Tahmisian v. Netacent, Inc. (In re Tahmisian)

NOT FOR PUBLICATION

J. Justin May, JOHNSON MAY, PLLC, Boise, Idaho, Attorney for Plaintiff/Counter-Defendant Greggory J. Tahmisian. ^[1]

Tracy L. Wright, HAWLEY TROXELL ENNIS & HAWLEY, LLP, Boise, Idaho, Attorney for Plaintiff /Counter-Defendant Solid State Operations, Inc.

Elijah M. Watkins, STOEL RIVES, LLP, Boise, Idaho, Attorney for Defendants/Counter-Claimants Netacent, Inc., Isaac Barrett, Quinn Watt, and Jordan Barrett.

William F. Gigray III and Brian Thomas O'Bannon, WHITE, PETERSON, GIGRAY & NICHOLS, PA, Nampa, Idaho, Attorneys for Defendant John McAllister.

MEMORANDUM OF DECISION

HON. BENJAMIN P. HURSH U.S. BANKRUPTCY JUDGE.

I. Introduction

The claims and counterclaims asserted in this case illustrate how conflict between shareholders in a closely held corporation can taint decisions by the Board of Directors, undermine sound management, and cause injury to the corporation. Underpinning the claims and counterclaims in this matter is a dispute between Netacent's two largest shareholders, Isaac Barrett ("Barrett") and Greg Tahmisian ("Tahmisian"), involving allegations of events that occurred when Tahmisian was president of the corporation. As the dispute unfolded, the remaining shareholders and Board of Directors sided with Barrett against Tahmisian, removed Tahmisian as president, installed Barrett as president of Netacent, and authorized various actions by the president, Board of Directors, and Netacent.

II. Motion for Partial Summary Judgment

Before the Court is a motion for partial summary judgment ("Motion") filed by Netacent, Inc., Barrett, Jordan Barrett ("Jordan"), and Quinn Watt ("Watt") (collectively the "Netacent Parties").^[2] The Netacent Parties argue and allege there are no genuine issues of material fact

with respect to Claims 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 18, and 19 in Debtor/Counter-Defendant Tahmisian Amended Complaint and they request dismissal of those counts.^[3]

The Motion is opposed by Solid State Operations, Inc. ("Solid State"), John McAllister ("McAllister"), and Tahmisian.^[4] Each brief opposing the Motion includes a Statement of Genuine Issues of Fact. The Netacent Parties filed replies.^[5]

Tahmisian's opposition was accompanied by a Motion to Strike portions of the Affidavit of Issac Barrett, to which the Netacent Parties objected.^[6] The Motion to Strike and corresponding objection, along with the other pleadings related to summary judgment motion, highlight two very divergent explanations for events that occurred after the shareholder discussions between Tahmisian and Barrett failed. Resolution of the disputed issues in this case is dependent on the credibility of Tahmisian, Barrett, and Watt. While the Declaration of Isaac Barrett contained numerous inadmissible statements which the Court has entirely disregarded, as a general matter, the Court afforded the competing declarations of these parties very little weight.

A hearing on the Motion was held on April 4, 2024. After considering the submissions and arguments of the parties, as well as applicable law, the Motion is resolved as set forth in this decision. Fed.R.Bankr.P. 7052; 9014.

III. Standards Governing Motions for Summary Judgment

A party may move for summary judgment, identifying each claim or defense, or the part of each claim or defense, on which summary judgment is sought. Summary judgment may be granted when no genuine and disputed issues of material fact exist, and, when viewing the

evidence most favorably to the non-moving party, the movant is entitled to judgment as a matter of law. Civil Rule 56, incorporated by Rule 7056;^[7] Celotex Corp. v. Catrett, 477 U.S. 317, 322- 23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Zetwick v. Cnty of Yolo, 850 F.3d 436, 440 (9th Cir. 2017). In resolving a motion for summary judgment, courts may not resolve genuine disputes of fact in favor of the party seeking summary judgment. Zetwick, 850 F.3d at 440. Moreover, the court does not weigh the evidence; rather it determines only whether a material factual dispute remains for trial. Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir. 1997).

An issue is "genuine" if there is sufficient evidence for a reasonable finder of fact to find in favor of the non-moving party, and a fact is "material" if it might affect the outcome of the case. Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir. 2001) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Where evidence is genuinely disputed on a particular issue, such as by conflicting testimony, that issue is inappropriate for resolution on summary judgment. Direct Techs., LLC v. Elec. Arts, Inc., 836 F.3d 1059, 1067 (9th Cir. 2016).

