United States District Court, S.D. Indiana, Indianapolis Division
ORDER ON DEFENDANT GARY FAIR'S MOTION FOR PARTIAL
J. McKINNEY, JUDGE
matter comes before the Court on Defendant Gary Fair's
(“Fair's”) Motion for Partial Summary
Judgment. Dkt. No. 135. Fair requests that the Court dismiss
Count I of Plaintiff Southeast Financial Credit Union's
(“SFCU's”) Complaint, alleging breach of
contract, as it relates to him individually. Dkt. No. 136 at
1. SFCU, however, opposes Fair's Motion for Partial
Summary Judgment, arguing that (1) the corporate veil of The
College Network, Inc. (“TCN”), should be pierced
to render Fair, a former Vice President of TCN, personally
liable for TCN's breaches of contracts formed between TCN
and SFCU; and (2) Fair participated in a civil conspiracy to
facilitate TCN's breaches of contract. See
generally, Dkt. No. 175.
reasons stated herein, the Court GRANTS Fair's Motion for
Partial Summary Judgment.
formed in 1995 by Gary L. Eyler (“Eyler”). Dkt.
No. 137, Ex. 1 (“Fair Aff.”), Ex. A. TCN's
main business was selling online study materials to college
students to help them test out of particular classes required
for their degrees. Dkt. No. 175, Ex. 2 (“Fair CLASS
purchase TCN's products, most TCN customers obtained
financing from external financial sources. Id. at
46:19-47:5. TCN entered into two agreements with SFCU, dated
July 21, 2003, and May 30, 2014, respectively, through which
SFCU agreed to provide financing to TCN's customers to
help them purchase TCN's educational products (the
“Agreements”). Dkt. No. 1, Ex. A & B. Under
the Agreements, SFCU deposited the full amounts it financed
to TCN customers into accounts TCN maintained with SFCU.
Id. at ¶ 3. If a TCN customer canceled or
defaulted on its loan from SFCU, the Agreements required TCN
to pay SFCU the amount owed on that loan through its SFCU
reserve account (“Chargebacks”). Id. at
was hired by Eyler in 2006, as TCN's Vice President,
Western Regional Officer. Fair CLASS Aff., 41:24-42:9. Fair
was responsible for managing TCN's operations in Las
Vegas, Nevada, including TCN's financial services and
customer support operations. Id. In 2011, Fair's
job title changed to Vice President of Call Center
Operations, which required him to manage all of TCN's
customer support services. Id. at 48:5-13. Fair was
listed as an officer of TCN with the Nevada Secretary of
State for a period of time between March 2006 and May 13,
2016. Dkt. No. 175, Ex. 7 at 3.
President of Call Center Operations for TCN, Fair was not
involved in TCN's relationships with its finance partners
and was not privy to TCN's contracts with its finance
partners. Fair CLASS Dep., 47:16-18; 53:21-23. Fair was not a
party to the Agreements and did not personally guaranty the
Agreements. Fair Aff., ¶¶ 9-10. Fair was also not
involved in negotiating the Agreements with SFCU and had no
knowledge of their specific terms prior to the start of this
litigation. Id. at ¶ 11. Furthermore, Fair had
no access to TCN's reserve accounts and had no authority
to make payments from TCN's accounts with SFCU or to make
decisions regarding TCN's deficits in its SFCU reserve
account. Id. at ¶¶ 14, 19-20.
January 2014, TCN began experiencing financial difficulties,
and failed to pay SFCU Chargebacks, which constituted a
breach of the Agreements. Dkt. No. 1, ¶¶ 27-33;
Dkt. No. 120, ¶¶ 29-35. On November 14, 2014, SFCU
held a teleconference with TCN representatives, including
Fair, and sent TCN a “Cease and Desist” letter in
order to address TCN's negative balance and to demand
that TCN stop making loan arrangements with SFCU's
borrowers. Fair Aff., ¶ 21.
