One Ethanol, LLC v. BOX BioScience, LLC

622 F.Supp.3d 568

ONE ETHANOL, LLC, Plaintiff, v. BOX BIOSCIENCE, LLC, et al., Defendants.

Case No. 1:21-cv-874

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

Signed August 22, 2022

Bruce Anthony Courtade, Rhoades McKee, Grand Rapids, MI, for Plaintiff.

Brett Dressler, Sellers Ayers Dortch & Lyons, Charlotte, NC, for Defendants.

BOX BioScience, LLC, Mt. Pleasant, SC, Pro Se.

Carlsbad Naturals, LLC, Cheyenne, WY, Pro Se.

OPINION AND ORDER

JANE M. BECKERING, United States District Judge

This case is a breach of contract dispute for failure to pay for distribution of alcohol-based hand sanitizer during the coronavirus pandemic. Plaintiff One Ethanol, LLC, asserts claims of partnership by estoppel, breach of contract, and unjust enrichment against BOX Bioscience, LLC ("BOX") and Carlsbad Naturals, LLC ("Carlsbad"); and claims of fraudulent inducement to contract and fraudulent misrepresentation against BOX, Carlsbad, and individuals Ryan Cowell and Troy Lorenz (the "Individual Defendants") (id.).¹ Now pending before the Court is Individual Defendants' Motion to Dismiss or Transfer Venue (ECF No. 12) and Plaintiff's Motion for Sanctions (ECF No. 19). Having considered the parties' submissions, the Court concludes that oral argument is not necessary to resolve the issues presented. See W.D. Mich. LCivR 7.2(d). For the following reasons, the Court denies Individual Defendants' motion and denies Plaintiff's motion.

I. BACKGROUND

A. Factual Background

According to Plaintiff, in early April 2020, "during the initial stages of the COVID-19 crisis and with demand for alcohol-based hand sanitizer at a critical high," Ryan Cowell contacted Plaintiff by phone and expressed interest in purchasing ethyl alcohol products, including hand sanitizer, "at bulk scale" (Compl., ¶ 12). Plaintiff alleges that Cowell spoke with Plaintiff's President, Devin Pearce, and stated that he represented both Defendants BOX and Carlsbad (id., ¶ 13). Plaintiff alleges that they "agreed to provide product for BOX and Carlsbad on a pay-on-delivery basis" based on those discussions with Cowell, and "Cowell provided [Plaintiff] with payment account and EIN information for Carlsbad via email" (id., ¶ 14).

Plaintiff alleges that Defendants Ryan Cowell and Troy Lorenz submitted Purchase Orders to Plaintiff, identifying the vendor as "Carlsbad Naturals," with shipment and delivery provided by Plaintiff "to various third parties, including delivery within the State of Michigan" (Compl., ¶ 15). Plaintiff alleges that the purchase orders submitted by Lorenz and Cowell and the corresponding invoices from Plaintiff, "confirm the terms of payment as due upon delivery" (id., ¶ 17). Plaintiff further alleges that between April 6 and April 10, 2020, Plaintiff "acquired materials for BOX and Carlsbad, and shipped product to third parties[ ] on behalf of BOX and Carlsbad," often on short notice or an express basis (id., ¶ 18). Plaintiff "directed its invoices" to Carlsbad Naturals (id.). According to Plaintiff, the "products delivered . . . were accepted without objection" (id., ¶ 19).

Between April 6 and April 10, 2020, Plaintiff asserts that neither BOX nor Carlsbad timely paid the invoices for the shipped product, due upon delivery (Compl., ¶ 20). On April 9, 2020, Pearce "inquired of [ ] Cowell (via text) the status of wire transfer payments" (id., ¶ 21). On April 10, 2020, Cowell stated that he was "100% logan [Lidster]/Jared [Berry] sent to [two, sic] payments. We were on a call at 7 last night while jared [Berry] was sending 2nd from chase. I emailed and sent the group text to logan [Lidster]" (id., ¶ 22 (alterations in quotation); see also Ex. C. to Compl., ECF No. 1-3 at PageID.30-31). Plaintiff asserts that they issued a further invoice on April 11, 2010, in reliance on this statement regarding payment; however, no payment was received until 3 days later (April 13, 2020) (Compl., ¶¶ 23-24). On April 13, 2020, Plaintiff received a partial wire transfer of $2,500 from BOX's account, "leaving a balance due of more than $122,000" (id., ¶ 24). Plaintiff alleges that the next day, "[o]n April 14, 2020, Jared Berry, Carlsbad's founder and principal," initiated a second wire transfer to Plaintiff totaling $62,149.05, "four days after [ ] Cowell represented the transfer had been made" (id., ¶ 25). Plaintiff alleges the money was received on April 15, 2020, and a third wire transfer "directly from BOX's account, in the amount of $60,193.20 -seven days after Cowell represented the transfer had been made" was received by Plaintiff (id., ¶¶ 26-27).

