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Top Ridge Investments, LLC v. Anichini, Inc.

United States District Court, D. Vermont

July 14, 2017


          OPINION AND ORDER (DOCS. 67, 68)

          Geoffrey W. Crawford, United States District Court Judge

         This lawsuit arises out of a failed attempt by plaintiff Top Ridge Investments, LLC, ("Top Ridge") and counterclaim defendants Jeffrey Tauber and Royal Heritage House, LLC ("RHH") to acquire Anichini, Inc. and related companies (collectively "Anichini") and to hire Anichini's principal, Susan Dollenmaier, as an executive in the reconstituted company. (See Doc. 75 at 1.)

         The action was originally filed in New York Supreme Court, County of New York, and removed to the United States District Court for the Southern District of New York ("SDNY") on the basis of diversity of citizenship. It was then transferred to the District of Vermont.

         Plaintiff Top Ridge is a single purpose entity formed by RHH and Mr. Tauber to purchase Anichini's commercial loan from People's United Bank, N.A. ("People's") (Doc. 75 at 7.) The loan is in default. (Doc. 68-1 ¶¶ 9, 10; Doc. 68-8 at 3.) Top Ridge seeks a judgment for the amount due ($569, 462.00 plus interest, late fees, and costs of collection) as well as a court order transferring all assets of Anichini, including an assignment of trademarks, to Top Ridge. (See Doc. 68 at 1-2; Doc. 76-1 ¶ 10.) It also seeks to enforce a personal guaranty against Ms. Dollenmaier. (Doc. 1-1, Complaint, ¶¶ 37-41.)

         In response, Anichini and Ms. Dollenmaier have filed a counterclaim against Top Ridge and third-party claims against RHH and Mr. Tauber for declaratory relief, breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent misrepresentation, tortious interference, and breach of fiduciary duty.[1] (Doc. 26 at 9, 15-19.)

         Prior Rulings by the Court

         On February 23, 2016, the New York Supreme Court issued an ex parte temporary restraining order ("TRO") enjoining Anichini from selling or otherwise transferring collateral except in the normal course of business pending a hearing on a motion for preliminary injunction. (Doc. 1-2.) The case was removed to the SDNY before the state court could hold a hearing on the preliminary injunction. The district court extended the TRO pending a hearing on the preliminary injunction.

         On March 21, 2016, the SDNY granted a motion to transfer the case to the District of Vermont. The TRO was extended to April 1, 2016, to permit this court time to consider the motion for a preliminary injunction.

         On May 23, 2016, this court held a hearing on the motion for a preliminary injunction. (Doc. 41.) Top Ridge sought an order requiring all collateral to be turned over to it by Anichini. Doc. 1-2. In a decision dated June 15, 2016, the court denied Top Ridge's motion for a preliminary injunction. Instead, the court issued a limited preliminary injunction consistent with the original TRO. The court's order enjoined Anichini from further encumbering or selling its assets except in the normal course of business. Anichini was also ordered to provide a monthly financial statement to Top Ridge. (Doc. 47.)

         In October 2016, the parties returned to court when Top Ridge renewed its request for a more expansive preliminary injunction placing it in possession of the collateral. Following a hearing, the court concluded that little had changed since its original decision in June 2016 and continued the limited preliminary injunction in place. The court repeated its order requiring monthly financial statements. (Doc. 66.)

         Pending Motions

         Two motions are now ripe for decision. These are Top Ridge's motion for summary judgment on its right to enforce the promissory note and other loan documents (Doc. 68) and RHH and Mr. Tauber's motion to dismiss Anichini's counterclaims (Doc. 67).

         By order issued on March 1, 2017, the court placed the parties on notice that it would convert the motion to dismiss to a motion for summary judgment and would consider the materials submitted in connection with Top Ridge's motion for summary judgment. Both sides were allowed additional time to submit additional declarations or memoranda. (Doc. 77.)

