Lee v. Lugg

• Court: Superior Court of Maine
• Decided: April 20, 2017
• Docket: CUMcv-15-149
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT

Cumberland, ss.

TAMMY LEE individually and on behalfofLEE COMMUNICATIONS, INC.

Plaintiff

v. Docket No. PORSC-CV-15-149

RICHARD H. LUGG

Defendant

DECISION AND JUDGMENT

This case came before the court for trial April 18, 2017. Plaintiff Tammy Lee

represented herself and Defendant Richard Lugg was represented by John Branson, Esq. Both

parties presented their own testimony and offered exhibits into evidence.

At the close of the Plaintiff's case-in-chief, Defendant Lugg made an oral motion for

judgment that the court took under advisement. For the reasons set forth below, the motion is

hereby denied.

Based on the entire record, the court hereby makes and adopts the following findings of

fact and conclusions oflaw and renders judgment as set forth below.

1. Plaintiff Tammy Lee is a former resident of Maine and current resident of California

who has worked since 1999 as a public relations and communications professional, and has an

extensive history of working on significant projects for major clients. In 200.3, she moved to

Maine, and in 2004, she incorporated her business by forming a Maine corporation called Lee

Communications, Inc. Although the business had several employees during the early 2000's,

Ms. Lee herself was the principal employee as of 2008. In that year, she went through a divorce and was in the process of selling the oceanfront home she and her former husband had

built.

2. Defendant Richard H. Lugg is a resident of Maine with experience in the aviation

industry. At all pertinent times, Mr. Lugg has been chief executive officer of a Delaware

corporation called SonicBlue Aerospace, Inc. [SonicBlue].

3. Since at least 2008, Mr. Lugg's focus through SonicBlue has been on promoting the

development of a high-efficiency hybrid jet engine, and specifically on raising capital from

various sources to fund the project. At some point during or before 2008, SonicBlue was

awarded a Maine Technology grant and Mr. Lugg began recruiting a group of professionals in

various fields to move the project forward.

4. Mr. Lugg's vision for SonicBlue was grand, if not grandiose. In an e-mail message,

Mr. Lugg described SonicBlue as

a company that is going to bring a sea change to the aerospace propulsion industry with an engine (we do not have to know exactly what type, class size, etc.) ... but we must express the picture to the world, and specifically investors, that we are the innovators, that we have the core technologies to do it (superconducting, magnetic bearings, electric segmentation, electric Brayton cycle) and most importantly we have the Team (or the very beginnings of a Team) ... we are really founding the dream Team. We are going to build ourselves up over time as we raise the capital to be the experts we need to be to get the job done.

Plaintiffs Ex. 2 (e-mail message Richard Lugg to Tammy Lee (Dec. 7. 2008)).

5. As the quoted message suggests, SonicBlue's emphasis in 2008 was on ra1smg

capital for its project, which existed only in concept as a "new, next generation subsonic,

transonic, supersonic and/or hypersonic hybrid jet-electric turbine engine design and

prototype." See Defendant's Ex. 1 at 1. In late 2008, SonicBlue representatives were traveling

to trade shows and other aerospace industry events to make connections with potential

investors and others.

2 6. Although SonicBlue was seeking investors in a variety of ways, the primary target

was an investor (or investor group) in Dubai who apparently had expressed a willingness to

consider investing several hundred million dollars in SonicBlue.

7. Tammy Lee was introduced to Mr. Lugg by a mutual friend in 2008. They began

corresponding in October 2008, and soon Mr. Lugg asked her to submit a proposal for

consulting services. She did so in November 2008. She was recruited onto the SonicBlue team

by Mr. Lugg to perform public relations, communications and similar functions, pursuant to an

agreement negotiated in November 2008 and finalized on or around December 1, 2008.

8. During the negotiations that resulted in their agreement, Ms. Lee emphasized to

Mr. Lugg that cash flow was very important to her, given her situation at the time, and that

her compensation needed to include a substantial hourly payment in addition to the SonicBlue

stock that Mr. Lugg was proposing to award to her in lieu of cash.