Based on the receipt of these "catch-up payments" from BOX and Carlsbad, and Cowell's representations regarding those payments, Plaintiff "agreed to continue to supply product to BOX and Carlsbad on a pay-on-delivery basis" (Compl., ¶ 28). Plaintiff alleges that between April 21 and April 27, 2020, additional purchase orders were submitted, and additional invoices and deliveries were made, however, "neither Carlsbad nor BOX made timely payment" and the "balance owed to [Plaintiff] had grown to $326,592.02" (id., ¶¶ 29-30). Plaintiff's Office Manager inquired as to payment, and Pearce "spoke directly with . . . Cowell and Lorenz" regarding the outstanding balance (id., ¶¶ 31-32). Plaintiff alleges that Cowell made material misrepresentations regarding payments to Plaintiff, including that he had sent two wires, but Plaintiff only received one, and that Cowell stated further wire payments were forthcoming from "California", but only one wire was received on May 8, 2020 (id., ¶ 33). Plaintiff states that the balance owed at this time was $256,657.20 (id.). Following these representations, Plaintiff alleges that Cowell and Lorenz made further representations to Plaintiff regarding forthcoming payments, "including that BOX was attempting to secure payment of the outstanding balance from Carlsbad, only Jared Berry could initiate a payment on behalf of Carlsbad," and that Logan Lidster was refusing to respond to Cowell or Lorenz (id., ¶ 34). On May 8, 13, and 14, 2020, Plaintiff further alleges that communications between Logan Lidster, Ryan Cowell, Troy Lorenz, and Plaintiff occurred regarding forthcoming wire transfers, including two transfers totaling $104,431.40 "initiated by BOX"—however, "[n]o such payments were ever received" (id., ¶¶ 35-38).

B. Procedural Posture

Plaintiff brought a first lawsuit in this Court for this breach of contract against Defendants BOX, Carlsbad, and the Individual Defendants in June 2020 (see One Ethanol, LLC v. BOX BioScience, et al., Case No. 1:20-cv-523, ECF No. 1). Defendants BOX, Cowell, and Lorenz ("BOX Defendants") jointly moved to dismiss the action for lack of subject matter jurisdiction, among other grounds (see id., Case No. 1:20-cv-523, ECF No. 26). Specifically, BOX Defendants brought a facial attack on subject matter jurisdiction, arguing that Plaintiff's allegations in the Complaint were insufficient to establish the diversity of the parties for failure to identify the citizenship of its own LLC members, as well as those of BOX and Carlsbad (see id., Case No. 1:20-cv-523, ECF No. 38 at PageID.314-315). According to the parties, Defendant Ryan Cowell is the sole member of BOX and BOX's owner/manager (see ECF No. 13 at PageID.131; ECF No. 10), and Defendant Troy Lorenz is "an agent or employee of both BOX and Carlsbad" (ECF No. 2 at PageID.90). Plaintiff's First Amended Complaint was dismissed without prejudice for failure to plead diversity jurisdiction as to the membership of the LLCs (see id., Case No. 1:20-cv-523, ECF No. 38 at PageID.315-316).

Following this dismissal, Plaintiff refiled its complaint in the 17th Circuit Court for Kent County on August 31, 2021 (ECF No. 2 at PageID.84-100). BOX Defendants, acting pro se, then removed the state action to this Court on October 12, 2021 (ECF No. 1 at PageID.1).² On November 9, 2021, Individual Defendants filed an Amended Notice of Removal (ECF No. 10).³ In the instant action, Plaintiff's claims are:

I. Partnership by Estoppel (BOX/Carlsbad)

II. Breach of Contract (BOX/Carlsbad Partnership)

III. Breach of Contract (BOX)

IV. Breach of Contract (Carlsbad)

V. Unjust Enrichment (BOX and Carlsbad)

VI. Fraudulent Inducement to Contract/Fraudulent Misrepresentation (All Defendants)

(Compl., ECF No. 2 at PageID.94-100). Plaintiff seeks an order declaring BOX and Carlsbad as a de facto partnership and estopping the denial of such a partnership, as well as joint and several liability to Plaintiff for all damages, liabilities, and obligations arising from the parties' relationship; a money judgment jointly and severally against Defendants for not less than $256,657.20, including consequential damages, interest, costs and expenses, and attorney fees; and any other relief at law or equity proper under the circumstances (id. at PageID.100).

On November 23, 2021, Individual Defendants filed the instant motion to dismiss or transfer venue (ECF No. 12). On that same day, Individual Defendants also filed a Supplement in support of their motion (ECF No. 14), in part related to their pro se status and electronic filing, and in which they also stated that "we realize that Box Bioscience, LLC needs to retain counsel and cannot be represented pro so . . . [n]evertheless, as individuals we by necessity need to push forward with this proceeding" (id. at PageID.153). Plaintiff filed a response in opposition to Individual Defendants' motion (ECF No. 18).

On December 21, 2021, Plaintiff filed a motion for Rule 11 sanctions against Defendants BOX Bioscience, LLC, Ryan Cowell, and Troy Lorenz (ECF No. 19), to which Individual Defendants filed a response (ECF No. 28). Both motions are ripe for review.

On January 5, 2022, this case was reassigned from the Hon. Hala Y. Jarbou to the undersigned (ECF No. 27).

Currently, BOX remains unrepresented by counsel in this proceeding, and default has been entered against both BOX and Carlsbad (ECF Nos. 25 & 32).⁴ Applicatio...