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LLC v. Sachs

United States District Court, D. Minnesota

March 30, 2017

4BRAVA, LLC, Plaintiff,
v.
DANIEL SACHS, DSC PRODUCTS, INC., and DSC PRODUCTS HOLDING, LLC, Defendants. LEDUC GIFTS & SPECIALTY PRODUCTS, LLC, d/b/a Signature USA, Plaintiff,
v.
DANIEL SACHS, DSC PRODUCTS, INC., DSC PRODUCTS HOLDING, LLC, Defendants. DSC PRODUCTS, INC., Counter Claimant,
v.
LEDUC GIFTS & SPECIALTY PRODUCTS, LLC, d/b/a Signature USA, Counter Defendant. DSC PRODUCTS, INC., Cross Claimant/Third Party Plaintiff,
v.
BRUCE LEDUC, JENNEA LEDUC, MARCI LEDUC, and 4BRAVA, LLC, Cross Defendants/Third Party Defendants.

          Adrianna Shannon, SHANNON LAW, LLC, for 4Brava, LLC and LeDuc Gifts & Specialty Products, LLC.

          Bonnie M. Smith, SHANNON LAW, LLC, for 4Brava, LLC, LeDuc Gifts & Specialty Products, LLC, Bruce LeDuc, Jennea LeDuc, and Marci LeDuc.

          Timothy J. O'Connor, LIND JENSEN SULLIVAN & PETERSON, PA, for LeDuc Gifts & Specialty Products, LLC, Bruce LeDuc, Jennea LeDuc, and Marci LeDuc.

          Troy J. Hutchinson, ROCK HUTCHINSON, PLLP, for Daniel Sachs, DSC Products, Inc., and DSC Products Holding, LLC.

          MEMORANDUM OPINION AND ORDER

          JOHN R. TUNHEIM Chief Judge

         These two related cases involve an abandoned business venture that sought to sell tumblers to Walmart and other large retailers under the name Three Two Eight, LLC (“Three Two Eight”). On one side of the deal were Daniel Sachs and his companies DSC Products, Inc. (“DSC Products”) and DSC Products Holding, LLC (collectively, “Defendants”). On the other side were the LeDuc family, including Bruce, [1] his daughter Jennea, and his wife Marcellas (collectively “the LeDucs”), and their companies, LeDuc Gifts & Specialty Products, LLC (“Signature”) and 4Brava, LLC (“4Brava”) (collectively, “Plaintiffs”).

         Before the Court are six motions and objections to an order of the Magistrate Judge. Plaintiffs seek affirmative summary judgment against Defendants in both cases.

         Plaintiffs and the LeDucs also seek dismissal of DSC Products' counterclaims, crossclaims, and third-party complaint claims.

         For the reasons that follow, the Court will grant in part and deny in part 4Brava's motion for affirmative summary judgment and deny Signature's motion for affirmative summary judgment. The Court will order the windup and termination of Three Two Eight. The Court will grant the motion to dismiss settled claims and Signature's, 4Brava's, and the LeDucs' motions for summary judgment on Defendants' counterclaims, crossclaims, and third-party complaint claims.

         BACKGROUND I. FACTUAL BACKGROUND

         A. Initial Discussions

         In early March 2014, Sachs contacted Bruce about supplying DSC Products with tumblers. (Decl. of Troy J. Hutchinson, Ex. A (“Sachs Dep.”) at 18:23-19:5, 69:19-70:14, Oct. 20, 2016, Docket No. 147; [2] Decl. of Adrianna Shannon (Shannon Decl.), Ex. 2 (“B. LeDuc Decl.”) ¶ 6, Aug. 15, 2016, Docket No. 118.) Bruce, along with Marcellas and Jennea, were “governors/managers” of Signature who owned injection molds and had been “designing, manufacturing, and selling double-wall thermal tumblers to individuals and retail establishments since 2004.” (B. LeDuc Decl. ¶¶ 2, 4-5, 21; see also Shannon Decl., Ex. 3 (“J. LeDuc Decl.”) ¶ 4.)[3] Sachs and DSC Products had a preexisting relationship with Walmart, and Sachs testified that he sought out Bruce because Sachs' prior manufacturer attempted to sell directly to Walmart. (Decl. of Daniel Sachs (“Sachs Decl.”) ¶¶ 2, 4, Oct. 19, 2016, Docket No. 145; Sachs Dep. at 70:9-14.)

