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Washington Frontier League Baseball, LLC v. Zimmerman

United States District Court, S.D. Indiana

May 29, 2018



          TANYA WALTON PRATT, United States District Court Judge

         This matter is before the Court on Motions for Summary Judgment filed pursuant to Federal Rule of Civil Procedure 56 by Nominal Defendant Frontier Professional Baseball, Inc. (“Frontier League”) (Filing No. 176) and by Defendants Michael E. Zimmerman, MKE Baseball, LLC, and MKE Sports & Entertainment, LLC (collectively “Zimmerman Defendants”) (Filing No. 213). Plaintiffs Washington Frontier League Baseball, LLC (“Washington Club”) and Stuart A. Williams (“Williams”) filed this derivative action on behalf of the Frontier League and themselves after the Zimmerman Defendants secured a baseball expansion opportunity in Kokomo, Indiana, which Washington Club and Williams had been pursuing. For the following reasons, the Court denies the Motions for Summary Judgment.

         I. BACKGROUND

         The following facts are not necessarily objectively true, but as required by Federal Rule of Civil Procedure 56, the facts are presented in the light most favorable to Williams and Washington Club as the non-moving parties. See Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

         Williams, his wife, and another individual are the owners of Washington Club, which is a member club in the Frontier League. The Frontier League is an independent, professional baseball league with thirteen teams. Each Frontier League member has a team that plays in the Frontier League. Each Frontier League member helps fund a travel team that plays in the Frontier League so that there are an even number of teams to balance out the playing schedule (Filing No. 75 at 2- 5; Filing No. 78 at 4).

         The Frontier League is a not-for-profit corporation organized under Ohio law and has its principal place of business in Illinois. Frontier League's board of directors is comprised of a representative from each of the member clubs within the Frontier League. Williams is Washington Club's representative and therefore serves as a director on Frontier League's board of directors (Filing No. 75 at 3-4; Filing No. 78 at 4; Filing No. 118 at 2-3).

         One of the other Frontier League members is Rock River Valley Baseball, LLC (“Rock River Valley Club”), which is owned by Defendant W. Chris Hanners (“Hanners”). Defendant Bryan Wickline (“Wickline”) was Rock River Valley Club's president and representative on Frontier League's board of directors. Joshua E. Schaub (“Schaub”) was the owner or managing member of another Frontier League member, the Joliet Slammers, and he was the director for that member team on Frontier League's board of directors (Filing No. 75 at 5; Filing No. 118 at 3; Filing No. 78 at 3).

         In early March 2014, the City of Kokomo, Indiana contacted the Frontier League to discuss the possibility of placing an expansion team in Kokomo's to-be-built baseball stadium (Filing No. 216-17 at 3). On March 10, 2014, Frontier League's Commissioner Bill Lee (“Commissioner Lee”), assistant commissioner Steve Tahsler (“Tahsler”), and one of Frontier League's directors, Steve Malliet (“Malliet”), visited Kokomo and met with Mayor Greg Goodnight (“Mayor Goodnight”), Director of Operations Randy McKay (“McKay”), and the city engineer to further discuss the opportunity of placing a baseball team in Kokomo. They discussed a lease for the stadium and other related matters (Filing No. 203-1 at 4; Filing No. 58-1 at 2).

         On March 11, 2014, Malliet summarized the meeting with the city officials for Frontier League's expansion committee, consisting of Schaub, Pat Salvi, and Clint Brown (“Brown”). Also on March 11, 2014, Commissioner Lee summarized the meeting for Frontier League's directors (Filing No. 203-1 at 5; Filing No. 58-1 at 3). Then on March 18, 2014, several members of the Frontier League participated in a conference call to discuss the Kokomo expansion opportunity. Hanners, Wickline, Schaub, Williams, and Malliet were among the conference call participants. The consensus from the conference call was that the members would take a unified approach to the Kokomo expansion opportunity rather than bid against each other (Filing No. 203-2; Filing No. 58-1 at 4-5).