         I. Motion for Summary Judgment

         A. Legal Standard

         A party is entitled to summary judgment only where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A fact is "material" when, under the substantive law, "it might affect the outcome of the suit." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute over a "material fact" is "genuine" where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

         "In deciding whether there is a genuine issue of material fact, [the court] must interpret all ambiguities and draw all factual inferences in favor of the nonmoving party." Salahuddin v. Goord, 467 F.3d 263, 272 (2d Cir. 2006) (citing Ford v. McGinnis, 352 F.3d 582, 587 (2d Cir. 2003)). "If, as to the issue on which summary judgment is sought, there is any evidence in the record from which a reasonable inference could be drawn in favor of the opposing party, summary judgment is improper." Fischl v. Armitage, 128 F.3d 50, 56 (2d Cir. 1997) (quoting Hetchkop v. Woodlawn at Grassmere, Inc., 116 F.3d 28, 33 (2d Cir. 1997)). On a motion for summary judgment, the court does not engage in credibility assessments, nor does it choose between conflicting versions of events or weigh the evidence; those are matters for the jury at trial. See, e.g., Fed. R. Civ. P. 56(e) 1963 advisory committee note; Anderson, 477 U.S. at 255.

         B. Positions of the Parties

         Top Ridge seeks a judgment against Anichini on the promissory note and against Ms. Dollenmaier on her personal guaranty. (Doc. 68 at 1-2.) In its statement of undisputed material facts, Top Ridge asserts that it purchased the loan documents, including the promissory note, security agreements, and personal guaranty, from People's in July 2015. (Doc. 68-1 ¶ 8.) Top Ridge states that the loan is secured by all personal property held by Anichini, including the rights to intangible assets, such as trademarks, trade names and contract rights. (Id. ¶ 4.) The security agreements contain terms preventing Anichini from asserting any setoff or counterclaim against the collateral as well as requiring notice of any claim against the lender. (Id. ¶ 7). Top Ridge asserts that the promissory note is in default and that it is entitled to foreclose on the collateral. (Id. ¶¶9-10.)

         Ms. Dollenmaier and Anichini agree that they executed a promissory note and security agreements with Chittenden Bank in 2005. [2] (Id. at 1.) Ms. Dollenmaier agrees that she executed a personal guaranty. (Id. at 1-2.) They do not deny that Top Ridge purchased the loan and the lender's rights in the collateral from People's.

         Ms. Dollenmaier and Anichini assert that Top Ridge's purchase of the loan was part of a larger transaction in which RHH would acquire Anichini, Ms. Dollenmaier and Anichini would be relieved of their bank debt and other obligations, and Ms. Dollenmaier would become a well-paid employee of a newly capitalized operation. (See Doc. 75-2 at 1-2 (citing Doc. 75-3 ¶¶ 14-38).) They contend that it is Top Ridge which is in breach of a contract to acquire Anichini on terms far more favorable to Ms. Dollenmaier than foreclosing on the collateral. They also make claims of breach of implied covenant of good faith and fair dealing, fraudulent misrepresentation, tortious interference with contractual relations, and breach of fiduciary duty. (Doc. 26 at 15-19.) Anichini and Ms. Dollenmaier argue that these defenses raise questions of fact sufficient to defeat Top Ridge's motion for summary judgment.

         C. Facts

         Considered in the light most favorable to Ms. Dollenmaier and Anichini, the non-moving parties, the facts are:

         Susan Dollenmaier founded the Anichini group of companies in New York in 1981 for the purpose of importing and selling high-end textiles, such as bed linens, to the luxury market. (See Doc. 75-3 ¶ 1.) Since 1986, Anichini has been based in Vermont, where it maintains its offices and a small retail store in Quechee. (Doc. 75-3 ¶¶ 2, 11.) Over the years the company grew. At its peak, Anichini employed more than 80 people and had annual sales in excess of $18 million. (Id. ¶ 6.) Anichini was hit hard by the recession in 2008 and has experienced financial difficulties since then. (Id. ¶¶ 7-10.) In 2005, Anichini and Ms. Dollenmaier took out a loan for up to $2.5 million from Chittenden Bank. (Doc. 75-2 at 1.) This loan represented Anichini's principal debt.

         In December 2013, Mr. Tauber, a New York investor, contacted Ms. Dollenmaier after visiting the Quechee store with his wife. (Doc. 75-3 ¶ 14.) Mr. Tauber operates a business called Royal Heritage Home, LLC, which sells consumer products to stores like Walmart and Bed Bath and Beyond. (Id. ¶ 15.) During early conversations between Mr. Tauber and Ms. Dollenmaier, Mr. Tauber expressed interest in acquiring the Anichini brand as well as Ms. Dollenmaier's creative talents. (Doc. 74 at 6.)

