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Lawrence Wholesale, LLC v. Nicholson

United States District Court, S.D. Indiana, New Albany Division

March 10, 2015




This matter is before the Court on Defendant Karen Nicholson's ("Ms. Nicholson") Motion for Judgment on the Pleadings on Plaintiff Lawrence Wholesale, LLC's ("Lawrence Wholesale") claim of breach of contract and unjust enrichment. (Filing No. 20). Lawrence Wholesale filed this action seeking to enforce a commercial guaranty agreement against Ms. Nicholson. For the reasons set forth below, Ms. Nicholson's Motion for Judgment on the Pleadings is GRANTED in part and DENIED in part.


The following facts are from Lawrence Wholesale's Complaint and are accepted as true for purposes of this Motion. Ms. Nicholson is the President of Abilene TX Foods, Inc. ("Abilene"), a company organized under the laws of California and located in Kentucky. Ms. Nicholson is a resident of Indiana and signed a Guarantee of Payment ("Guaranty Agreement") on July 29, 2010, to induce Lawrence Wholesale to deliver goods and services to Abilene. (Filing No. 1, at ECF p. 2). Neither the agreement between Abilene and Lawrence Wholesale, nor the Guarantee Agreement, contained a choice of law provision. Ms. Nicholson agreed to guarantee the repayment of the costs of the goods and services delivered to Abilene from Lawrence Wholesale. (Filing No. 1, at ECF p. 2). Abilene requested and received goods and services from Lawrence Wholesale from September 2010 to November 2010. (Filing No. 1, at ECF p. 2). As of January 31, 2013, Abilene was indebted to Lawrence Wholesale in the amount of $1, 508, 729.14. Lawrence Wholesale delivered Ms. Nicholson a demand letter on February 14, 2014, requesting payment to satisfy the total debt. (Filing No. 1, at ECF p. 2). On March 12, 2014, Lawrence Wholesale filed a Complaint against Ms. Nicholson for breach of contract and unjust enrichment. (Filing No. 1, at ECF p. 3). Lawrence Wholesale alleges that Ms. Nicholson breached the terms of the Guaranty Agreement by failing to repay the amounts owed by Abilene to Lawrence Wholesale and that Ms. Nicholson was unjustly enriched because, directly or through her interest in Abilene, she received and enjoyed a benefit from the delivery of the goods and services.


Fed. Civ. Proc. Rule 12(c) permits either party to move for judgment after the complaint and answer have been filed by the parties. Rule 12(c) motions are reviewed under the same standard as a motion to dismiss for failure to state a claim under Fed. Civ. Proc. Rule 12(b)(6). Frey v. Bank One, 91 F.3d 45, 46 (7th Cir. 1996). Rule 12(c) permits a judgment based on the pleadings alone, which include "the complaint, the answer, and any written instruments attached as exhibits." N. Indiana Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998) (citations omitted). "[A] complaint must always... allege enough facts to state a claim to relief that is plausible on its face.'" Limestone Development Corp. v. Village of Lemont, Ill., 520 F.3d 797, 803 (7th Cir. 2008) ( see Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court views the facts in the complaint in the light most favorable to the nonmoving party and will grant the motion "only if it appears beyond doubt that the plaintiff cannot prove any facts that would support [their] claim for relief." Id. The Court need not ignore facts set forth in the complaint that undermine the plaintiff's claim or give weight to unsupported conclusions of law. Id. To succeed, the moving party must demonstrate that there are no material issues of fact to be resolved. Id.


Ms. Nicholson moves for judgment on the pleadings on two different grounds. First, she argues that Kentucky law applies to the parties' dispute and the Guaranty Agreement is not enforceable under Kentucky law. Second, she asserts that unjust enrichment is not an available remedy. Lawrence Wholesale argues that it is not clear from the Complaint which state's laws apply to the Guarantee Agreement, and that the case should proceed to discovery to establish these facts. These arguments are addressed in turn below.

A. Choice of Law

When a federal court hears a case in diversity, it applies the choice of law rules of the forum state to determine which state's substantive law applies. Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009). Therefore, if the laws of more than one jurisdiction arguably could apply to particular case, federal courts must apply the forum state's choice of law rules. Jean v. Dugan, 20 F.3d 255, 260-61 (7th Cir. 1994) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941)). Accordingly, the Court will apply Indiana's choice of law rules to determine which state's law governs the substantive issues. Two contracttype theories have been presented before the Court: a breach of contract and unjust enrichment. See Community Care Centers, Inc. v. Sullivan, 701 N.E.2d 1234, 1239 (Ind.Ct.App. 1998) (describing claim for unjust enrichment as quasi-contractual in nature). Indiana courts apply the "most intimate contacts" test to resolve any choice of law issues in a contract action. Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Standard Fusee Corp., 940 N.E.2d 810, 815 (Ind. 2010) (citations omitted).

The Court must first determine whether a conflict of law actually exists before engaging in a choice of law analysis. In re Griffin Trading Co., 683 F.3d 819, 824 (7th Cir. 2012). Ms. Nicholson states that the law of Kentucky should apply while Lawrence Wholesale argues that Indiana law should apply. Citing the Restatement of the Law, Second, Conflict of Laws § 194, Lawrence Wholesale purports that the rule of validation applies, being that if the Guaranty Agreement is invalid in Kentucky but valid in Indiana, then Indiana law applies. Lawrence Wholesale, however, cites no Indiana legal authority to support its argument. Thus, the Court finds this argument unpersuasive; precedent regarding choice of law indicates otherwise.

In Kentucky, a guaranty of payment is governed by Kentucky Revised Statute § 371.065 (1990):

No guaranty of an indebtedness which either is not written on, or does not expressly refer to, the instrument or instruments being guaranteed shall be valid or enforceable unless it is in writing signed by the guarantor and contains provisions specifying the amount of the maximum aggregate liability of the guarantor thereunder, and the date on which the guaranty terminates.

The purpose of the statute is to protect guarantors from over-reaching guaranties and unintended obligations. See Wheeler & Clevenger Oil Co. v. Washburn, 127 S.W.3d 609, 615 (Ky. 2004) ("[The statute] is a consumer-protection provision designed to protect the guarantor by reducing the risk of a guarantor agreeing to guarantee an unknown obligation"). ...

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