         Commissioner Lee asked Williams to assist in preparing a Memorandum of Understanding (“MOU”) with Kokomo to address the Kokomo expansion opportunity. On March 19, 2014, Commissioner Lee signed the MOU on behalf of the Frontier League, and Kokomo also signed the MOU, which gave both parties the exclusive opportunity to gather more information and conduct further negotiations with one another. The MOU expired by its own terms on May 18, 2014 (Filing No. 224-1).

         Before the expiration of the MOU, the Kokomo expansion opportunity was discussed at the Frontier League's board of directors meeting held on March 25, 2014 (Filing No. 58-1 at 5). At the meeting, the directors decided to hold off on any further discussions about who would participate in the Kokomo expansion opportunity until a lease was negotiated with Kokomo (Filing No. 203-8 at 9-10). The directors agreed that Brown, owner of the member club in Florence, Kentucky, would pursue the Kokomo expansion opportunity on behalf of the Frontier League and its members under the umbrella of the March 19, 2014 MOU. Williams assisted Brown whenever asked (Filing No. 203-53 at 2; Filing No. 224-10 at 2; Filing No. 203-8 at 9, 11). While the Frontier League was having discussions with Kokomo about the expansion opportunity, the Defendants were discussing the Kokomo expansion opportunity for themselves (see, e.g., Filing No. 224-11).

         Following some discussions and negotiations, Brown informed McKay and Commissioner Lee that he was withdrawing from the negotiations between the Frontier League and Kokomo on June 17, 2014 (Filing No. 203-21). Commissioner Lee called Williams and asked him to pursue the negotiations with Kokomo, and Commissioner Lee encouraged the Kokomo officials to visit Pennsylvania to see Washington Club's operations (Filing No. 203-8 at 14).

         While the Kokomo officials were arranging a Pennsylvania visit with Williams, Hanners and Wickline met with Commissioner Lee on June 18 and 19, 2014, to ask about the status of the Kokomo expansion opportunity. Commissioner Lee told Hanners and Wickline that Williams was working on the negotiations, and they would need to talk with Williams. Also on June 19, 2014, Zimmerman met with Hanners, Wickline, and Commissioner Lee, and Commissioner Lee directed them to first talk with Williams before pursuing Kokomo (Filing No. 58-1 at 7-8).

         On June 20, 2014, Mayor Goodnight, McKay, and other city officials visited the Washington Club operations in Pennsylvania with Williams. They were impressed with what they saw and were excited to work with Williams. Then Williams started making arrangements to visit them in Kokomo (Filing No. 203-8 at 14-15).

         On June 25, 2014, Wickline emailed the Kokomo city engineer, asking to set up a meeting for Hanners with Kokomo officials. The Kokomo city engineer forwarded the request to McKay, who coordinated a meeting with Wickline. Wickline informed McKay that one of Hanners' partners, Zimmerman, would join them for the meeting (Filing No. 224-11).

         On June 26, 2014, Hanners, Zimmerman, and Schaub met with McKay in Kokomo to discuss the opportunity of bringing a team there and securing a lease for the baseball stadium (Filing No. 203-75 at 3; Filing No. 216-20 at 2). During the meeting, McKay exchanged text messages with Commissioner Lee, which confirmed that Schaub, Hanners, and Zimmerman were meeting with Kokomo. Commissioner Lee encouraged McKay not to finalize anything until after he talked with Williams, to which McKay agreed (Filing No. 58-1 at 14). McKay also emailed Williams to let him know that he had been contacted by a Rock River Valley Club representative and would be meeting with them to discuss a team in Kokomo. McKay informed Williams that he would tell them that Kokomo was working with Williams and would hopefully be entering into a lease agreement. Williams responded with an email expressing appreciation for being informed (Filing No. 224-2).

         Williams called Commissioner Lee and said that he would not visit Kokomo to discuss Frontier League's expansion into Kokomo unless the Frontier League spoke with Hanners. Commissioner Lee informed Williams that he would take care of it and that Williams should assume Hanners would not meet with Kokomo unless Commissioner Lee told Williams differently. Commissioner Lee did not inform Williams differently (Filing No. 203-8 at 15-16).