         On April 23, 2014, Signature sent Sachs a price list for some of its tumblers. (Sachs Dep. at 93:11-23; B. LeDuc Decl. ¶ 7; Shannon Decl., Ex. 4.) In May 2014, Signature sent Sachs product samples, which Sachs used in sales presentations to Walmart. (B. LeDuc Decl. ¶¶ 8; Sachs Dep. at 71:16-72:10.) Bruce and Sachs met in person with a Walmart buyer, Jason Rogers, in August 2014. (B. LeDuc Decl. ¶¶ 14-21; Sachs Dep. at 147:17-148:10.) At that meeting, Sachs and Bruce pitched Rogers American Tumbler products and showed him Signature's catalog. (Sachs Dep. at 148:12-149:3, 169:6-8; Shannon Decl., Ex. 5 (“Rogers Dep.”) at 24:19-27:16.)

         Around September 2014, Walmart committed to “ordering 24 items for 200 stores, ” which is referred to as “Flow 1.” (B. LeDuc Decl. ¶ 24; see also Rogers Dep. at 29:1-24, 120:2-17.) Four of Signature's injection molds could fill the order, but needed some modifications to use the Tritan material that Walmart required. (B. LeDuc Decl. ¶¶ 25-27; see also Rogers Dep. at 116:15-117:13; Shannon Decl., Ex. 50 (December 2014 email chain, including Sachs asking about the cost and time it would take “to convert the current super traveler into Tritan”).)

         Bruce allegedly told Sachs that Sachs would “be responsible for paying half of the costs to modify Signature USA's molds” - estimated at “between $30, 000 and $40, 000” - because Signature did not want to “bear the risks on the [Walmart] orders alone.” (B. LeDuc ¶ 28.) In September 2014, Sachs emailed a manufacturer for estimates regarding his “friend Bruce LeDuc” who was “looking for a lid for his coffee mug.” (Shannon Decl., Ex. 7.)

         In September 2014, Sachs emailed Bruce and informed him that he submitted samples for a second, larger order with Walmart, referred to as “Flow 2.” (Shannon Decl., Ex. 9; B. LeDuc Decl. ¶¶ 36, 38-39.) Bruce explained that Sachs said this additional order would not require delivery until later in the next year; however, Walmart agreed to a faster timeframe than anticipated, which required the parties to fill Flow 2 early in 2015 rather than later that year. (B. LeDuc Decl. ¶¶ 38-39.)

         B. Purchasing Molds

         Bruce decided Signature would need to “have some new equipment built, ” including copying some of its existing molds, in order to meet the needs of the new order. (Id. ¶¶ 40-41.) Bruce allegedly told Sachs that Signature was not interested in funding the new molds for the second order, but because Sachs had already committed, Signature agreed to “commission the design and build of the additional needed molds and equipment, ” if Sachs provided “copies of the purchase orders from [Walmart] and funds . . . in advance.” (Id. ¶ 43.) Bruce stated, “Sachs agreed to assist with financing the design and build of the new molds and equipment needed to fill the [Walmart] orders, but only if he would have a guarantee of receiving his money back upon completion of the Flow 2.” (Id. ¶ 47; see also J. LeDuc ¶ 27 (stating that Sachs agreed to contribute to the molds, but that “he wanted at least some of his money back if Three Two Eight failed and the partnership was dissolved in less than three years”).)

         Sachs disputes the LeDucs' characterization of the purchase of the molds. Sachs testified that he initially intended to purchase the product from Signature; but, once it became apparent that Signature could not fulfill the Walmart orders with its existing molds, he testified that “Bruce and [Sachs] decided on a verbal agreement that [they] were going to . . . purchase tooling together, and [they] were going to start a business together that sold product to the mass retailers. And [they] agreed that [they] were going to split the tools, ” as well as the costs, profits, and losses. (Sachs Dep. at 72:13-74:4.) But, Sachs could not identify a particular date or a specific conversation in which they reached this agreement. (Id. at 74:5-10.) Sachs only stated that the verbal agreement occurred before the confirmation of Walmart's Flow 1 order, at some point between April 2014 and September 2014. (Id. at 109:17-110:24, 171:22-172:1.)