         In January 2014, Mr. Tauber and Ms. Dollenmaier met to discuss how RHH and Anichini might be combined. (Doc. 75-3 ¶l 5.) To facilitate the potential merger or acquisition, RHH executed a Non-Disclosure Agreement ("NDA"). (Id.) The NDA granted RHH and Mr. Tauber access to Anichini's financial information, business plans, and customer and supplier lists. (Id.) Anichini furnished RHH and Mr. Tauber with the names and contact information of Anichini customers, designers, and suppliers, as well as the company's financial information for the years 2009 through 2013. (Id. ¶ 16.) After the January 2014 meeting, Anichini continued to provide RHH and Mr. Tauber with updated financial information. (Id.)

         On January 17, 2014, Mr. Tauber emailed Anichini an outline of proposed terms for a potential merger or acquisition between RHH and Anichini. (Doc. 26-2 at 2-3.) Over the course of the next fifteen months, representatives from Anichini and RHH met several times to negotiate terms and work towards a final agreement. (Doc. 75-3 at 3.) On October 3, 2014, Mr. Tauber, on behalf of RHH, emailed Anichini a term sheet detailing specifics of a proposed offer by RHH to acquire Anichini and to employ Ms. Dollenmaier. (Doc. 75-9 at 2-3, 6-8.) Anichini and RHH continued exchanging proposals concerning the terms of their potential merger or acquisition throughout the late winter and early spring of 2015. (Doc. 75-3 at 3; see e.g., Doc. 26-3 at 2-5; Doc. 26-4 at 2-3.)

         Mr. Tauber and Ms. Dollenmaier met on or around April 15 and 16, 2015, to discuss their negotiations to date. (Doc. 75 ¶¶ 23-24; see Doc. 26-4 at 3.) Based on the conversations that occurred at these meetings, Mr. Tauber drafted a second term sheet which he provided to Anichini. (Doc. 26-5 at 1, 4.) Mr. Tauber confirmed his approval of the term sheet in an email dated April 24, 2015, which he sent to Anichini representative Patricia Reinhardt and Ms. Dollenmaier. (Doc. 26-5 at 2.)

         The April 24th term sheet proposes that in exchange for acquiring Anichini, RHH would: (1) assume Anichini's bank debt up to $450, 000; (2) provide $425, 000 to pay other old debt; (3) assume $625, 000 of current accounts payable; (4) pay $250, 000 for excess assets, such as excess inventory or security deposits; (5) execute and deliver a Seller's Note for $900, 000; and (6) agree to pay a 3% royalty on certain sales. (Doc. 26-5 at 4; Doc. 75-3 ¶ 24.) In the body of the email to which the term sheet is attached, Mr. Tauber wrote: "As far as I'm concerned we have our basic term sheet and concepts agreed to on the WORD doc we created." (Doc. 26-5 at 2.) Mr. Tauber added: "I see no reason why [Ms. Dollenmaier] and I shouldn't get together Monday and start to prep for the final closing." (Doc. 26-5 at 2.)

         The parties disagree over the nature of the term sheet attached to the April 24, 2015 email. Ms. Dollenmaier and Anichini argue that the term sheet contains all of the material terms of the Agreement between the parties, and both parties agreed to these material terms and thus, "[a]s of April 24, 2015, there existed a valid, binding, enforceable agreement among RHH, Mr. Tauber, Ms. Dollenmaier and Anichini." (Doc. 75 at 9.) Mr. Tauber and RHH respond that the term sheet and April 24 email were "nothing more than an unenforceable 'agreement to agree.'" (Doc. 67-1 at 9.)

         Ms. Dollenmaier, Mr. Tauber, Anichini, and RHH continued to negotiate after April 24. Ms. Dollenmaier and Anichini supplied more financial information to Mr. Tauber and RHH. (See, e.g., Doc. 75-5 at 35-38.) Ms. Dollenmaier also continued to provide Mr. Tauber with information on Anichini's suppliers, customers, and designers. Ms. Dollenmaier introduced Mr. Tauber to Anichini contacts in India and Italy and provided Mr. Tauber with a list of celebrity customers. (Doc. 75-13 at 2-9.)

         Between April and July 2015, Ms. Dollenmaier and Mr. Tauber also continued to discuss RHH's commitment to assist with funding for Anichini's purchase orders. On July 8, 2015, Mr. Tauber emailed Ms. Dollenmaier and explained that he and she could develop a funding mechanism for Anichini's business "once the People's [United Bank loan] transaction is complete." (Doc. 75-14 at 4.) On or around July 23, 2015, Mr. Tauber confirmed that he and Ms. Dollenmaier had "a clear understanding" of their business relationship, ...

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