         On Sunday, June 29, 2014, Williams visited Kokomo (Filing No. 58-1 at 15; Filing No. 216-20 at 2). Williams perceived that the city officials' attitude toward him had changed since their visit to his Washington Club operation. In preparation for the June 29, 2014 visit, Williams had expressed his intention of finalizing the lease, but during his visit to Kokomo, Williams realized that McKay was not interested in discussing the lease. Mayor Goodnight arrived late and provided a short tour of the city but did not discuss the expansion opportunity (Filing No. 203-8 at 14-19). Then on Monday, June 30, 2014, Mayor Goodnight called Commissioner Lee to tell him that Kokomo had decided to work with Hanners and his partners (Filing No. 58-1 at 16).

         On July 2, 2014, two days after Mayor Goodnight called Commissioner Lee, Frontier League's executive committee held a conference call to discuss the Kokomo expansion opportunity. Williams shared his belief that the Rock River Valley Club was soon going to close on a lease with Kokomo, and he wanted the executive committee to direct Hanners not to enter a lease until after the executive committee could review the lease and allow other Frontier League members to join the lease (Filing No. 58-1 at 16).

         The executive committee asked Frontier League's attorney, Thomas Ysursa (“Ysursa”), to send a letter to Hanners asking him for an update on Kokomo, informing him that he needed Frontier League's approval before a lease could be signed, and informing him that after a lease was signed a meeting would be held to determine what other members wanted to join the expansion opportunity. However, before Ysursa could send the requested letter, he received an email from Zimmerman on July 2, 2014, which included a copy of the lease that was being presented to Kokomo. The proposed lease was between Kokomo and the Rock River Valley Club. Zimmerman informed Ysursa that “[w]e understand and empathize with other owners if they are unsettled about ‘the deal.'” (Filing No. 58-1 at 17.) Zimmerman went on in his email to invite other owners to consider entering into the expansion opportunity, which would include Kokomo and the Rock River Valley Club (Filing No. 203-53 at 2-3; Filing No. 218-5 at 5; Filing No. 75 at 10-11; Filing No. 119 at 5-6; Filing No. 58-1 at 16-17).

         After receiving Zimmerman's email, Ysursa sent a letter to Hanners later that day, on July 2, 2014, asserting that the Kokomo expansion opportunity was an opportunity for the Frontier League to pursue and that if Hanners failed to offer participation in the opportunity to his fellow members, he would be breaching his fiduciary duties. He noted that Hanners should “take no further action of any kind in relation to Kokomo until such time as you provide the League the opportunity to review the lease and you provide an update to the Executive Committee as to the state of your negotiations and your intentions with Kokomo.” (Filing No. 203-53 at 2-3; Filing No. 203-74 at 21; Filing No. 58-1 at 17.)

         Ysursa spoke with Hanners on July 3, 2014, and asked him to allow the Frontier League to finish the lease negotiations. Hanners stated that he was agreeable but would first have to talk with his people-Zimmerman (Filing No. 58-1 at 18). Ysursa confirmed this conversation in a letter dated July 4, 2014 (Filing No. 203-54). On July 7, 2014, the executive committee met to discuss a course of action that assumed Hanners would comply with the Frontier League's directives and turn over the Kokomo negotiations to the Frontier League. However, Hanners communicated to Ysursa his plan to be in Kokomo to finalize the negotiations (Filing No. 224-9 at 1; Filing No. 58-1 at 19).

         On July 8, 2014, Ysursa sent another letter to Hanners in an effort to resolve the situation with Kokomo and Hanners' involvement there. Ysursa explained that the expansion opportunity was always a Frontier League opportunity, and the Frontier League should be permitted to finalize the lease and team membership with Kokomo (Filing No. 203-55).

         Also on July 8, 2014, McKay sent a text message to Commissioner Lee stating that Kokomo had reached an agreement on the lease with Hanners' group, which would bring a team to Kokomo. McKay indicated that there was no guarantee it would be a Frontier League team, but Kokomo hoped that it would be (Filing No. 203-67; Filing No. 203-74 at 21; Filing No. 224-3). By letter dated July 9, 2014, Ysursa informed Hanners that if he failed to conform to the directives of the Frontier League and the bylaws and his duties, he would be in breach of his fiduciary duties, and “the Frontier League will take all legal and administrative actions it deems appropriate to protect its members and interests.” (Filing No. 203-67 at 2; Filing No. 203-74 at 21.)