         Sachs also testified that either he purchased the molds to own himself or their partnership purchased the molds making him a co-owner. (See, e.g., Id. at 125:7-15; Sachs Decl. ¶ 7-11.) However, Sachs thought that he would receive reimbursement for his financing of the molds if the partnership ended, and admitted that the parties never discussed Sachs keepings the molds if the partnership fell through, (see Sachs Dep. at 125:2-25), which does not necessarily conflict with the LeDucs' characterization of the arrangement - aside from whether Sachs was considered to have “purchased” or “invested” in the tools. Sachs also stated that Sachs and Bruce “agreed that [they] would invest in new tooling.” (Id. at 55:23-56:4.) Sachs admitted no written contract exists stating Sachs would own the tools. (Id. at 123:25-124:14.) But Sachs testified to his belief that “purchasing, ” providing money for the molds, equated to “ownership.” (Id. at 74:12-78:15, 124:18-19.) Sachs specifically stated that “[i]f I purchase something with my money, then yes, I own - I have ownership in that.” (Id. at 78:14-15.)

         The record evidence shows that Signature entered into agreements with Aroplax Corporation (“Aroplax”) to create the additional molds. (See Shannon Decl., Ex. 10; B. LeDuc Decl. ¶ 32.) Signature corresponded directly with Aroplax in creating the molds. (Shannon Decl., Ex. 11; B. LeDuc Decl. ¶ 56.) Sachs was not directly involved in discussions with Aroplax about the molds. (Shannon Decl., Ex. 11 (showing the LeDucs and Aroplax did not copy Sachs on emails about the mold designs); Sachs Dep. at 89:12-90:2 (Sachs acknowledging he did not have “a whole lot” of involvement in the design of the molds).) Sachs recognized that “Signature, in Aroplax's eyes, was the owner of the tools, on paper” because “Signature gave Aroplax the purchase orders for the tools.” (Sachs Dep. at 208:8-14.)

         C. Three Two Eight LLC

         Sachs “broached the idea of a partnership between” DSC Products and Signature after they met with Rogers, but Bruce stated he “was not interested in exposing Signature USA to the risks required to sell to mass-market discount retailers like [Walmart], ” and he did not want to “creat[e] a compet[i]tor of Signature USA.” (B. LeDuc Decl. ¶ 22.)

         After confirming Flow 2, Sachs “rais[ed] the partnership idea again[, ] suggesting that [Sachs and the LeDucs] split profits and losses on the [Walmart] transactions.” (Id. ¶ 44.) According to Bruce, he responded that the LeDucs would only consider a partnership if it involved a “separate company which would be established to share both the costs and the profits equally.” (Id. ¶ 45.)

         In October 2014, Sachs flew to Minnesota to meet with Bruce and Jennea about forming a partnership. (Sachs Dep. at 202:15-19; B. LeDuc Decl. ¶ 48.) On November 13, 2014, Sachs stated that he formed DSC Products Holding to represent his part of the new partnership. (B. LeDuc Decl. ¶ 57; Shannon Decl., Ex. 12; J. LeDuc Decl. ¶ 11.) Sachs created this new company, rather than using DSC Products because he “wanted to have it separate from [his] everyday business that [he] still had at the time.” (Sachs Dep. at 185:22-186:3.) On November 26, 2014, Jennea and Marcellas LeDuc formed 4Brava to represent “the LeDuc branch of the partnership.” (B. LeDuc Decl. ¶ 59; J. LeDuc Decl. ¶ 11.)

         According to Bruce and Jennea, Sachs gave Jennea permission to name and register their partnership as a Minnesota LLC, and Jennea did so, filing articles of incorporation and paying certain fees to register Three Two Eight on November 26, 2014. (B. LeDuc Decl. ¶¶ 57, 60; J. LeDuc Decl. ¶ 12.) The parties agreed to split costs and profits equally between 4Brava and DSC Products Holding. (Sachs Dep. at 33:21-34:25; B. LeDuc Decl. ¶ 50; J. LeDuc Decl. ¶ 6.) Bruce and Jennea stated that the parties agreed that the LeDucs would have majority control in decision-making, (B. LeDuc Decl. ¶ 51; J. LeDuc Decl. ¶ 6), but Sachs testified that they “didn't get into much” with regard to decision-making, (Sachs Dep. at 203:21-204:4).

