Arkansas-Missouri Forest Products, LLC v. Stuart J. Lerner, Defendants/Respondents.

486 S.W.3d 438, 2016 Mo. App. LEXIS 25, 2016 WL 234889
CourtMissouri Court of Appeals
DecidedJanuary 19, 2016
DocketED102321
StatusPublished
Cited by13 cases

This text of 486 S.W.3d 438 (Arkansas-Missouri Forest Products, LLC v. Stuart J. Lerner, Defendants/Respondents.) is published on Counsel Stack Legal Research, covering Missouri Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arkansas-Missouri Forest Products, LLC v. Stuart J. Lerner, Defendants/Respondents., 486 S.W.3d 438, 2016 Mo. App. LEXIS 25, 2016 WL 234889 (Mo. Ct. App. 2016).

Opinion

Angela T. Quigless, Judge

I. Introduction

Plaintiff Arkansas-Missouri Forest Products, L.L.C. (“Ark-Mo”) appeals from the trial court’s judgment notwithstanding the verdict (“JNOV”) that set aside the jury’s verdict in favor of Ark-Mo on Ark-Mo’s breach of contract claim against Stuart Lerner (“Lerner”). The jury awarded Ark-Mo $2,169,398 in damages. Ark-Mo also appeals from the trial court’s judgment in favor of defendants on Ark-Mo’s claim for an accounting. We reverse the JNOV in favor of Lerner and remand for entry of judgment against Lerner in accordance, with the verdict. We also reverse the trial court’s judgment in favor of defendants and against Ark-Mo on Ark-Mo’s claim for an accounting and remand with instructions.

II. Factual Background

In reviewing a JNOV, we consider the 'evidence and reasonable inferences favorable to the jury verdict and disregard contrary evidence that does not support the verdict. Kasal v. Freihaut, 860 S.W.2d 24, 25 (Mo.App.E.D.1993). Viewed in this light, the evidence was as follows: Ark-Mo is a Missouri company owned by Mark Garnett (“Garnett”) and Diann Gar-nett. 1 The Garnetts use Ark-Mo as their investment vehicle through which they own interests in certain businesses, including those at issue in the underlying litigation. The Garnetts also own an interest in Garnett Wood Products, a company that sells wood and hails for use in the manufacture of pallets. Garnett has been involved in the pallet business for a long time.

When Lerner, a California resident,,met Garnett in 1987, Lerner had just formed L <& M Pallet, which started manufacturing white pallets. Lerner purchased substantial amounts of wood from Garnett Wood Products on behalf of L & M Pallet through word of mouth about Garnett. Garnett extended “a lot of credit” to Lerner .because L & M Pallet was a growing company and it was difficult for Lerner to get credit in California. Lerner and Gar- *442 nett transacted their business without formal documentation. Over time, Garnett and Lerner became good friends and their families spent time together regularly. Lerner attended the Garnetts’ annual deer hunting events.

After Lerner sold L & M Pallet in 1994, Lerner began working with CHEP USA (“CHEP”), which owns and leases blue wooden pallets 2 to its customers. Lerner formed Blue Chip Manufacturing in California to operate a manufacturing facility for CHEP. From 1998 to 2002, Lerner manufactured for CHEP blue pallets which were mostly consumed in the west coast. During this period, Garnett Wood Products sold lumber and nails to various companies including CHEP and Blue Chip Manufacturing. By 2002, the blue pallet market in the west coast became saturated and the need for Blue Chip Manufacturing to produce pallets for CHEP declined. In 2000, Garnett and Lerner already knew that the west coast market for CHEP pallets would become saturated. Accordingly, they started discussing various scenarios to further their business together, including potentially manufacturing pallets for CHEP in the central and east coast regions. In,these discussions, Lerner told Garnett that, if they “could do something with CHEP,” Lerner would split any profits 50-50 with Garnett. Nothing developed with CHEP in 2000.

In 2003 and 2004, Garnett and Lerner met with representatives of CHEP and discussed the advantages to CHEP of a centralized manufacturing location in the Midwest. A CHEP manufacturing facility in the Midwest would allow Garnett and Lerner to take advantage of Garnett’s presence and knowledge of the pallet business in the Midwest and concurrently satisfy CHEP’s desire to expand its business in the central and east coast regions.' Gar-nett was actively involved in their discussion with CHEP regarding such facility in the Midwest. Garnett and Lerner also agreed ■ that Garnett, through Ark-Mo, would be “the one who’s going to have to take care of the day-to-day operation of the plant” since Lerner did not want to move to the Midwest. Since 2000, Garnett and Lerner had not discussed further what their respective ownership interests would be in any future projects with CHEP. However, Lerner told Garnett that they would be partners. The representatives of CHEP also knew them as partners in their dealings with CHEP.

After Garnett, Lerner, and the representatives of CHEP actively searched for a location for a CHEP manufacturing facility in the Midwest, they found a desirable location in Southaven, Mississippi. Gar-nett, Lerner, and CHEP agreed that the pallet manufacturing facility would be owned by CHEP and operated by Lerner and Garnett’s jointly-owned business. In spring of 2005, Garnett and Lerner met with James Harper (“Harper”), an attorney in Southaven whom Lerner had hired to prepare the organizational documents for Blue .Chip II, L.L.C. (“BC II”), the entity that would contract with CHEP to manage the Southaven facility. Based on their prior conversations about partnering to work with CHEP, Garnett believed that Ark-Mo would have a 50% ownership interest in BC II. However, the organizational documents prepared by Harper at Lerner’s direction gave L & M Ventures (“L & M,” Lerner’s investment company) a 65% ownership interest in BC II, Lerner’s brother a 5% interest, and Ark-Mo a 30% *443 interest. Although Garnett was surprised, he did not say anything in Harper’s office because he wanted to think about the situation before he reacted. -

Upon exiting Harper’s' office, Garnett expressed his disappointment and asked Lerner why he had allocated Ark-Mo only 30% of BC II when the promise was “SO-SO.” In response, Lerner told Garnett that his brother, an attorney, told him that it was necessary. Garnett asked Lerner whether the interest allocation would be the same for “every CHEP venture from now on other than the things [they were] already doing.” Lerner said yes and they “shook hands” (the “Parking Lot Deal”). Garnett did not document this agreement because he and Lerner had relied on oral agreements in the past. In April of 2005, Ark-Mo, L & M, and Lerner’s brother executed the BC II Operating Agreement. Proportionate to their respective interests, Ark-Mo paid $45,000 for its 30% share in BC II and L & M paid $105,000 for its 65% share. ! ' 1

During the preparation for and start-up of the Southaven facility, Garnett was regularly on site dealing with various aspects of the permitting and organization of the operation. Ray Garza, Lerner’s employee who had experience at Blue Chip Manufacturing, was brought in to help set up the Southaven facility. The facility opened in April, 2005.

In early May of 2005, BC II hired , Robert Gossett (“Gossett”) to work as on-site manager of the operations in Southaven. As a result of Gossett’s hiring, Garnett no longer needed to be constantly in Southa-ven. Garnett went to Southaven once a week but continued to receive and monitor daily production reports and stayed involved in the operations. Lerner was in Southaven for quarterly meetings, but infrequently beyond that. The Southaven operation was very successful.

In late 2005, Garnett visited a CHEP repair facility in Florida.

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486 S.W.3d 438, 2016 Mo. App. LEXIS 25, 2016 WL 234889, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arkansas-missouri-forest-products-llc-v-stuart-j-lerner-moctapp-2016.