         On July 11, 2014, Mayor Goodnight emailed Commissioner Lee to inform him that Kokomo was working with Zimmerman and his group (Filing No. 203-4 at 2; Filing No. 224-12). MKE Baseball LLC, one of Zimmerman's entities, executed a lease with Kokomo for the baseball opportunity in Kokomo. The lease was assignable by MKE Baseball to any limited liability company in which Hanners or Zimmerman was a majority owner and expressly included the Rock River Valley Club (Filing No. 224-17). After securing the lease with Kokomo, Hanners and Zimmerman presented several different proposals to the Frontier League members for Zimmerman's admission into the Frontier League and to approve a franchise in Kokomo under Hanners' and Zimmerman's control (Filing No. 204-1; Filing No. 75 at 13; Filing No. 119 at 7).

         Zimmerman offered to sell an interest in the Kokomo opportunity to the members of the Frontier League, while at the same time acknowledging that the Frontier League had always viewed Kokomo as a Frontier League opportunity (Filing No. 75 at 13-14; Filing No. 119 at 7). Regarding the value of a Kokomo team, Zimmerman informed the Frontier League directors that “we estimate the fair market value of the Kokomo baseball team to be $1, 000, 000.” (Filing No. 204-1 at 6.) The Frontier League denied the Zimmerman Defendants' expansion application to join the Frontier League on August 7, 2014 (Filing No. 203-24).

         In September 2014, Zimmerman announced that he was bringing a team from the Prospect League, a competitor of the Frontier League, to Kokomo to play at the stadium covered by the Kokomo lease (Filing No. 75 at 14; Filing No. 119 at 7; Filing No. 203-46 at 6). At the end of September 2014, Wickline resigned as the director of the Rock River Valley Club, a Frontier League team, and on October 17, 2014, the Prospect League announced that Wickline had been named its commissioner (Filing No. 75 at 14; Filing No. 78 at 10; Filing No. 118 at 9).

         The Plaintiffs allege that, because the Frontier League did not secure the Kokomo expansion opportunity, “the League members, and therefore the League itself, incurred the significant costs associated with funding the travel team[, and] . . . the League and its members lost the fair market value of the Kokomo opportunity . . . [and] the $50, 000 expansion fee.” (Filing No. 75 at 14-15.)

         Washington Club made two demands on the Frontier League to bring this derivative action on its own behalf. The first demand was an August 20, 2014 letter to the Frontier League's executive committee, explaining the damages the Frontier League had already incurred as a result of the conduct of Hanners, Wickline, and the Zimmerman Defendants and demanding the initiation of its own legal action against the Zimmerman Defendants. The demand requested that the executive committee convene to discuss the demand (Filing No. 203-31 at 4-5). Washington Club made a second demand sixteen days later through a letter dated September 5, 2014. This second letter addressed additional damages to the Frontier League resulting from Kokomo's and Zimmerman's announcement that a Prospect League team would be based in Kokomo. Washington Club demanded that the Frontier League consider taking its own action against the Zimmerman Defendants and at least have the executive committee meet as a precursor to further action.

         Approximately three months before initiating this lawsuit, Washington Club filed an internal administrative complaint with the Frontier League against Rock River Valley Club, Hanners, and Wickline on August 27, 2014 (Filing No. 203-52 at 2). The internal complaint was handled by Commissioner Lee pursuant to the Frontier League's by-laws. Commissioner Lee conducted an eight-month investigation, which resulted in a 44-page decision against Rock River Valley Club and an assessment of a fine (Filing No. 203-1 at 2; Filing No. 58-1).

         On November 14, 2014, Washington Club and Williams filed this lawsuit before the Frontier League provided a response to the derivative suit demands. The initial complaint alleged claims for civil conspiracy to breach fiduciary duties, tortious interference with a business relationship, and unjust enrichment against the Zimmerman Defendants (Filing No. 1). On January 13, 2015, the Zimmerman ...

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