Degon v. Williams

• Court: District Court, E.D. Washington
• Decided: October 31, 2024
• Docket: 2:22-cv-00142
• Status: Unknown

Opinion

1 FILED IN THE 2 U.S. DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 3 Oct 31, 2024 4 SEAN F. MCAVOY, CLERK 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF WASHINGTON 7 8 9 DANIEL DEGON, No. 2:22-CV-00142-SAB 10 Plaintiff, 11 v. ORDER DENYING PLAINTIFF’S 12 MICHAEL WILLIAMS, MOTION FOR PARTIAL 13 Defendant. SUMMARY JUDGMENT 14 15 On October 3, 2024, the Court held a videoconference hearing in this matter 16 to address Plaintiff’s pending Motion for Partial Summary Judgment. ECF No. 63. 17 Plaintiff was represented by Riley Leonard, Jason Piskel, and Robert Gingras. 18 Defendant was represented by Andrea Meyer. 19 At the hearing, the Court heard arguments on the Motion and took it under 20 advisement. After further reviewing the briefing, caselaw, and record, the Court 21 denies Plaintiff’s Motion. 22 MOTION STANDARD 23 Summary judgment is appropriate “if the movant shows that there is no 24 genuine dispute as to any material fact and the movant is entitled to judgment as a 25 matter of law.” Fed. R. Civ. P. 56(a). There is no genuine issue for trial unless 26 there is sufficient evidence favoring the non-moving party for a jury to return a 27 verdict in that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 28 (1986). The moving party has the initial burden of showing the absence of a 1 genuine issue of fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). 2 If the moving party meets its initial burden, the non-moving party must go beyond 3 the pleadings and “set forth specific facts showing that there is a genuine issue for 4 trial.” Anderson, 477 U.S. at 248. 5 In addition to showing there are no questions of material fact, the moving 6 party must also show it is entitled to judgment as a matter of law. Smith v. Univ. of 7 Wash. Law Sch., 233 F.3d 1188, 1193 (9th Cir. 2000). The moving party is entitled 8 to judgment as a matter of law when the non-moving party fails to make a 9 sufficient showing on an essential element of a claim on which the non-moving 10 party has the burden of proof. Celotex, 477 U.S. at 323. The non-moving party 11 cannot rely on conclusory allegations alone to create an issue of material fact. 12 Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993). 13 When considering a motion for summary judgment, a court may neither 14 weigh the evidence nor assess credibility; instead, “the evidence of the non-movant 15 is to be believed, and all justifiable inferences are to be drawn in his favor.” 16 Anderson, 477 U.S. at 255. 17 BACKGROUND 18 This case was filed in the U.S. District Court for the Eastern District of 19 Washington on June 14, 2022, and pursuant to 28 U.S.C. § 1332. In July 2020, 20 Plaintiff claims he lost all ownership interest in two railroad projects located in 21 Spangle, Washington, in which he and Defendant were business partners. He 22 asserts eight causes of action in his Second Amended Complaint for: (1) breach of 23 contract as to the Spangle Agreement; (2) negligent misrepresentation; (3) fraud; 24 (4) breach of fiduciary duty as to the Spangle Agreement; (5) breach of contract as 25 to the WDB Agreement; (6) breach of fiduciary duty as to the WDB Agreement; 26 (7) quantum meruit; and (8) unjust enrichment. Below are the material facts of this 27 case not in dispute. 28 On July 7, 2016, Defendant drafted and both parties signed a handwritten, 1 one-page contract describing the development and ownership interests in two 2 railroad projects. The agreement was titled Spangle Agreement and read: 3 Contract Agreement 4

5 This agreement made between (Mike Williams) of P.O. Box 331 Richmond Mo. 64085 and (Dan Degon) of 4150 East Fountain St, 6 Mesa Arizona 85205 on July 7, 2016. Both parties agree to the 7 following terms and agreement on two projects located in Spokane County near Spangle Washington. 8

9 Project 1. Spangle Transload/trash and various commodities Dan Degon shall have 25% interest in project. Ownership shall be 10 transferred upon payoff of facility. No money will be distributed 11 before payoff unless mutually agreed by both parties.

