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Morris v. Crain

Court of Appeals of Indiana

March 7, 2017

Don Morris and Randy Coakes, Appellants-Plaintiffs,
v.
Brad Crain and Richard Redpath, Appellees-Defendants

         Appeal from the Hendricks Superior Court The Honorable Mark A. Smith, Judge Trial Court Cause No. 32D04-1208-PL-91

          Attorney for Appellants James E. Ayers Wernle, Ristine & Ayers Crawfordsville, Indiana

          Attorneys for Appellees Sean M. Clapp Ian T. Keeler Clapp Ferrucci Indianapolis, Indiana

          Crone, Judge.

         Case Summary

         [¶1] Don Morris and Randy Coakes (collectively "Plaintiffs") appeal the trial court's entry of summary judgment in favor of Brad Crain and Richard Redpath ("Crain").[1] The sole restated issue presented for our review is whether the trial court erred when it entered summary judgment for Crain. Concluding that genuine issues of material fact remain for trial, we reverse and remand for further proceedings.

         Facts and Procedural History

         [¶2] This is essentially the third appeal surrounding an alleged business relationship that existed among these parties. In one of those prior appeals, this Court set out the relevant underlying facts and procedural history.

The facts most favorable to [Plaintiffs], the non-movants for summary judgment, are as follows. In 2006, Morris was employed by Waste Recovery, which provided biological effluent destruction systems products. 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." 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. 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 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.
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. 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 claims were unfounded or, at a minimum, were premature, and that the case distilled to "a case of an oral contract at best between Mr. Crain and Mr. Redpath and Mr. Morris and Mr. Coakes ... of dubious merit." Counsel for Crain and Redpath argued that there had, at most, been discussion about a business yet to be formed, "an offer that was never accepted."
On the following day, the trial court issued an order dismissing defendants Biesecker, Johnson, Ross, and Sollars and ordering the remaining parties to submit documents:
1.Plaintiffs, within ten (10) days, must file with the Court a document stating with specificity the legal theories the Plaintiffs assert against the Defendants.
2.Within ten (10) days thereafter, the Defendants must file a document stating with specificity the legal elements of the Plaintiffs theories that the ...

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