         On December 4, 2014, Sachs emailed Signature the Walmart purchase order for Flow 1. (B. LeDuc Decl. ¶ 62; Shannon Decl., Ex. 13.) The purchase orders were in DSC Products' name, but Jennea and Bruce stated that Sachs assured them the orders would be transferred to Three Two Eight's name. (J. LeDuc Decl. ¶ 21; B. LeDuc Decl. ¶¶ 64, 69.)

         At the same time, Bruce sent orders for the modified and new molds to Aroplax in December 2014 on Signature's account because Aroplax “would not agree to fill orders for Three Two Eight or for Sachs or his companies because they had not worked with them in the past.” (B. LeDuc Decl. ¶¶ 75-76; see also J. LeDuc. Decl. ¶ 23.) Bruce told Sachs that Signature would allow this arrangement “only if the [Walmart] purchase orders were transferred to Three Two Eight's name” and payments from Walmart were “scheduled to be paid in a Three Two Eight bank account which both parties could access.” (B. LeDuc Decl. ¶ 77.) Jennea stated that Signature agreed to act as guarantor for Three Two Eight's services with Aroplax “in exchange for Three Two Eight's agreement to purchase samples from Signature USA, to rent Signature USA's molding and equipment for production of Three Two Eight's tumblers, and to pay for[]the expenses incurred.” (J. LeDuc Decl. ¶ 24.) According to Bruce, Sachs agreed to change the account name with Walmart. (B. LeDuc Decl. ¶ 77.)

         On January 6, 2015, Sachs sent Bruce an email stating that he had received the purchase order for Flow 2 with Walmart. (Id. ¶ 79.) On the same date, Sachs told the LeDucs to place orders in Signature's name for Three Two Eight for both Flow 1 and Flow 2 with Aroplax, and noted “[a]s soon as our new company is set up we can submit a change order to Aroplax from our new company.” (Shannon Decl., Ex. 14; B. LeDuc Decl. ¶ 80.)

         Bruce stated that on January 15, 2015, Jennea emailed Sachs a draft operating agreement for Three Two Eight and “a draft trademark assignment agreement, ” and stated “that [she] would be forwarding an agreement regarding use of molds.” (B. LeDuc Decl. ¶ 82.) The parties held a conference call around February 10, 2015, in which the parties agreed once again to split profits and losses equally, and that Jennea, Bruce, and Sachs would each have an equal vote in decision-making. (Id. ¶¶ 85, 87-88.) According to Bruce, the parties also discussed a lease agreement for Three Two Eight's use of Signature's molds, under which Sachs would be reimbursed for three years, and after that time, Three Two Eight could continue to use the molds until operation ceased. (Id. ¶ 89.) Under that plan, “Signature USA would maintain ownership of the molds, insurance on the molds, and maintain the molds.” (Id.) According to Bruce, Sachs agreed to the plan “as long as he was able to receive a return of funds toward the molds if Three Two Eight, LLC was no longer operating in less than three years.” (Id.)

         On February 12, 2015, Signature sent Sachs a draft lease agreement reflecting these terms, which Sachs forwarded to his attorney. (Id. ¶¶ 91-92; Shannon Decl., Ex. 15.) Sachs testified the parties did not use the word “lease” until Signature sent this email and that this email constituted the first time Signature asserted ownership over the molds. (Sachs Dep. at 51:14-53:6.) Sachs also forwarded the proposed agreement to his wife, Celestina Sachs (“Celestina”), who was neither an owner in Three Two Eight nor privy to any discussions regarding the partnership. (Shannon Decl., Ex. 16 (“C. Sachs Dep.”) at 7:14-24, 10:8-10, 12:4-6, 13:5-8.) Celestina read through the contract, and “two things really stuck out to” her; she was surprised by the decision-making provision, giving the LeDucs the majority in decision-making, and by the tool lease agreement because it was her “understanding that the tools were co-owned.” (Id. at 13:9-14:13.) Celestina asked Sachs about ownership of the tools and Sachs told her, “Bruce told me not to worry. He only did that for tax reasons.” (Id. at 15:3-8.) Celestina told Sachs not to sign the agreement. (Id. at 17:7-8.) Then, around February 13, 2015, Sachs and Celestina held a conference call with Bruce and Jennea, and Sachs “echo[ed]” Celestina's concerns regarding the lease. (Id. at 16:22-17:19; B. LeDuc Decl. ¶¶ 93-94.) In response, Bruce and Jennea made clear that they viewed the tools as Signature's property, and that ownership of the tools was not negotiable. (See C. Sachs Dep. at 17:20-18:4; B. LeDuc Decl. ¶¶ 94-95, 97.)