12 Project 2. Locomotive Shop and Storage Track 13 Mike Williams and Dan Degon shall be 50/50 owners of the facility. Property is located on State ROW and partially on 70 acre tract. Any 14 additional partner or partners may become owners if mutually agreed 15 by Dan Degon and Mike Williams. 16 17 Plaintiff and Defendant agreed that Project 1 was set for a parcel south of 18 Cameron Road. Project 2 was the 70-acre lot north of Cameron Road. 19 After signing the contract, Plaintiff applied for permitting, coordinated with 20 Spokane County and Simpson Engineers for project management, and organized a 21 bidding process for construction. On April 4, 2017, Plaintiff created Rocky Point 22 Rail Terminal, LLC. 23 In July of 2017, the Washington State Department of Transportation 24 (“WSDOT”) sent offer letters to the Williams Group and Whitman Terminaling, 25 both owned by Defendant, to purchase the rights of way north and south of 26 Cameron Road in Spangle. The rights of way were acquired by each group on 27 August 25, 2017. 28 From October to November 2017, construction on a storage track south of 1 Cameron Road commenced. 2 On or around December 20, 2017, Plaintiff, Defendant, and Defendant’s 3 daughter Avory Beggs created a limited liability company, WDB Terminaling, 4 LLC (“WDB”), converted from Rocky Point Terminal, LLC. Ownership interests 5 divided into 36% for Plaintiff, 56% for Defendant, and 8% for Beggs. Defendant 6 was listed as the initial manager, and each partner gave $0 for the initial capital 7 contribution. All parties signed the agreement. The intent of the business was for 8 railcar services. 9 Beggs brought in roughly $1,150,000 from North American Rail Partners to 10 fund WDB in exchange for an ownership interest in WDB. 11 On January 2, 2018, Defendant sold 20% of his shares of common stock in 12 WDB to NAR Fund I, LLC. Plaintiff did not know of or consent to the sale. This 13 dropped Defendant’s interest in WDB to 36%. 14 By October 1, 2018, construction had completed for storage tracks south of 15 Cameron Road to store railcars. On that day, Plaintiff and Defendant discussed 16 Plaintiff’s ownership rights related to the storage track south of Cameron Road. 17 Defendant told Plaintiff he did not have ownership rights in the track. 18 In the spring of 2019, Plaintiff submitted an invoice for $23,724.25 for fuel 19 for work done on the WDB site, and in February and April of 2019, WDB paid out 20 $5,317 for engineering services and $128,541.35 for drilling and blasting. 21 On February 21, 2020, Beggs contacted Plaintiff to seek a status report on 22 obtaining an Industry Track Agreement (“ITA”) from the state for the switch in the 23 main rail line north of Cameron Road. The ITA would constitute an agreement 24 among the entity developing the property north of Cameron Road, WSDOT, and 25 SS&P, the rail operator. Plaintiff emailed his contact on March 9, 2020, for an 26 update on the WDB project ITA and received a reply that it was in the state’s 27 hands on March 11, 2020. He stated he was lead on the project. 28 On March 13, 2020, Beggs removed Plaintiff from communication on the 1 ITA and project north of Cameron Road. In July 2020, Defendant informed 2 Plaintiff that the project was not built under WDB. It was built under Whitman 3 Terminaling. 4 On April 3, 2020, the engineering company contacted Plaintiff and Matt 5 Ruple, an employee with Whitman Terminaling, to clarify the point of contact for 6 the project north of Cameron Road because Plaintiff had previously been the 7 contact since 2017. Ruple responded that he was the lead on the ROW north of 8 Cameron Road. 9 In July of 2020, Plaintiff and Defendant met in Spangle at the lot north of 10 Cameron Road. Defendant told Plaintiff the project was built under Whitman 11 Terminaling and not WDB, so Plaintiff was not an owner. Whitman stores loaded 12 and empty railcars in Spangle. 13 Plaintiff claims losses of at least $612,750 in distributions for storage 14 revenue at both locations; and ownership value in both projects between 15 $4,530,000 and $5,518,000. He seeks compensatory damages in excess of $75,000; 16 a judicial determination the Spangle Agreement was the operative partnership 17 agreement under which Projects 1 and 2 were intended to be developed, or a 18 determination the WDB Agreement was the operative partnership under which 19 Project 2 was intended to be developed; attorney’s fees and costs; and pre- and 20 post-judgment interest. 