9. Their agreement was documented in the form of a Consulting Agreement and

Nondisclosure dated as of December 1, 2008 ["the Consulting Agreement"]. Defendant's

Exhibit 1. The introductory paragraph of the Consulting Agreement identifies the parties as

"SonicBlue Aerospace, Inc. ('Company')" and "Lee Communications, Inc. (Tammy Lee,

president) ... ('Consultant')." However, the signature lines at the end of the Consulting

Agreement read as follows:

_ sl__________ _ Name: Tammy Lee Consultant

Sonic Blue Aerospace, Inc.

By_sl_ _ _ _ __ _ __ Title: Chief Executive Officer Richard H. Lugg SonicBlue Aerospace, Inc.

3 10. Thus, the Consulting Agreement is consistent in designating SonicBlue as one of

the parties, but is not consistent as to Lee Communications, given that Ms. Lee did not sign in

her corporate capacity. Also, the Consulting Agreement is inconsistent in its use of pronouns

to refer to the Consultant-"his", "her" and "its" are all used with reference to the Consultant.

11. The Consulting Agreement defines the Consultant's services to be "marketing,

marketing intelligence, research, public relations, business planning, investment networking,

web design, copy marketing materials, and other related services ..." Defendant's Exhibit 1 at

1. The agreement calls for the Consultant to devote between 20 and 120 hours per month to

services for the Company and to be paid $150 per hour initially, plus 10,000 shares of stock

upon signing and additional shares for each hour of work at 50 shares per hour. Defendant's

Exhibit 1 §§ S(a)-(b), at 2.

12. Ms. Lee rendered consulting services to SonicBlue for about four months,

beginning in December 2008 and ending in March 2009. She submitted an invoice for each

month's services, dated the 10th of the succeeding month, beginning January 10, 2009 and

ending April 10, 2009. See Plaintiff's Exhibit 1. Each of the four invoices was in the name of

Lee Communications, Inc. and billed to SonicBlue Aerospace. Each invoice indicated that

"[r]emittance is due within thirty days."

IS . Ms. Lee readily accepted Mr. Lugg's portrayal of himself as a successful

entrepreneur and of SonicBlue as a company with tremendous potential. She was taken in by

his grand vision of developing a revolutionary engine. She was impressed by the qualifications

of the members of his team, and by what Mr. Lugg claimed to be his connections with high-end

investors.

14. According to the voluminous e-mail correspondence between them over the course

of the few months they worked together, Ms. Lee and Mr. Lugg also developed what Ms. Lee

4 believed to be a genuine friendship--they came to share their thoughts and ideas about wellness

and spirituality and other matters not directly involved in the business of SonicBlue. See

Plaintiffs Exhibit 2. As a result, Ms. Lee came to hold Mr. Lugg in high trust and regard.

15. Such was her enthusiasm for Richard Lugg's vision for SonicBlue that she involved

members of her family in the SonicBlue venture--her father and brother both made

investments in stock and her mother provided financial services.

16. In early January 2009, Tammy Lee hosted a meeting of the SonicBlue team at the

oceanfront home she had placed on the market. Her work for SonicBlue included travel to the

Aspen resort for meetings and skiing; to Washington State for technical meetings at a

university; to New York City for more meetings, and to California for a conference in early

March.

17. According to the four invoices, Ms. Lee worked 95.75 hours for SonicBlue in

December 2008, 47 hours in January 2009, 81.25 hours in February 2009, and 69.75 hours in

March 2009, for a total of 293. 7 5 hours. The invoices indicate that she devoted substantial

time to "counsel, strategy and planning," "partner meetings," "investor meetings," and "writing

and editing," and lesser amounts of time to "media relations" and "web site development."

Exactly what is entailed in "counsel, strategy and planning" is not clear, but it appears to

involve internal work as opposed to meetings and contacts with outsiders. Her writing and

editing focused on media releases, promotional and marketing materials, and also on the

SonicBlue business plan, which went through a number of edits, revisions and drafts during her

time with SonicBlue.

