Landes Capital Mgmt. v. HJT Holdings, LLC

LANDES CAPITAL MANAGEMENT, LLC., Plaintiff, v. HJT HOLDINGS, LLC., Defendant.

No. 1:19CV902

United States District Court, N.D. Ohio, Eastern Division

August 3, 2021

OPINION AND ORDER

CHRISTOPHER A. BOYKO Senior United States District Judge.

This matter is before the Court on Defendant HJT Holdings LLC's Motion for Summary Judgment. (ECF # 15). Upon review, the Court grants HJT's Motion on Landes's Unjust Enrichment/Quantum Meruit and Fraud claims and denies HJT's Motion on Landes's Breach of Contract claim.

According to its Complaint, Landes Capital Management, LLC. (“Landes”) obtains negotiable letters of credit for customers from banks. These letters of credit provide guarantees that payments will be on time and for the correct amount.

On November 6, 2018, Landes alleges it entered into a written contract with Defendant HJT Holdings, LLC. (“HJT”), wherein Landes would obtain a Documentary Letter of Credit (“DLC”) in the amount of $7, 000, 000 for HJT in return for a 7% commission. HJT needed the funds to facilitate a charitable purchase of oil from a Russian company for delivery to the nation of Ghana. As part of the contract, HJT agreed to deposit 2% of the commission payment into an escrow account prior to Landes securing the DLC.

Landes alleges it delivered the DLC to HJT on December 3, 2018 via the Society of Worldwide Interbank Financial Telecommunications System (“SWIFT”) and on December 6, 2018, Landes invoiced HJT for the remaining five percent commission.

However due to circumstances outside Landes's control, the underlying transaction fell through. As a result, HJT has refused to pay the remaining commission. Landes brings this suit for Breach of Contract, Quantum Meruit/Unjust Enrichment and Fraud, alleging it performed under the parties' contract all its obligations but HJT has failed to pay the contract price.

HJT has Counterclaimed for Breach of Contract, Negligent Misrepresentation and Unjust Enrichment, alleging Landes was supposed to secure a DLC from a top tier bank by November 14 2018, but failed to timely deliver the DLC. When it did deliver a purported DLC, it was rejected by the recipient bank as noncompliant and possibly fraudulent, resulting in HJT losing the underlying transaction and a deposit it made to secure the underlying transaction.

HJT Motion For Summary Judgment

HJT argues it is entitled to summary judgment on Landes's claims because Landes has not produced any enforceable written agreement. The Agreement for Financial Services that Landes attaches to its Complaint is unsigned, was never provided to HJT or its principal, Jerome Thomas, and was never agreed upon.

According to the affidavit of Jerome Thomas, he was semi-retired from the fast food and beverage industry in 2018 and was primarily engaged in investing and charitable work when an opportunity came along to broker the purchase of petroleum from a Russian company for a buyer in Ghana. The Russian seller required a DLC to secure the transaction so HJT reached out to Landes in November 2018. Thomas attests he informed Landes he needed a DLC from a top tier bank no later than November 14, 2018. Landes represented it had substantial experience in such transactions and further represented it could obtain the necessary DLC in the time frame requested.

Landes required as payment for obtaining the DLC 7% of the $7, 000, 000 underlying transaction amount with 2% to be held in escrow until the DLC was delivered. HJT deposited the 2% which amounted to $140, 000, in the escrow account.

Thomas attests that the parties agreed that full payment of the commission would be made upon the acceptance of a compliant DLC by the seller. According to HJT, Landes failed to timely acquire a suitable DLC from a top tier bank. The DLC ultimately obtained by Landes was rejected by the Russian seller as being “unprofessional, ” was a “cut and paste job” and was untraceable by the Russian seller's fiduciary. HJT lost a $75, 000 deposit, as well as a loss of reputation as a result.

HJT moves for dismissal of Landes's claims because Landes never provided complete written responses or objections to HJT's Fed.R.Civ.P. 34 document request and never served its own discovery on HJT. It never produced a signed, executed copy of the Agreement for Financial Services on which it bases its Breach of Contract claim and further failed to produce any evidence, including any email or fax, that the Agreement was ever provided HJT. Landes failed to produce any third party correspondence or evidence that it attempted to obtain, or did in fact obtain, a compliant DLC. Landes's purported written Agreement contains typographical errors and appears to have been created after the fact.

