Preview:

FOR PUBLICATION

ATTORNEY FOR APPELLANTS: JAMES E. AYERS Wernle, Ristine & Ayers Crawfordsville, Indiana

ATTORNEYS FOR APPELLEES: Brad Crain and Richard Redpath BRUCE D. LACONI SEAN M. CLAPP Clapp Ferrucci Fishers, Indiana BioSAFE Engineering, LLC THOMAS G. BURROUGHS MICHAEL W. HILE RONALD G. SENTMAN Katz & Korin, PC Indianapolis, Indiana

FILED
Jun 18 2012, 9:45 am
of the supreme court, court of appeals and tax court

CLERK

IN THE COURT OF APPEALS OF INDIANA
DON MORRIS and RANDY COAKES, Appellants-Plaintiffs, vs. BRAD CRAIN, RICHARD REDPATH, BIOSAFE ENGINEERING, LLC, STEVE BIESECKER, TYLER JOHNSON, BRANDON ROSS and CHRIS SOLLARS, Appellees-Defendants. ) ) ) ) ) ) ) ) ) ) ) )

No. 32A01-1109-PL-414

APPEAL FROM THE HENDRICKS CIRCUIT COURT The Honorable Jeffrey V. Boles, Judge Cause No. 32C01-1003-PL-12

June 18, 2012 OPINION - FOR PUBLICATION BAILEY, Judge

Case Summary Appellants-Plaintiffs Donald Morris ("Morris") and Randy Coakes ("Coakes") appeal the grant of summary judgment in favor of Appellees-Defendants Brad Crain ("Crain"), Richard Redpath ("Redpath"), and BioSafe Engineering, LLC ("BioSafe")1 upon breach of contract and equitable claims.2 They present a single, consolidated issue: whether the defendants demonstrated their entitlement to summary judgment.3 We reverse. Facts and Procedural History The facts most favorable to Morris and Coakes, the non-movants for summary
1

On July 28, 2011, consistent with the agreement reached by the parties at the summary judgment hearing, the trial court dismissed defendants Steve Biesecker, Tyler Johnson, Brandon Ross, and Chris Sollars. (App. 8.)
2

The Amended Complaint sought a declaratory judgment regarding ownership of BioSafe as well as the appointment of a receiver and an accounting of funds. The averments of the Amended Complaint included allegations of fraud; additionally, the Plaintiffs contended "this case is also brought as a derivative action to establish, fix, and determine the rights of the LLC for recoupment from Brad Crain and Richard Redpath and disgorgement by Defendants to the LLC of any benefits, property, or funds received improperly." (App. 15.) However, after the summary judgment hearing, the trial court ordered the plaintiffs to clarify, in writing, the causes of action upon which they were proceeding. The plaintiffs responded that their theories of recovery were breach of contract, unjust enrichment, and estoppel. (App. 171.)
3

Morris and Coakes have also strenuously argued that the BioSafe operating agreement should be stricken as a "false document." Appellants' Brief at 6. However, Morris and Coakes have abandoned any shareholder derivative claim and do not contend that they are actually members holding shares of record. Rather, they claim an equitable, as opposed to legal, interest. They contend an oral contract was breached and the defendants were unjustly enriched precisely because Crain and Redpath formed an LLC without regard to the plaintiffs' contract rights and contributions. The operating agreement, naming only Crain and Redpath, is support for the proposition that Morris and Coakes were excluded. It is accordingly unclear how admission of the document is prejudicial to them. Nonetheless, Morris and Coakes concede that the operating agreement was admissible evidence, if only for a limited purpose. Appellants' Brief at 6. Essentially, Morris and Coakes concede the authenticity of the document (but challenge the date of signature), as the plaintiffs have alleged that Crain and Redpath in fact established themselves as 50/50 members of BioSafe, albeit wrongfully.

2

judgment, are as follows. In 2006, Morris was employed by Waste Recovery, which provided biological effluent destruction systems products.4 When it became apparent that the company was insolvent, Morris approached Redpath in regard to forming a new company to "take control of the niche industry." (App. 78.) On November 15, 2006, Waste Recovery ceased doing business; Morris paid a rent installment and agreed to execute a five-year lease for the premises previously occupied by Waste Recovery. He initiated remodeling of the premises and began to investigate financing. Later in November, Crain, Coakes, Redpath, and Morris conducted a conference call regarding the new business. Morris and Coakes drafted a spreadsheet of proposed ownership shares (45% to Morris, as President, 25% and 20% to Crain and Redpath, respectively, as Vice-Presidents, and 2% each to Coakes, Biesecker, Johnson, Ross, and Sollars). After negotiation, the shares allocation was changed to 40% for Morris, 30% for Crain, and 20% for Redpath (with the others retaining 2% each). Marketing materials were distributed indicating that Redpath, Morris, and Crain were "principals" of BioSafe. (App. 103.) Nonetheless, in January of 2007, Articles of Organization for BioSafe were filed with the Indiana Secretary of State, indicating that Crain and Redpath were the sole members, each having 50% ownership. In August of 2007, Crain advised Morris that a building in Brownsburg had been leased in anticipation of acquiring Waste Recovery assets. The following month, Morris asked Crain about signing to purchase Waste Recovery assets, and was told that Crain and

4

Apparently, the products were used in management of animal carcasses.

3

Redpath had been representing that they were each 50/50 owners. Later that month, BioSafe successfully bid for the assets of Waste Recovery. Redpath advised Morris that new investors now owned 50% of BioSafe. The new owners of record were Justin Bisland ("Bisland") and LPM Investments, LLC. In October of 2007, Bisland came into the BioSafe offices and fired Morris. Morris was unable to locate the electronic document he had drafted with regard to shared ownership; he reached the conclusion that it had been deleted from the company files.5 On March 5, 2010, Morris and Coakes filed their complaint. An amended complaint asserted that Morris and Coakes had equitable interests and contractual rights in BioSafe and that they had standing to bring a shareholder derivative action.6 They sought the appointment of a receiver, an accounting and disgorgement of funds, and BioSafe's dissolution. The defendants answered, denying that Redpath and Crain had created a false document, made false representations, brought about the plaintiff's ouster, diverted funds, or met with Morris to discuss ownership participation. The defendants also denied that Morris and Coakes held an equitable interest, or that they had standing to bring a shareholder derivative claim. On February 8, 2011, the majority of the defendants moved for summary judgment; Crain and Redpath subsequently joined in the motion. The parties made their respective designations of materials. The trial court conducted a hearing on July 26, 2011, at which argument of counsel was heard. BioSafe's counsel argued that the shareholder derivative
5

There is no indication of record that Morris and Coakes sought e-discovery (discovery of electronically stored information).
6

See Ind. Code

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