Lamson & Sessions Company v. William H. Peters

576 F. App'x 538
CourtCourt of Appeals for the Sixth Circuit
DecidedAugust 13, 2014
Docket12-4193
StatusUnpublished
Cited by7 cases

This text of 576 F. App'x 538 (Lamson & Sessions Company v. William H. Peters) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lamson & Sessions Company v. William H. Peters, 576 F. App'x 538 (6th Cir. 2014).

Opinions

ALICE M. BATCHELDER, Chief Judge.

The Lamson & Sessions Co. appeals the grant of summary judgment to the defendants on certain of its claims in this case arising out of a Chapter 7 Bankruptcy adversary proceeding. For the reasons that follow, we AFFIRM.

[540]*540I.

In 1976, the Lamson & Sessions Co. purchased Youngstown Steel Door, a manufacturer of steel rail-car doors, and operated it as a wholly-owned subsidiary. Being a traditional heavy industry, Youngstown Steel Door had accumulated long-term obligations stemming from retiree pensions and healthcare, union issues, asbestos, and other environmental contamination.

In early 1988, Youngstown Steel Door began negotiations to sell its business to a new company, Youngstown Steel Door Industries, Inc. (YSD), formed by its former executives, including the named defendants herein, William Mundinger and William Peters. The other remaining defendant, Phil Dennison, was an accountant and a partner at Packer Thomas & Co. accounting firm, who directed the annual audits of YSD’s financial statements.

While the parties were negotiating, several Youngstown Steel Door retirees brought a class action to enjoin the sale, naming as defendants Lamson, Youngstown Steel Door, YSD, and Youngstown Steel Door’s retiree benefit plan. These lawsuits were proceeding in state court.

On March 9, 1988, Youngstown Steel Door and YSD finalized the sale in a “Purchase Agreement,” in which YSD acquired the business and assets, as well as certain liabilities stemming from health care and pension claims. But the Purchase Agreement specifically excluded liability from the pending class-action lawsuits. Lamson was not a party to the Purchase Agreement.

On August 31, 1988, the class-action defendants (specifically, Lamson, Youngstown Steel Door, and YSD) settled the class-action lawsuits by signing two Settlement Agreements with the classes of retiree plaintiffs. In the Settlement Agreements, YSD agreed to continue paying retirement and healthcare benefits for 15 to 22 years, Youngstown Steel Door guaranteed YSD’s agreement, and Lam-son guaranteed Youngstown Steel Door’s obligation. YSD operated the business and paid these benefits for almost 15 years, at a cost of approximately $40,000 per month.

In November 2001, YSD obtained an unexpected windfall of almost $4 million when its long-time health insurance carrier demutualized. Acting on the advice of corporate counsel, outside counsel, and its outside accountant (Phil Dennison of Packer Thomas, who determined that YSD had sufficient retained earnings to make the shareholder distribution), YSD distributed most of this money to its remaining shareholders; i.e., to Mundinger and Peters. In late 2002, YSD also spun-off its wholly-owned subsidiary, Triax-YSD Inc., to those shareholders at a total value of $1,241,347, according to the district court.

In early 2003, YSD contacted a bankruptcy and restructuring attorney to discuss the possibility of YSD’s filing bankruptcy because YSD had been losing money for several months and was running out of credit availability. YSD did not file for bankruptcy at that time; rather, it decided to cut its expenses by defaulting on the $40,000 per month retiree payments, which would cause responsibility for those payments to revert to Youngstown Steel Door, and then Lam-son, pursuant to the Settlement Agreements from the class actions.

On April 3, 2003, YSD notified the retirees that it would no longer pay the benefits, thus declaring itself in “default” under the Settlement Agreement. In response, Lamson loaned money to YSD, evidenced by certain promissory notes and secured with a mortgage, so that YSD could contin[541]*541ue to pay the benefits. Using this money, YSD paid benefits for another year.

In April 2004, YSD’s main creditor foreclosed on YSD, requiring the sale of its assets to a third party and rendering YSD defunct. From the proceeds of the sale, YSD repaid Lamson’s loans and Lamson released its liens. Lamson assumed the YSD retiree benefit payments.

On July 9, 2004, Lamson sued YSD, Mundinger, and Peters in state court, claiming breach of contract, fraudulent transfer, breach of fiduciary duty, and unjust enrichment. Almost a year later, YSD filed for Chapter 7 bankruptcy, removing Lamson’s lawsuit to the bankruptcy court. The bankruptcy court stayed the claims against YSD and appointed a bankruptcy trustee.

The bankruptcy court substituted the trustee as the plaintiff for the claims of fraudulent conveyance and breach of fiduciary duty, because those claims were common to all unsecured creditors. Lamson remained the plaintiff for its claims against Mundinger and Peters personally for alter ego breach of contract and unjust enrichment. Lamson filed amended complaints, naming Dennison and Packer Thomas on claims of tortious interference with contract, and adding YSD’s in-house counsel as a defendant. The district court, acting on a joint motion, withdrew the bankruptcy reference and transferred the proceeding to the district court.

The defendants moved for summary judgment on several of the claims and, in separate orders, the district court granted summary judgments. Only four are before us on appeal:

1. Lamson’s claim of alter ego breach of contract, for breach of the Purchase Agreement1, against Mun-dinger and Peters. The district court granted summary judgment, holding that Lamson (1) was not a party to the Purchase Agreement; (2) could not show a breach of the Purchase Agreement; and (3) had not claimed a breach of the Settlement Agreement. [R. 101]
2. Lamson’s claim of tortious interference with contract against Mundinger and Peters. The district court granted summary judgment, holding that the claim must fail because Lamson could not show a breach of contract, which is a prerequisite element to this cause of action. [R. 101]
3. Lamson’s claim of tortious interference with contract against accountants Dennison and Packer Thomas. The district court granted summary judgment, holding that (1) Lamson could not show that the accountant’s advice proximately caused the YSD directors to breach the contract— rather, Lamson itself had argued that the YSD directors acted regardless of any advice; (2) the statute of limitations had expired; and (3) under Ohio law, recovery was barred by the economic-loss rule. [R. 100]
4. Lamson’s claim of unjust enrichment, based on the loans in 2003, against Mundinger and Peters. The district court granted summary judgment, holding that this claim [542]*542must fail as a matter of Ohio law due to the existence of an express contract, that being the promissory notes secured by a mortgage, and full repayment of those loans. [R. 101]

On August 14, 2012, the district court announced that the parties had settled and dismissed all outstanding claims, which rendered the forgoing grants of summary judgment final and appealable. On September 13, 2012, Lamson appealed the judgments on these four claims.

II.

The district court decided all of these issues on summary judgment, so our review is de novo. See Keith v. County of Oakland, 703 F.3d 918, 923 (6th Cir.2013).

A.

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Cite This Page — Counsel Stack

Bluebook (online)
576 F. App'x 538, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lamson-sessions-company-v-william-h-peters-ca6-2014.