Larchmont Holdings, LLC v. N. Shore Servs., LLC

292 F.Supp.3d 833

LARCHMONT HOLDINGS, LLC, Plaintiff,

v.NORTH SHORE SERVICES, LLC and William Bethke, Defendants.

16–cv–575–slc

United States District Court, W.D. Wisconsin.

Signed November 9, 2017

Douglas Maynard Poland, Alison E. Stites, Rathje & Woodward, LLC, Madison, WI, Kaitlyn Anne Wild, Rathje & Woodward, LLC, Wheaton, IL, for Plaintiff.

Joshua Lee Johanningmeier, Adam Reed Prinsen, Mark Warren Hancock, Godfrey & Kahn S.C., Madison, WI, for Defendants.

OPINION and ORDER

STEPHEN L. CROCKER, Magistrate JudgeThis lawsuit presents a land contract dispute that arises out of a failed frac sand mining venture. Jurisdiction is present under 28 U.S.C. § 1332. See Jan. 13, 2017 Ord., dkt. 41 (denying motion to dismiss for lack of diversity jurisdiction). Plaintiff Larchmont Holdings, LLC (created by David Westrate, Neil Benham, and Patricia and Richard McHugh) agreed to pay defendant William Bethke and his LLC, North Shore Services (hereafter collectively referred to as North Shore) $4 million on a land contract for 300 acres of wooded land in North Central Wisconsin. Larchmont anticipated that it could quickly assemble and bring on line a frac sand mine from which Larchmont's members would reap millions in yearly profits and pay off the land contract. The mining operation never got off the ground, which left Larchmont with half a square mile of forest and past due installment payments on the land contract's $2,275,000 balance. So, Larchmont brought this lawsuit, asserting seven different claims for relief. See Second Amended Complaint, dkt. 56. In its answer, North Shore filed counterclaims for strict foreclosure on its land contract and for breach of the implied duty of good faith and fair dealing. See dkt. 58 at 57.

Before the court is North Shore's motion for summary judgment on its strict foreclosure counterclaim and on all seven of Larchmont's contract-related claims. See dkt. 73. North Shore has not moved for summary judgment on its counterclaim for breach of the implied covenant of good faith and fair dealing. See dkt. 58. In its response, Larchmont has raised a series of affirmative defenses to North Shore's claim for strict foreclosure. See dkt. 91 at 17–18.

For the reasons explained below, I am granting North Shore's motion for summary judgment against all seven of Larchmont's contract claims. As for North Shore's motion for summary judgment on its strict foreclosure claim, I conclude that North Shore has the right of strict foreclosure under the terms of the land contract and has satisfied the elements of such a claim. That said, I am denying North Shore's motion because it has not developed an argument that some of Larchmont's affirmative defenses—specifically laches, equitable estoppel, and unclean hands—fail as a matter of law.

PRELIMINARY PROCEDURAL OBSERVATIONS

During the court's review and analysis of the summary judgment submissions, I found that, while the attorneys for both sides presented work that is well-above-average, sometimes they said too much, other times they said too little.

As for the "too much," both parties failed to comply consistently with the court's summary judgment procedures, which are provided in the preliminary pretrial conference order (dkt. 22). The procedures state that

When a responding party disputes a proposed finding of fact, the response must be limited to those facts necessary to raise a dispute. The court will disregard any new facts that are not directly responsive to the proposed fact. If a responding party believes that more facts are necessary to tell its story, it should include them in its own proposed facts, as discussed in II.B.

Proc. to be Followed on Mot. For Summ. Judg. , § II.D.4 at 8.

Contrary to this directive, both parties included new facts—often several paragraphs of new facts—in several of their responses to the opposing party's proposed findings of fact. Accordingly, I have disregarded new facts included only in a party's response to a proposed finding of fact. Abraham v. Wash. Grp. Int'l, Inc. , 766 F.3d 735, 737 (7th Cir. 2014) ("[T]his Circuit has routinely held that a district court may strictly enforce compliance with its local rules regarding summary judgment motions."); Schmidt v. Eagle Waste & Recycling, Inc. , 599 F.3d 626, 630–31 (7th Cir. 2010) (holding that the district court did not err when it deemed the defendant's proposed findings of fact admitted and refused to consider additional facts for the plaintiff's failure to follow the local procedures on proposed findings of fact).

