreement described the same three remedies contained in the Facilities Agreement. [Id. at 25- 26]. Maynord testified that he was unaware of a notice ever having been provided by Defendant to either TriState or SecurAmerica regarding any performance deficiency under the Security Agreement. [Id. at 26]. Further, he was unaware of Defendant having obtained any alternative contractors to perform the security services or to remedy any alleged deficiencies or of any notices of termination having been sent by Defendant to either TriState or SecurAmerica regarding the Security Agreement. [Id.]. Maynord also confirmed that paragraph 15, which required any modifications to be in writing signed by all parties, and the attorney's fee provision in paragraph 18(d), were consistent with the previously discussed provisions in the Facilities Agreement. [Id.].

Addressing the Exhibits to the Security Agreement, Maynord stated that in addition to the annual costs for security services previously discussed, Exhibit A allowed fuel at cost plus 10% to be charged to Defendant, noting that there typically are no supplies for security services. [Id. at 27]. Exhibit B established the scope of service for janitorial services to be provided under the agreement, with no written amendments having been signed by the parties. There was also a Revised Exhibit A to the Security Agreement, dated November 4, 2016, which reduced the hours as well as the billing on an annual basis from $341, 653 to $326, 712. [Id.].

Next, Maynord provided testimony concerning the Assignment and Assumption Agreement (“Assignment”), dated November 17, 2017, and corresponding redacted copy of the Asset Purchase Agreement (“Purchase Agreement”) of the same date. [Id. at 28 and 30; Exh. 3].

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He explained that TriState assigned all right, title, and interest in the Facilities Agreement to ERMC and assigned the Security Agreement to SecurAmerica. [Id. at 30-31]. He further explained that any amounts that were already past due and owing, or accounts receivable, were included as part of the acquired assets in the Purchase Agreement, but that they were distributed only to SecurAmerica. [Id. at 31-32]. Maynord clarified that “because of a function of the constraint within the system, ” the accounts receivable “had to be assigned to a single job within SecurAmerica, ” and so, even if janitorial and maintenance billed amounts were due and owing as of the time of the assignment, they were reflected on SecurAmerica's books rather than ERMC's. [Id. at 32-33]. He continued, however, that for amounts incurred or billed after the assignment, those related to security would have been reflected on SecurAmerica books, while those related to janitorial and maintenance would have been reflected on ERMC's. [Id. at 33]. Maynord testified that after the Assignment and Assumption Agreement and Purchase Agreement went through, ERMC and SecurAmerica began performing services for Defendant under the respective agreements. [Id.].

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