         After this conversation, Sachs continued making payments on the molds, including one the same day. (B. LeDuc Decl. ¶ 98; Sachs Dep. at 216:10-13; see also Shannon Decl., Ex. 18.) Sachs testified that he “started looking at the books, and . . . realized that . . . [he] had put in 400, 000-plus dollars, ” and that in moving forward without assurances that he would get the molds he “was taking a gamble.” (Sachs Dep. at 193:11-194:6, 216:10-21.) However, the only documented payment in the record by that time was Sachs' initial contribution of $40, 602.50 to the molds. (Shannon Decl., Ex. 17.)

         Soon after the telephone conference, on February 23, 2015, Signature threatened to stop production until Sachs assured Signature that the Walmart orders and proceeds were in Three Two Eight's name and went directly into a Three Two Eight account. (B. LeDuc Decl. ¶¶ 100-01; J. LeDuc Decl. ¶ 32; see also Shannon Decl., Exs. 19-21.) For example, on February 23, 2015, the LeDucs' attorney emailed Sachs' attorney, and copied the parties, regarding the remaining disputes, stating:

All of this is for nothing, however, if we cannot at a minimum have the Walmart POs assigned to Three Two Eight today, and have the Walmart funds placed in a Three Two Eight bank account. If we do not have such an assignment agreement and evidence that Walmart has been directed to remit funds to Three Two Eight rather than to your client, my client will be forced to stop all manufacturing and production on the Walmart orders today . . . .

(Shannon Decl., Ex. 20.) Bruce also emailed Jennea and Sachs later that day, asking for confirmation on the creation of a joint account and “that Walmart [would] be wiring their payments to the joint account for the two POs.” (Id., Ex 21.) Sachs responded a few hours later:

Bruce, I do not know how long it will take for the paperwork to be submitted and all proper information [to] be setup at Walmart. I called the accounting department there today and I was not able to get a hold of anyone. I left messages and I will continue again tomorrow. What I do know is that I promise that I will get this set up so that we all have security knowing that the money from [W]almart PO's will be funded into our new partnership.

(Id.) Sachs sent a second email later that night suggesting that they use a different bank for the joint account, and asserting:

Regarding Walmart, just so you know there are not two purchase orders for Walmart, there will be close to 100 P.O.'s on these two orders. Like I mentioned earlier, I don't know at this point how to switch the remit to address. I need to speak to someone who can walk me through the process. But I am working on it! I don't know how long it will take but I will keep you updated the second I know.

(Shannon Decl., Ex. 22.)

         Also on February 23, Sachs and Jennea corresponded by text message where Sachs said he “left a message for the accounting department and [he would] again continue to try until [he got] a hold of someone” to change the remittance for the Walmart payment, but that it was “a big corporate frustrating circle every time [he] need[ed] to change a major part of [his] supplier ID.” (Id., Ex. 23; J. LeDuc Decl. ¶ 43.) Sachs testified that he was referring to changing the bank where Walmart directed payment, rather than changing the supplier of record. (Sachs Dep. at 233:20-234:16.) Sachs never intended or attempted to switch the purchase orders or supplier information from DSC Products to Three Two Eight with Walmart. (Id. at 230:1-231:5.) Sachs testified that it would have been “impossible for Walmart to issue a [purchase order] in the name of Three Two Eight” because the company was new and did not have a “Dun & Bradstreet number” or “credibility.”[4] (Id. at 226:3-23.) Sachs testified that he told Bruce this fact, but could not think of when he did so. (Id. at 226:3-227:5.) Sachs also could not identify where he learned that Walmart would not do business with a company like Three Two Eight. (Id. at 227:23-228:13.)

         Sachs admitted that the only change he attempted to make was a March 26, 2015 request to route the Walmart payments directly into the Three Two Eight bank account. (Id. at 227:1-5; Shannon Decl., Ex. 29.) On March 27, 2015, Sachs emailed Bruce and Jennea stating he “requested a bank change directly to our new account 328 LLC, ” after which “all money will go directly to this account.”[5] (Shannon Decl., Ex. 24; see also Sachs Dep. at 251:2-23.) However, Walmart rejected Sachs' request because DSC Products was the supplier of record, (Sachs Dep. at 227:1-5, 231:12-19); therefore Walmart continued to deposit the payments into DSC Products' account, and Sachs transferred some of the funds into Three Two Eight's joint account himself, (see Shannon Decl., Exs. 43-44; J. LeDuc Decl. ¶ 72).