21 PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT 22 This case centers on a dispute over whether the parties developed land in 23 rural Spangle, Washington, for railroad operations. Plaintiff claims a project he 24 helped develop and maintains ownership rights to sits on that land. Defendant 25 claims a facility is out there, but Plaintiff has no rights to it. 26 Defendant seems to be gaslighting Plaintiff by playing a business shell game 27 to deprive Plaintiff of ownership rights to the projects. But this Court deals in facts, 28 and the facts of this case are disputed. 1 In his present Motion, Plaintiff seeks judgment on his causes of action for 2 (1) breach of contract as to the Spangle agreement, (4) breach of fiduciary duty as 3 to the Spangle Agreement, (5) breach of contract as to the WDB Agreement, (6) 4 breach of fiduciary duty as to the WDB Agreement, and (8) unjust enrichment. 5 The Court considers each in turn. 6 I. Claim 1 for Breach of Contract — Spangle Agreement 7 a. Legal Standard 8 Under Washington State law, a breach of contract occurs when (1) the 9 parties entered into an enforceable contract; (2) the contract was breached by one 10 or both parties; and (3) the party seeking recovery was damaged as a result of the 11 breaching party’s actions. See Nw. Indep. Forest Mfrs v. Dep’t of Labor & Indus., 12 78 Wash. App. 707, 712 (1995). 13 To be found enforceable, a contract must contain an offer and acceptance, as 14 well as a promised exchange or consideration. See Lehrer v. State, Dep’t of Soc. & 15 Health Servs., 101 Wash. App. 509, 512–13 (2000). It also must contain essential 16 terms, to which the parties mutually assent. See McEachern v. Sherwood & 17 Roberts, Inc., 36 Wash. App. 576, 579 (1984). If the parties do not mutually assent, 18 the contract is unenforceable. See Swanson v. Holmquist, 13 Wash. App. 939, 942 19 (1975). “Even where an agreement might be too indefinite on its terms to be 20 specifically enforced, it may be certain enough to constitute a valid contract, the 21 breach of which may give rise to damages.” McEachern, 36 Wash. App. at 579. 22 Washington State adheres to the objective manifestation theory of contracts, 23 meaning a court attempts to understand the parties’ intent by looking to the 24 agreement, rather than the subjective intents. See Hearst Commc’ns, Inc. v. Seattle 25 Times Co., 154 Wash. 2d 493, 503 (2005) (en banc). Any language subject to 26 interpretation is construed against the drafting party. See Guy Stickney, Inc. v. 27 Underwood, 67 Wash. 2d 824, 827 (1966). 28 // 1 b. Analysis 2 The Spangle Agreement is incomplete. Though it contains the parties’ 3 identities and certain details of the proposed projects, both Plaintiff and Defendant 4 rely on parole evidence to add to the agreement on material issues of duty, location 5 of the projects, and the ownership payout. 6 There are genuine material issues of fact regarding the nature and terms of 7 the agreement and whether those terms were breached. The Court cannot conclude 8 as a matter of law whether there was a contract and if so, whether it was breached. 9 Thus, the Court denies summary judgment for Claim 1 for breach of contract as to 10 the Spangle Agreement. 11 II. Claim 4 for Breach of Fiduciary Duty — Spangle Agreement 12 a. Legal Standard 13 Washington State defines a general partnership as “composed of two or 14 more persons (usually not a married couple) who agree to contribute money, labor, 15 and/or skill to a business. Each partner shares the profits, losses, and management 16 of the business and each partner is personally and equally liable for debts of the 17 partnership. Formal terms of the partnership are usually contained within a written 18 partnership agreement.”1 19 Washington places a great weight on the distribution of losses in 20 determining the existence of a partnership. See DeFelice v. State, Emp’t Sec. Dep’t, 21 187 Wash. App. 779, 788–89 (2015) (citing Gottlieb Bros. v. Culbertson’s, 152 22 Wash. 205, 209 (1929)). Further, “while a partnership’s existence can be 23 established by circumstantial evidence, circumstantial evidence does not tend to 24 prove the existence of a partnership unless it is inconsistent with any other theory.” 25