18. SonicBlue paid Lee Communications a total of $19,487.65 in five payments between

December 6, 2008 and March 17, 2009. The payment amounts and dates do not correspond to

5 the dates or the amounts of the Lee Communications invoices to SonicBlue, so it is difficult to

correlate any payment to any invoice.

19. The months of January, February and March saw Mr. Lugg and others networking

and traveling in an increasingly desperate effort to attract major investors to the project, and,

in doing so, burning rapidly through the funds that SonicBlue had obtained from the Maine

Technology grant and from other sources not identified in the record.

20. By early March, money was so short that SonicBlue could not fund a trip to Dubai

that Mr. Lugg believed he, along with Sam Merrill, the chief financial officer, needed to make in

order to woo a potential investor. Mr. Lugg told Ms. Lee that available credit cards were

"maxed out" and asked if she would buy his and Mr. Merrill's airline tickets for the flight to

Dubai. Still a believer in Mr. Lugg's vision, she agreed, even though the Consulting

Agreement says nothing about fronting expenses not related directly to the Consultant's own

work.

21. She purchased the two tickets for a total of $2,189.74 through her own credit card.

The expense is listed on the April 10 Lee Communications invoice to Sonic Blue.

22. Mr. Lugg was in communication with Ms. Lee during the period March 7-1.3, while

he and Mr. Merrill waited for their meeting with the potential investor. At one point, he wrote

that "I have shared with everyone that I shall not be leaving the country without a check."

Plaintiff's Exhibit 2 (Richard Lugg e-mail to Tammy Lee March 10, 2009). However, he did

return without a check-the promised meeting never happened.

2.3. The SonicBlue enterprise fizzled in March 2009 for lack of money, although Mr.

Lugg has managed to keep SonicBlue going. He continues to seek to raise capital, although

with seemingly no more success than came in 2008-09. The corporation continues to make

periodic filings with the Securities and Exchange Commission about its investment-related

6 activity, see Plaintiffs Exhibit 3. Although Mr. Lugg may be the only person actively

involved in SonicBlue these days, there is no evidence that would justify piercing the corporate

veil or holding Mr. Lugg personally liable for the obligations of SonicBlue to Lee

Communications or to Tammy Lee.

24. Although Mr. Lugg was critical of Ms. Lee's work for SonicBlue during his

testimony, his criticisms are unfounded. His claim that Ms. Lee was responsible for

fundraising is belied by the other evidence, including his own description of Ms. Lee as a "VP

level marketing, business development, public and investor relations person." Plaintiffs Ex. 2

(Richard Lugg e-mail message to Lindsay Sterling (Dec. 5, 2008). Presumably, if she had been

responsible for recruiting investors, it should have been Ms. Lee, not Mr. Lugg, who traveled

to Dubai in March 2009.

25. For reasons not explained at trial, Ms. Lee and Lee Communications waited six

years-until April 10, 2015-to file their complaint in this action. The complaint names

Tammy Lee as plaintiff, individually "and on behalf of Lee Communications, Inc.," presumably

because Lee Communications has been dissolved. The named defendants were Richard H.

Lugg, Sam Merrill, and SonicBlue Aerospace, Inc. Mr. Merrill and SonicBlue Aerospace have

both been dismissed as defendants, leaving Richard Lugg as the sole remaining defendant.

26. The complaint contains three counts-breach of contract, unjust enrichment and

quantum meruit.

27. Defendant Lugg is entitled to judgment on the breach of contract count because

the contractual relationship that Ms. Lee and/or Lee Communications had plainly was with

SonicBlue, not Mr. Lugg individually. Moreover, there is no basis in the evidence to hold Mr.

Lugg personally liable for SonicBlue's obligations to Ms. Lee and/or Lee Communications.

7 28. The general six-year statute of limitations applies, see 14 M.R.S. § 752. Based on

payment on each invoice being due in SO days, the limitations period arguably had run on the

invoices dated January 10 and February 10, 2009 by the time this case was commenced on April

10, 2009. Payment on the March 10, 2009 invoice became past due on April 10, 2009.