North Shore also contends that Larchmont has proposed several findings of fact that are duplicative of its responses to defendants' proposed findings of fact, thereby ignoring the procedural requirement that the "purpose of additional findings of fact [by the non-moving party] is to SUPPLEMENT the moving party's proposed findings of fact, not to dispute any facts proposed by the moving party." Proc. , § II.B.2 at 7. Although I agree that Larchmont proposed findings of fact that duplicate its responses to North Shore's proposed factual findings, I did not see Larchmont violating this procedural requirement by proposing additional facts in lieu of providing responses to defendants' proposed findings.

As for the "too little," notwithstanding the length, detail, and general thoroughness of their presentations, both sides waived arguments by failing properly to present them. As noted below where this occurred, this court does not have the time or resources to explore or analyze matters left unexplored or unanalyzed by the parties. So, pursuant to circuit law, the court has enforced the waivers against the waiving party.

UNDISPUTED FACTS

The following facts are undisputed except where noted.

I. The Parties

Plaintiff Larchmont Holdings, LLC is a limited liability company organized under the laws of the State of Wisconsin on December 18, 2012, with its principal place of business in Eau Claire, Wisconsin. The members of Larchmont include David Westrate's Roth IRA and traditional IRA, Dr. Neal Benham's Roth IRA, Patricia and Richard McHugh, and Oakdale, LLC. Oakdale LLC's members are David Westrate and the Westerberry Family Trust.

Defendant North Shore Services, LLC is a limited liability company organized under the laws of the Wisconsin on October 18, 2000, with its principal place of business in Eau Claire, Wisconsin. William Bethke, a citizen of Wisconsin, is the sole member of North Shore. For ease of reference, I will usually refer to the defendants collectively as North Shore (primarily in the legal analysis) but will separate them when necessary for clarity (primarily in the facts).

In 2011, North Shore LLC owned approximately 300 acres of land in Jackson County, Wisconsin ("the Property").

Benham and Bethke both are dentists and they have shared a dental office building in Eau Claire, Wisconsin, for over 25 years. Benham and Westrate are friends and both were involved in the negotiations with Bethke for the purchase of the Property on December 20, 2012. Although McHugh was a purchaser, he did not meet Bethke until sometime in 2013.

In a September 2013 email, Westrate described the members of Larchmont as retired or nearly retired businessmen who each has done business in Eau Claire for more than 40 years and who have a total of more than 150 years of diverse business experience. Westrate has a masters degree in economics and was the president of an Eau Claire company that created and marketed legal education seminars. Westrate has served on the board of directors of Citizens Community Federal Bank in Eau Claire since 1993. McHugh started Choice Products USA, LLC and served as its president for almost 30 years and served as chairman of the board of directors for Citizens Community Federal Bank for decades.

II. Benham and Westrate Search for Frac Sand Mining Sites

Around September 2011, Benham started to look for properties to buy in Eau Claire County and Jackson County as possible sites for frac sand mining.¹ On November 7, 2011, Benham met with Mel Bollom, a professional in the sand industry.² The two had a wide-ranging discussion about the frac sand market, including how quickly a prospective buyer would need to move into the market, how quickly a buyer could expect to make profits, the total initial investment that would be required, how big a parcel of land would be required, the logistics of transporting mined sand, and the permitting required. After this meeting, Bollom told Benham in an email that "the sand buying companies have made most of their site selections," that "to be in a marketable position" Benham would need to be "in the marketplace within 30–60 days" and that "if this land is located in a non-zoned township, it is a far more desirable situation than a site controlled by county zoning (but, Jackson County is a better County to deal with than Chippewa or Eau Claire)."

Benham approached his friend, David Westrate, about buying land together to develop a frac sand mine. Westrate was receptive, so in 2011 and 2012, Westrate and Benham visited potential frac sand investment properties with Bollom. By late 2011 or early 2012, Benham approached Bethke about developing the Property—and possibly other nearby properties—as a sand mine. In December 2011 and February 2012, Bollom visited Benham's and Bethke's dental offices to provide an informal presentation about the frac sand industry. Jim Geraghty, Mark Sontag, and Jeff Jones, who all were landowners who owned property near the Property, also were present. (The parties dispute what these individuals understood Bollom's intended role would be with respect to the group.)

On March 7, 2012, Benham emailed Wisconsin's Department of Natural Resources (DNR), stating that he was "getting ready to open a sand mine in Jackson County and would like to know what are the clean air regulations and any permitting that is required." On March 9, 2012, the DNR responded that the limited information provided about the proposal made ...