January 8, 2015, Eyler sent an email to various TCN managers,
including Fair, regarding TCN's poor financial condition
and announced the formation of the “Rapid Rebuild
Committee, ” which was tasked with forming a plan to
stop TCN's financial decline. Fair Aff., Ex. B. The Rapid
Rebuild Committee was comprised of outside consultant Ken
Knapik, Eyler, and eight TCN executives, including Fair. Fair
Aff., Ex. D. While Fair claims to not understand all of the
factors that caused TCN's financial issues, it became
apparent to Fair by the summer of 2015 that TCN could not
survive. Fair CLASS Dep., 63:22-64:6.
Rapid Rebuild Committee created a business plan, which
included the sale of TCN's main asset, the online portal
used for its educational products (the “Portal”).
Dkt. No. 175, Ex. 1 (“Fair eTest Out Dep.”),
176:17-177:15. TCN planned to sell the Portal to eTest Out
Learning Systems LLC (“eTest Out”). Id.
at 178:10-170:2. eTest Out is a Nevada limited liability
corporation that was formed on June 8, 2015, with the
intention of selling study materials to individuals in the
nursing industry to help them earn college credit.
Id. at 51:9-15; Fair Aff., Ex. J. Eyler owns 70% of
eTest Out and acts as eTest Out's Chief Executive
Officer. Dkt. 175, Ex. 4 (“Eyler eTest Out
Dep.”), 96:20-97:1; Fair eTest Out Dep., 216:18-218:25.
Fair was appointed Chief Operating Officer of eTest Out in
late 2015 and has a small ownership interest in that company.
Fair eTest Out Dep., 55:22-23; Eyler eTest Out Dep., 80:4-15.
eTest Out intended to purchase the Portal from TCN for $1,
246, 000.00 through a promissory note funded by eTest
Out's expected sales revenue. Fair eTest Out Dep.,
Rapid Rebuild Committee's business plan also included the
creation of a support mechanism to handle TCN's customer
service operations. Fair CLASS Dep., 63:22-64:8. Career
Learning & Academic Support Services, LLC
(“CLASS”), was created as a Nevada limited
liability corporation on July 29, 2015. Dkt. No. 139, Ex. 2.
CLASS was meant to provide TCN's customers with customer
support services after TCN could no longer provide such
services. Fair eTest Out Dep., 125:18-20. Eyler is the sole
grantor, trustee, and beneficiary of the CLASS Management
Trust, which is the Manager and sole member of CLASS. Fair
CLASS Dep., 94:5-16. Eyler is also the Chief Executive
Officer of CLASS. Id. at 89:3-90:11. Fair was named
the successor trustee of the CLASS Management Trust and acted
as the initial Chief Operating Officer of CLASS until
November 2015. Id. at 12:2-6; 95:3-6. Fair is
currently the Senior Vice President for CLASS. Id.
at 90:12-13. Additionally, CLASS is wholly owned by eTest
Out. Fair Aff., Ex. H.
formulating its business plan, the Rapid Rebuild Committee
assumed that each of the finance companies providing loans to
TCN's customers would be willing to enter into a Customer
Services Agreement with CLASS in order to provide their
borrowers with continued access to the Portal. Id.
Under the Customer Services Agreement, each finance company
would be required to pay CLASS a service fee of $7.00 per
month for each active loan account it has with TCN, in
exchange for CLASS's support services for the Portal.
Id.; Fair CLASS Dep., 139:4-25. Fair presented SFCU
with the business plan developed by the Rapid Rebuild
Committee and the proposed Customer Services Agreements on
September 9, 2015. Fair Aff., Ex. E. Fair was also present
when Eyler explained to SFCU that TCN was going out of
business due to its financial problems and could no longer
provide customer support services to SFCU's borrowers.
Fair Aff., ¶ 23. TCN ceased its operations in October
2015. Fair CLASS Dep., 52:3-20.
filed this action on September 25, 2015, seeking actual and
punitive damages, as well as injunctive relief to prevent the
Defendants from restricting SFCU's customer's access
to the Portal. Dkt. No. 1. SFCU alleged, among other
things, that TCN breached its contracts with SFCU.
Id. On December 21, 2015, in response to SFCU's
Motion for Judgment on the Pleadings, TCN admitted that it
was liable to SFCU for breaching the Agreements, and this
Court ordered that TCN was liable for SFCU for breach of
contract, pending a determination of damages. Dkt. No. 64;
Dkt. No. 88. In addition to seeking liability against ...