26 1 See WASH. STATE SEC’Y OF STATE, WHAT ARE WASHINGTON STATE BUSINESS 27 STRUCTURES?, https://www.sos.wa.gov/corporations-charities/frequently-asked- questions-faqs/what-are-washington-state-business-structures (last visited Oct. 21, 28 2024). 1 DeFelice, 187 Wash. App. at 789 (citing Eder v. Reddick, 46 Wash. 2d 41, 49 2 (1955)). 3 b. Analysis 4 The Court first must determine whether a fiduciary duty existed. In the 5 Spangle Agreement, the only reference to “partners” is the last line: “Any 6 additional partner or partners may become owners if mutually agreed by Dan 7 Degon and Mike Williams.” Any other arguments to support or negate the 8 existence of a partnership—creating a fiduciary duty—rely on disputed material 9 facts and cannot be ruled on at this stage. 10 The Court denies Plaintiff summary judgment as to Claim 4 for breach of 11 fiduciary duty as to the Spangle Agreement. 12 III. Claim 5 for Breach of Contract – WDB Agreement 13 a. Legal Standard 14 The Court again addresses the breach of contract factors considered under 15 Washington State law as applied to the WDB Agreement. See. Nw. Indep. Forest 16 Mfrs v. Dep’t of Labor & Indus., 78 Wash. App. 707, 712 (1995). 17 b. Analysis 18 The parties agree the WDB Agreement is an enforceable contract, which 19 created a Limited Liability Company under Washington State law. 20 However, there are several material facts in dispute regarding the projects, 21 distribution of ownership, financial responsibilities, and more. There is also a 22 factual dispute as to the sale of part of Defendant’s interest in WDB Terminaling to 23 NAR Fund. 24 The disputes are material issues for a trier of fact to decide. The Court 25 denies Plaintiff summary judgment as to Claim 5 for breach of contract on the 26 WDB Agreement. 27 // 28 // 1 IV. Claim 6 for Breach of Fiduciary Duty – WDB Agreement 2 a. Legal Standard 3 A breach of a fiduciary duty results in a liability in tort. See Miller v. U.S. 4 Bank of Wash., N.A., 72 Wash. App. 416, 426 (1994). It is a question of law 5 whether a duty exists. See Hansen v. Friend, 118 Wash. 2d 476, 479 (1992). Under 6 Washington State law and to bring a claim for breach of fiduciary duty, a plaintiff 7 must show “(1) the existence of a fiduciary duty, (2) a breach of that fiduciary 8 duty, (3) resulting injury, and (4) that the breach of duty proximately caused the 9 injury.” Arden v. Forsberg & Umlauf, P.S., 193 Wash. App. 731, 743 (2016). 10 “A fiduciary relationship arises as a matter of law in certain contexts such as 11 [. . .] partner and partner.” Micro Enhancement Int’l, Inc. v. Coopers & Lybrand, 12 LLP, 110 Wash. App. 412, 434 (2002). Partners in a member-managed LLC are 13 “accountable to each other and the partnership as fiduciaries.” Bishop of Victoria 14 Crop. Sole v. Corp. Bus. Park, LLC, 138 Wash. App. 443, 456 (2007). Further, 15 Wash. Rev. Code § 25.05.165 requires partners to adhere to the fiduciary duties of 16 loyalty and care, including to avoid secret profits, self-dealing, and conflicts of 17 interest, as well as refraining from competing with the partnership. 18 b. Analysis 19 Plaintiff and Defendant had a fiduciary relationship through their partnership 20 under WDB LLC. Under this relationship, each partner was “accountable to each 21 other and the partnership as fiduciaries.” Bishop of Victoria, 138 Wash. App. at 22 456. They owed the duties of care and loyalty. Wash. Rev. Code § 25.05.165. 23 However, given there are material disputes of fact regarding whether 24 Defendant breached the contract under the WDB Agreement, the Court cannot rule 25 on whether a subsequent breach of fiduciary duty resulted. 26 The Court denies Plaintiff summary judgment as to Claim 6 for breach of 27 fiduciary duty on the WDB Agreement because there are genuine issues of 28 material fact. 1 V. Claim 8: Unjust Enrichment Plaintiff conditioned Claim 8 for unjust enrichment on the invalidation of th 3|| Spangle Agreement. As discussed, the Court cannot rule on the validation of either agreement at this stage, which makes a ruling on this claim premature. 5 The Court denies Plaintiff summary judgment as to Claim 8 for unjust enrichment. Accordingly, IT IS HEREBY ORDERED: 8 l. Plaintiff's Motion for Partial Summary Judgment, ECF No. 63, is DENIED. 10 2. The parties shall file a joint status report with proposed new trial dates 11||on or before November 15, 2024. 12 IT IS SO ORDERED. The District Court Executive is hereby directed to 13}| file this Order and provide copies to counsel. 14 DATED this 31st day of October 2024. 15 16 17 18 ‘ 9 Sfraleyld Eee Yoar 20 Stanley A. Bastian 21 Chief United States District Judge 22 23 24 25 26 27 28 ORDER DENYING PLAINTIFF’S MOTION FOR PARTIAL SUMMARY