         According to the LeDucs, Signature decided to move forward on the Walmart orders based on Sachs' representations and the fact that he continued to act as though the partnership would proceed. (B. LeDuc Decl. ¶¶ 107, 113; J. LeDuc Decl. ¶ 46.) Production started on the Walmart orders in early March 2015. (Sachs Dep. at 216:2-6.) On March 17, 2015, Sachs entered into two contracts with Biscayne Sales and Marketing, Inc. (“Biscayne”), one for Biscayne to work for DSC Products with Walmart and Sam's Club, and one for Biscayne to represent Three Two Eight products in sales to Walmart. (Shannon Decl., Ex. 27; id., Ex. 53 ¶ 4-6; id., Ex. 54 ¶ 5; B. LeDuc Decl. ¶ 115.)

         Bruce and Sachs also pursued sales with Menards on behalf of Three Two Eight. In April 2015, Bruce met Doug McCauley, a sales representative with Menards, to discuss Three Two Eight selling tumblers to Menards. (B. LeDuc Decl. ¶ 121; see also Sachs Dep. at 267:6-24.) According to Jennea, Menards agreed to purchase tumblers from Three Two Eight in late April 2015. (J. LeDuc Decl. ¶ 52.) On May 4, 2015, McCauley sent an email to Bruce and Sachs telling them to get the documents together for a purchase order from Menards, and Sachs responded “I am on it, ” copying Bruce. (Shannon Decl., Ex. 28.) Jennea and Bruce stated that in May 2015, Sachs also sent Jennea an agreement for sales to Menards and Target, which Sachs had already signed, and Jennea signed and returned; however, no such agreement is provided in support. (B. LeDuc Decl. ¶ 116; J. LeDuc Decl. ¶¶ 53-54.)

         According to Bruce, Sachs expressed uncertainty in a May 2015 call about whether Menards would agree to purchase from Three Two Eight. (B. LeDuc Decl. ¶ 124.) But then in a conference call with McCauley, Bruce learned Sachs had been talking to McCauley independently and that Sachs had already learned that Menards would issue a purchase order. (Id.) Sachs completed all of the Menards paperwork under the name DSC Products, rather than Three Two Eight. (Id. ¶ 125; Shannon Decl., Exs. 30-31.) Sachs stated the reason for using DSC Products' name was that Three Two Eight “had no history.” (Sachs Dep. at 264:13-25.) On May 8, 2015, Sachs and Jennea posted two job openings with Three Two Eight, and Three Two Eight hired Sachs' bookkeeper, Deborah O'Leary, as Three Two Eight's bookkeeper. (J. LeDuc Decl. ¶¶ 55-57.)

         Signature and Three Two Eight completed the Walmart orders “as scheduled.” (J. LeDuc Decl. ¶ 46.) There is not clear evidence in the record regarding precisely when the parties completed the Walmart orders, but the record reflects an expected end date of May 8, 2015. (See Shannon Decl., Ex. 51.)

         D. Breakdown within Three Two Eight

         Bruce stated that on May 14, 2015, Sachs informed Bruce and Jennea that Sachs wanted to dissolve the partnership. (B. LeDuc Decl. ¶ 126.) In a May 18, 2015 email, Sachs proposed dissolving Three Two Eight; under Sachs' proposal, the parties would split the Walmart revenue, DSC Products would take over the Menards order and any future Walmart orders, and the parties would split the tools. (Shannon Decl., Ex. 33; B. LeDuc Decl. ¶ 128; J. LeDuc Decl. ¶ 69.) In that same email, Sachs estimated that the partnership still owed Aroplax $736, 000.00. (Shannon Decl., Ex. 33.)

