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Pipeline Productions, Inc. v. Madison Companies, LLC

United States District Court, D. Kansas

January 9, 2019

PIPELINE PRODUCTIONS, INC., et al., Plaintiffs,
v.
THE MADISON COMPANIES, LLC, et al., Defendants.

          MEMORANDUM AND ORDER

          KATHRYN H. VRATIL UNITED STATES DISTRICT JUDGE

         On May 21, 2015, Pipeline Productions, Inc. and Backwood Enterprises, LLC sued Horsepower Entertainment and The Madison Companies, LLC. Complaint (Doc. #1). On June 19, 2017, OK Productions, Inc. and Brett Mosiman joined as plaintiffs. Amended Complaint (Doc. #56). On August 30, 2019, plaintiffs added as defendants Kaaboo LLC, KaabooWorks Services LLC (“KWS”), KaabooWorks LLC, Kaaboo Del Mar LLC (“KDM”) and WarDawgz, LLC. Second Amended Complaint (Doc. #570). As of November 15, 2019, plaintiffs alleged that defendants had reneged on their promise to partner in the production of a music festival, and brought claims for breach of contract (Count I), breach of fiduciary duty (Count II), fraud (Count III), tortious interference (Count IV) and successor and alter ego liability (Count V). See Amended Pretrial Order (Doc. #660). Defendants assert counterclaims against Pipeline, Backwood, OK Productions and Mosiman for breach of contract, promissory estoppel and unjust enrichment.

         On December 19, 2019, the Court dismissed the tort claims by OK Productions and Mosiman (Counts II, III and IV), thereby eliminating their affirmative claims for relief in this litigation.[1] See Memorandum And Order (Doc. #712). The Court also dismissed plaintiffs' tortious interference claims (Count IV) against Kaaboo, KWS, KaabooWorks, KDM and WarDawgz. Id. Because Mosiman and OK Productions have no remaining claims for affirmative relief, the Court dismisses them as plaintiffs.[2] As a result, the following claims remain:

1. Breach of Contract (Count I): Pipeline and Backwood against Madison and Horsepower;
2. Breach of Fiduciary Duty (Count II): Pipeline and Backwood against Madison and Horsepower;
3. Fraud (Count III): Pipeline and Backwood against Madison and Horsepower;
4. Tortious Interference (Count IV): Pipeline and Backwood against Madison and Horsepower;
5. Successor and Alter Ego Liability (Count V): Pipeline and Backwood against Kaaboo, KDM, KaabooWorks, KWS and WarDawgz;
6. Breach of Contract Counterclaim: Madison and Horsepower[3] against Pipeline, Backwood, OK Productions and Brett Mosiman;
7. Promissory Estoppel Counterclaim: Madison and Horsepower against Pipeline, Backwood, OK Productions and Brett Mosiman;
8. Unjust Enrichment Counterclaim: Madison and Horsepower against Pipeline, Backwood, OK Productions and Brett Mosiman.

         This matter is before the Court on Defendants' Motion For Summary Judgment (Doc. #663) filed November 18, 2019. For reasons stated below, the Court sustains defendants' motion in part.

         Factual Background [4]

         I. Parties

         Brett Mosiman produces live music festivals, and is the principal and owner of music festival entities OK Productions, Backwood Enterprises and Pipeline Productions (except where otherwise noted, collectively referred to as “plaintiffs”). Nate Prenger, Brian Pilsl, Brian Wingerd and Taylor Gustafson worked for plaintiffs.

         Bryan Gordon, Seth Wolkov and Rob Walker own Madison, a venture capital firm. Madison owns Horsepower, a music festival business. In November of 2014, Madison and Horsepower formed Kaaboo and KDM. Seven months later, in June of 2015, they formed KaabooWorks and KWS. In December of 2016, Gordon, Wolkov and Walker, along with Barbara O'Hare, formed WarDawgz. Except where otherwise noted, the Court refers to Madison, Horsepower, the Kaaboo entities and WarDawgz as “defendants.”

         II. Negotiations

         Backwood owned a music festival called “Thunder on the Mountain” (“Thunder”). On July 28, 2014, Pipeline, OK Productions, Mosiman and Prenger executed a Letter of Intent (“LOI”) under which Horsepower would invest in a new company, Pipeline Festivals, LLC. Pursuant to the LOI, Horsepower would own 51 per cent of several festivals that plaintiffs had previously produced, including Thunder. The LOI provided that unless the parties agreed otherwise, the LOI would automatically terminate on November 1, 2014. That date arrived, and because the parties had not finalized any agreement, the LOI terminated.

         After November 1, 2014, the parties began discussing a transaction that would only involve Thunder. On November 4, 2014, Mosiman emailed Gordon to propose two alternative investment scenarios. “Option A” called for an investment of $1.4 million for 50 per cent of a new company that would own Thunder. Under “Option B, ” Madison would invest $700, 000, plus $500, 000 in operating capital, in exchange for a 51 per cent interest in a new company that would own Thunder. Moreover, Madison would pay Pipeline $80, 000 to book, market and produce Thunder, and Madison would receive $40, 000 to run books.