In cases where intent is at issue, summary judgment is seldom granted; however, "summary judgment is appropriate if all reasonable inferences defeat the claims of one side, even when intent is at issue." Gertsch v. Johnson & Johnson, Fin. Corp. (In re Gertsch), 237 B.R. 160, 165 (9th Cir. BAP 1999). Summary judgment may be defeated by evidence "such that a reasonable juror drawing all inferences in favor of the respondent could return a verdict in the respondent's favor." Reza v. Pearce, 806 F.3d 497, 505 (9th Cir. 2015). On the other hand, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving

party, there is no genuine issue for trial and summary judgment is appropriate. Zetwick, 850 F.3d 436 at 441.

The moving party bears the initial burden of showing there is no genuine issue of material fact. Martin v. Mowery (In re Mowery), 591 B.R. 1, 5 (Bankr. D. Idaho 2018) (citing Esposito v. Noyes (In re Lake Country Invs.), 255 B.R. 588, 597 (Bankr. D. Idaho 2000) (citing Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998))). If the non-moving party bears the ultimate burden of proof on an element at trial, the burden remains with that party to make a showing sufficient to establish the existence of that element in order to survive a motion for summary judgment. Id.

Although the moving party bears the initial burden of showing there is no genuine issue of material fact, summary judgment may be granted to a non-moving party. Civil Rule 56, made applicable in bankruptcy cases pursuant to Rule 7056, permits the Court some latitude with respect to summary judgment motions. It provides:

(f) Judgment Independent of the Motion. After giving notice and a reasonable time to respond, the court may:

(1) grant summary judgment for a nonmovant;

(2) grant the motion on grounds not raised by a party; or

(3) consider summary judgment on its own after identifying for the parties material facts that may not be genuinely in dispute.

Thus, the fact that a party has not independently sought summary judgment or otherwise joined in a moving party's motion does not necessarily foreclose a grant of summary judgment to that party. Gospel Missions of Am. v. City of Los Angeles, 328 F.3d 548, 553 (9th Cir. 2003) ("Even when there has been no cross-motion for summary judgment, a district court may enter summary judgment sua sponte against a moving party if the losing party has had a 'full and fair opportunity to ventilate the issues involved in the matter."); Cool Fuel, Inc. v. Connett, 685 F.2d 309, 312 (9th Cir. 1982) ("[I]f one party moves for summary judgment and … it is made to

appear from all the records, files, affidavits and documents presented that there is no genuine dispute respecting a material fact essential to the proof of movant's case and that the case cannot be proved if a trial should be held, the court may sua sponte grant summary judgment to the non-moving party."); Holmes v. Idaho Power Co. Sec. Plan for Senior Mgmt. Emps., No. CV03-514-S-EJL, 2005 WL 1863180, at *1 (D. Idaho Aug. 4, 2005).

IV. Undisputed Facts

While much is disputed, there are facts upon which the parties agree.

A. Tahmisian, Barrett, McAllister, and Watt; Netacent Corporation's formation

1. Tahmisian, Barrett, McAllister and Watt's shared experience at the Idaho Department of Labor provide the foundation for Netacent Corporation, and its Unemployment Insurance product development

Netacent Solutions, LLC ("Netacent LLC") was formed by Tahmisian in May 2008 for the purpose of consulting and software development. Tahmisian was the sole member of Netacent LLC.^[8] Two years later, Netacent LLC was retained as a subcontractor on a software development project for the Idaho Department of Health and Welfare, ("IHW").^[9] Under their arrangement, Tahmisian provided services to Netacent LLC and Netacent LLC billed the prime contractor, KMP Companies ("KMP"), and KMP invoiced IHW for the services. IHW paid KMP, KMP paid Netacent, LLC, and Tahmisian received payment from Netacent LLC.^[10]

In 2012, Netacent LLC's services on behalf of IHW ended and its technical services for the Idaho Department of Labor ("IDOL") began.^[11] The payment arrangement for IDOL was the same as that with IHW, i.e., Tahmisian provided services to Netacent LLC, Netacent LLC billed

the prime contractor, KMP, and KMP invoiced IDOL.^[12] Through Netacent LLC's work for IDOL, Tahmisian encountered McAllister. McAllister was the Chief Deputy Director at IDOL. Barrett was employed at IDOL as a database architect, and Watt was also an IDOL employee. His...