         On May 20, 2015, Jennea emailed Sachs regarding the location of the Walmart deposits after she learned the payments to Three Two Eight's account did not come directly from Walmart. (Id., Ex. 38; B. LeDuc Decl. ¶ 131; J. LeDuc Decl. ¶¶ 75-77.) According to Jennea, “Sachs responded by simply stating that [Walmart] sends checks to DSC [Products].” (J. LeDuc Decl. ¶ 72.) The next day, Jennea emailed Sachs stating that 4Brava would transfer money to Three Two Eight in order to pay Aroplax's outstanding bills, but only if Sachs put the Menards purchase order in Three Two Eight's name and provided 4Brava with a schedule of Walmart's expected payments to the Three Two Eight account. (Shannon Decl., Ex. 36.) Also, on May 27, 2015, Jennea emailed Sachs a notice of special meeting to dissolve the partnership, but Sachs never responded. (Id., Ex. 34; B. LeDuc Decl. ¶ 136; J. LeDuc Decl. ¶ 79.) Around the same time, Sachs sought to fill the Menards order with Aroplax on his own. (Shannon Decl., Ex. 35; B. LeDuc Decl. ¶ 130; J. LeDuc Decl. ¶ 71.) On May 28, 2015, Aroplax refused, stating that it recognized Signature as the owner of the molds and that it could not complete DSC Products' order without written approval from Signature. (Shannon Decl., Ex. 55.) Sachs responded by claiming ownership of the molds and threatening that Signature would “be held responsible for any [lost] business opportunities.” (Id.)

         On June 3, 2015, Jennea texted Sachs asking about the Walmart deposits and requesting that Sachs “return the money to Three [Two] Eight's bank account.” (Shannon Decl., Ex. 39 at 94.) Sachs responded that he would not return the money “until the tools are acknowledged as DSC[‘s].” (Id.; J. LeDuc Decl. ¶ 87.) On June 15, 2015, Jennea learned from an affiliate of Biscayne that Sachs completed a Menards contract under the name DSC Products, rather than Three Two Eight. (J. LeDuc Decl. ¶ 89.) On June 24, 2015, Jennea emailed Sachs stating the molds could be used to fulfill new Three Two Eight obligations if: third-party vendors, including Aroplax, were paid in full on behalf of Three Two Eight for all prior orders; third-party vendors, including Aroplax, were paid in advance for the future order; and Three Two Eight paid Signature for the use of the molds. (Shannon Decl., Ex. 41; Sachs Dep. at 265:12-266:8.) Sachs did not respond to the email. (Sachs Dep. at 266:4-8.) Sachs eventually commissioned several of his own molds from Aroplax. (See Id. at 139:1-147:1; B. LeDuc Decl. ¶ 138.)

         E. The Parties' Financials

         Sachs estimated DSC Products received $1.5 million from Walmart, but acknowledged that Walmart records showing $1.7 or 1.8 million were likely accurate. (Sachs Dep. at 252:23-253:19; see also Shannon Decl., Ex. 56 at 1.) Three Two Eight had $672, 782.68 in outstanding debts on May 27, 2015, (Shannon Decl., Ex. 56 at 13), and Plaintiffs state that Three Two Eight incurred an additional $96, 847.15 in interest, costs, and penalties.

         Aroplax stopped or threatened to stop production on Signature's orders along with Three Two Eight's orders until they received payment. (J. LeDuc Decl. ¶ 92; B. LeDuc Decl. ¶ 139.) In order to satisfy Three Two Eight's obligations, 4Brava and Three Two Eight had to pay third-party vendors and creditors without any of the Walmart income. (B. LeDuc Decl. ¶ 140; J. LeDuc Decl. ¶ 91.) 4Brava contributed $535, 003.12, which Three Two Eight paid to outside vendors, and Three Two Eight “borrowed” $206, 552.68 from Signature to pay third parties. (Shannon Decl., Ex. 56 at 14.) Sachs admitted that either 4Brava or Signature paid Aroplax $630, 000.00, following the breakdown of the partnership. (Sachs Dep. at 258:7-18.) Sachs valued the disputed tools at $395, 000.00. (Id. at 257:6-7.) Sachs conceded he has received more than the amount of money he invested in the molds from the Walmart revenue. (Id. at 217:6-11.)