However, the claim for the amounts billed in the April 10, 2009 invoice is plainly not time­

barred.

29. Plaintiff Tammy Lee has not proved that Defendant Richard Lugg is liable to her

for breach of contract, or on theories of quantum meruit and unjust enrichment for the services

and expenses due under the Consultant Agreement. The Law Court has consistently held that

the existence of a valid, enforceable contract often precludes recovery on a theory of unjust

enrichment. See, e.g., id. ~119-20; Nadeau v. Pitman, 1999 ME 104,, 14,731 A.2d 863. The

Consultant Agreement is such a valid and enforceable contract and, although there is some

uncertainty as to whether the consultant was Lee Communications, Inc. or Tammy Lee herself,

there is no doubt that the other party was SonicBlue, not Mr. Lugg.

SO. However, not all of Ms. Lee's claim arises under the Consultant Agreement. Her

purchase of the two plane tickets for Mr. Lugg and Mr. Merrill at Mr. Lugg's request was

clearly outside the scope of the Consultant Agreement. Unlike the expenses she had incurred

and billed for relating to her work under the Consultant Agreement, her advance of funds for

the plane tickets had nothing to do with her consulting work. Also, this was not a gift-Ms.

Lee plainly expected to be reimbursed because she later billed SonicBlue for the cost of the

tickets, but there was no discussion of who would be reimbursing Ms. Lee. The fact that Ms.

Lee looked first to SonicBlue for reimbursement does not preclude her looking also to Mr.

Lugg, at whose request and for whose direct and personal benefit she made the purchase.

8 Likewise, because reimbursement was due May 10, 2009, less than six years before the

complaint was filed in this case, the claim is not time-barred.

3 I. To make out a claim for unjust enrichment,

a claimant must establish that: (1) it conferred a benefit on the other party; (2) the other party had appreciation or knowledge of the benefit; and (3) the acceptance or retention of the benefit was under such circumstances as to make it inequitable for it to retain the benefit without payment of its value.

Tucci v. City ofBiddeford, 2005 ME 7, ~ 14, 864 A.2d 185 (quoted in Me. Eye Care Assocs. P.A. v.

Gorman, 2006 ME 15, ~ 26, 890 A.2d 707).

32. Here, Ms. Lee conferred a benefit upon Mr. Lugg himself at his request; he clearly

accepted the benefit with full knowledge that it was being conferred, and his acceptance and

retention of the benefit was under circumstances that render it inequitable for him to retain the

benefit without paying its value.

33. Defendant Lugg is entitled to judgment on Count I of the complaint, for breach of

contract. Plaintiff Lee is entitled to judgment on Count II, for unjust enrichment. Quantum

meruit, the theory of liability asserted in Count III, is usually considered to apply to the

provision of goods and services rather than to loans of money, so Defendant will be granted

judgment on Count III as well.

IT IS HEREBY ORDERED AND ADJUDGED AS FOLLOWS:

I. Defendant Lugg's motion for judgment, which was taken under advisement at

the close of Plaintiff Lee's case-in-chief is hereby denied.

2. Defendant Richard Lugg is granted judgment on Counts I and III of the complaint.

3. Judgment on Count II of the complaint is granted to Plaintiff Tammy Lee against

Defendant Richard H. Lugg in the amount of $2,189.74, plus pre-judgment and post-judgment

interest. Pre-judgment interest is 3.27% annually and post-judgment interest is 6.27%

annually.

9 4. Neither party having substantially prevailed, each party shall bear its own costs.

Pursuant to M.R. Civ. P. 79(a), the clerk is hereby directed to incorporate this Decision

and Judgment by reference in the docket.

Dated April 20 2017 A. M. Horton, Justice

ATTY FOR DEFENDANT: JOHN BRANSON, ESQ PLAINTIFF, PRO SE LAW OFFICE OF JOHN BRANSON PO BOX 7526 PORTu\ND, ME 04112