HJT also contends Landes's Unjust Enrichment /Quantum Meruit claim fails because Landes expressly contends it entered into a contract with HJT and Ohio law bars recovery under an unjust enrichment theory when there exists a contract that governs the parties interactions. Moreover, far from benefitting from Landes's efforts, HJT lost money and its reputation due to Landes's failure to provide a suitable DLC. Landes has not produced any discovery showing its efforts in trying to obtain a DLC. It has produced no cost analysis and no time sheets showing hours worked on the project. In short, Landes offers no evidence on which to base its purported losses. Moreover, the SWIFT documents lack any indicia of legitimacy.

Finally, HJT moves to dismiss Landes's Fraud claim as it fails to allege with the requisite specificity what misrepresentations, if any, were made.

Landes responds that HJT admits the parties had a contractual agreement for Landes to secure a DLC in the amount of $7, 000, 000 in exchange for a commission of 7%. This is evidenced by the undisputed fact that HJT paid $140, 000 into an escrow account per the terms of the Agreement. HJT has also counterclaimed for Breach of Contract, further evidencing the parties had entered into an agreement. As further evidence, Landes offers the declaration of Justin D. Smith, owner of Landes, who declares that on November 6, 2018, Landes and HJT entered into a written agreement wherein Landes would secure a DLC in the amount of seven million dollars and, in return, HJT would pay $140, 000 initially and upon delivery of the DLC, HJT would pay the remaining balance of $350, 000. According to Smith, Landes performed all its obligations under the terms of the Agreement and delivered a DLC in the amount of $7, 000, 000. In fact, Landes delivered two conforming DLC's.

Although these were subsequently rejected by the seller, this does not alter the fact that Landes performed its obligations fully. Furthermore, HJT incorrectly states the parties agreement required the DLC be issued from a top tier bank, but HJT refused or was unable to pay for such a DLC. Moreover, HJT approved the DLC that was delivered to the Russian petroleum refinery. The second DLC was not rejected due to any flaw in the DLC itself; rather, it was rejected by the bank because the bank did not engage in the petroleum business. Thus, Landes is entitled to payment under the terms of the parties' contract.

Landes further argues that HJT is not entitled to summary judgment on its Quantum Meruit/ Unjust Enrichment claim. While HJT is correct that a party cannot prevail on such a claim when there exists a contract that governs the transaction, it is HJT that is disputing whether a contract existed. Under these circumstances, Ohio law permits alternative pleading and Landes may pursue its claim.

Landes also maintains its Fraud claim must survive summary judgment because it can satisfy the elements of a Fraud and/or Fraudulent Inducement claim by showing HJT made material misrepresentations to induce Landes to acquire a DLC.

Lastly, Landes contends it has not failed to provide discovery in response to HJT's discovery requests. Landes produced responsive documents to HJT's discovery requests, but HJT never filed any motion complaining of the lack of responsive documents at any time this litigation. HJT failed to file a Motion to Compel and failed to timely object to any lack of production. Consequently, HJT is not entitled to dismissal for any failure of Landes to prosecute.

LAW AND ANALYSIS

Standard of Review

Summary judgment shall be granted only if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” See Fed.R.Civ.P. 56(a). The burden is on the moving party to conclusively show no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Lansing Dairy. Inc. v. Espy, 39 F.3d 1339 1347 (6th Cir. 1994). The moving party must either point to “particular parts of materials in the record, including depositions, documents, electronically stored information affidavits or declarations, stipulations, admissions, interrogatory answers, or other materials” or show “that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” See Fed.R.Civ.P. 56(c)(1)(A), (B). A court considering a motion for summary judgment must view the facts and all inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Once the movant presents evidence to meet its burden, the nonmoving party may not rest on its pleadings, but must come forward with some significant probative evidence to support its claim. Celotex, 477 U.S. at 324; Lansing Dairy, 39 F.3d at 1347.

This Court does not have the responsibility to search the record sua sponte for genuine issues of material fact. Betkerur v. Aultman Hospital...