         F. Sachs' Other Litigation

         Plaintiffs note that another manufacturer, Williams Industries, Inc. (“Williams”), filed a counterclaim against DSC Products in the Southern District of California. There, Williams alleged that DSC Products failed to pay for Williams' manufacturing of tumblers for Walmart. (See Shannon Decl., Ex. 60.) According to the Williams' president, DSC Products entered into an agreement that Williams would be the sole manufacturer for Walmart's orders of tumblers through DSC Products. (Id., Ex. 61 ¶ 7.) DSC Products placed orders with Williams in January 2014, and Williams delivered tumblers to Walmart and invoiced them to DSC Products between April and June 2014, (id. ¶¶ 9-10, 12-13), which was the same time Sachs and Bruce discussed forming a joint venture, (see B. LeDuc Decl. ¶¶ 6-11). Sachs then refused to pay Williams for the products, leaving, according to Williams, more than $1.4 million in unpaid invoices. (Shannon Decl., Ex. 61 ¶¶ 13-17.) Williams contended that Sachs never objected to their arrangement, and that “[i]t was only when DSC[ Products'] payments for the Walmart orders became due, and Williams began pursuing DSC [Products] for the over $1.4 million owed to Williams, that Mr. Sachs began alleging ‘fraud' and refusing to pay its outstanding obligations.” (Id., Ex. 62 ¶ 13.)

         G. Relationship Between Defendants

         Sachs testified his monetary contribution to the molds came from DSC Products. (Sachs Dep. at 195:5-11.) When asked whether the money came from DSC Products Holding, Sachs said “[i]t's possible that [he] moved money from DSC Products, Inc. to DSC Products Holding for some of it, but the reality is . . . the money came from DSC [Products], from Dan Sachs personally and through [his] business.” (Id. at 195:12-17.) Sachs further specified that the funds “came out of DSC Products' business account, ” and when asked if that meant the money came “from Dan Sachs personally or DSC Products, Inc. or DSC [Products] Holding, LLC, ” he responded, “[i]t doesn't really matter where it came from. It came from DSC Products.” (Id. at 195:22-196:6.)

         O'Leary did not set up separate accounting records for DSC Products Holding, “because DSC [Products] Holding[] really had no activity.” (Shannon Decl., Ex. 32 (“O'Leary Dep.”) at 13:8-12, 14:5-7; Sachs Dep. at 186:7-17.) O'Leary also did not keep a separate ledger for Three Two Eight. (O'Leary Dep. at 13:16-14:4.) O'Leary acknowledged that she combined the accounts because “all of the bills and the product [were] under Three Two Eight. . . . [b]ut all of the invoices and revenue were under DSC Products, Inc.” (Id. at 53:18-25.) O'Leary agreed that “you can't do business like that.” (Id. at 54:5-6; see also Id. at 16:2-4 (“I started realizing that I can't have the inventory in one company and the invoicing in another company.”).)

         DSC Products' accounting records also included some of Sachs' personal expenses, including more than $300, 000.00 for settlement of a lawsuit brought against Sachs personally. (Id. at 32:21-33:13; Shannon Decl., Ex. 44 at 2.) Finally, Sachs took $513, 644.00 in distributions from DSC Products' account during 2015. (O'Leary Dep. at 38:3-14; Shannon Decl., Ex. 44 at 2.)

         H. Sachs' Declaration

         In response to the present motions, Defendants rely almost solely on a declaration from Sachs dated October 19, 2016 - the day of Defendants' responses in opposition to the present motions. (See generally Sachs Decl. ¶¶ 1-30.) Plaintiffs contend that the Court should disregard Sachs' declaration as a sham declaration created to fabricate a fact dispute. The Eighth Circuit has “held that parties to a motion for summary judgment cannot create sham issues of fact in an effort to defeat summary judgment.” RSBI Aerospace, Inc. v. Affiliated FM Ins. Co., 49 F.3d 399, 402 (8th Cir. 1995). If an affidavit intended to prevent summary judgment conflicts with prior testimony from the affiant, it “will preclude summary judgment only if the prior testimony reflects confusion on the part of the witness and the affidavits explain why the earlier testimony is in conflict with the affidavits.” Id. (citing Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d 1361 (8th Cir. 1983)). RSBI Aerospace involved clear conflicting testimony: the new affidavits stated the plaintiff was not an employee on a certain date, when the same witnesses previously affirmed his employment status. Id.

         Here, Plaintiffs rely on a series of alleged contradictions that are not as stark. Generally, Sachs' deposition reflects uncertainty over the ownership of the molds and the details of the Three Two Eight partnership, and portions of Sachs' declaration reflect more certainty in a contradictory manner. Thus, while the Court will not entirely disregard Sachs' declaration as a “sham, ” the Court will look to all the evidence presented when determining if genuine issues of material fact remain. In particular, there are several statements in the ...


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