         In a phone call on November 6, 2014, Gordon accepted a slightly modified version of Option B (increasing $700, 000 to $750, 000). Gordon stated that Option B was “the only one that would work for him, ” and “made it very clear that he was very excited about the opportunity” to be Mosiman's partner. Mosiman's Dep. (Doc. #672-16) filed November 18, 2019 at 11:25-12:15, 16:22-17:13, 29:17-31:6. The verbal agreement did not contain all relevant provisions, such as when payments were due and which of defendants' entities would pay them, but Mosiman understood that the parties would flesh out those details later. Later that day, Mosiman emailed Gordon to discuss booking Chris Young for the festival, to which Gordon responded, “Do it, please!” Gordon Email (Doc. #684-9) filed November 29, 2019. Plaintiffs subsequently made commitments to many artists, sold tickets and solicited vendors for Thunder. Defendants created four entities with variations of the name “Thunder on the Mountain, ” made $272, 000 in artist deposits and instructed plaintiffs which artists to book for the festival.

         On November 24, 2014, Gordon emailed Mosiman advising him that Horsepower's investment committee had met to discuss the proposal and the meeting had gone well, with the proposal garnering unanimous approval. Gordon stated that they were “green to go, subject to docs, lease finalization and final due dili.” Gordon Email (Doc. #665-9) filed November 18, 2019. In response, Mosiman did not contend that an agreement was already in place.

         On December 12, 2014, Gary Burghart, defendants' Chief Legal Officer, sent to Mosiman and Prenger drafts of proposed operating agreements for the Thunder entities and a draft contribution agreement calling for plaintiffs and an affiliated entity to contribute certain assets. The drafts reflected defendants' agreement to pay $750, 000 to purchase the 51 per cent interest in Thunder. The accompanying email stated, “These documents are drafts and subject to continuing review and comment by Bryan Gordon.” Burghart Email (Doc. #665-15) filed November 18, 2019 at 2. Through March of 2015, defendants spent more than $10, 000 conducting substantial due diligence on a wide variety of issues.

         On December 16, 2014, Burghart had a telephone conference with Matt Gough (counsel for plaintiffs) and John Murdock (outside counsel for Horsepower), in which they identified and discussed several points on which the parties disagreed, including how the parties would make certain decisions for Thunder. On January 7, 2015, Gough emailed Murdock and Burghart that the parties had not addressed “one or two of the open issues, ” and that with respect to some of the open items, he believed that Mosiman and Gordon would continue to negotiate. Gough Email (Doc. #665-20). Similarly, in an internal email between Mosiman and Prenger, Mosiman acknowledged the existence of “two outstanding issues” and proposed sending an email to Gordon about those issues. Mosiman continued, “We gotta get this closed or I'll be at the homeless shelter. The risk is he says fuck it - ‘m out but we have nearly $300K of his money now with NO signed agreement to get it back or charge for it.”[5] Mosiman Emails (Doc. #665-12).

         Between January and March of 2015, the parties continued to negotiate several terms of the agreement, including provisions relating to loans, equipment leases and liquor licenses. On March 29, 2015, Murdock sent Gough copies of an operating agreement and ten other agreements, along with marked-up versions showing changes from previous drafts. On April 7, 2015, Gough responded that plaintiffs did not agree to the new terms. Gough also warned defendants that reneging on the deal would substantially harm plaintiffs. The parties later ceased negotiations, and plaintiffs cancelled Thunder. Plaintiffs have not produced another music festival.

         III. Subsequent Events

         As early as March of 2015, before the parties ceased their negotiations, defendants were communicating with Prenger about coming to work for them. On July 1, 2015, plaintiffs fired Prenger. The next day, KWS officially hired him. Defendants later hired or retained several of plaintiffs' other employees, including Pilsl, Wingerd and Gustafson.

         Defendants have filed two lawsuits against plaintiffs. In Delaware, defendants sought a declaration that the parties did not enter into a joint venture and recoupment of the $272, 000 that they had paid for Thunder artist deposits. In Colorado, defendants sued plaintiffs for defamation. The courts dismissed both cases for lack of personal jurisdiction.

         Legal Standards

         Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show no genuine issue as to any material fact and that the moving parties are entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Hill v. Allstate Ins. Co., 479 F.3d 735, 740 (10th Cir. 2007). A factual dispute is “material” only if it “might affect the outcome of the suit under the governing law.” Liberty Lobby, 477 U.S. at 248. A “genuine” factual dispute requires more than a mere scintilla of evidence in support of a party's position. Id. at 252.

         The moving parties bear the initial burden of showing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Nahno-Lopez v. Houser, 625 F.3d 1279, 1283 (10th Cir. 2010). Once the moving parties meet their burden, the burden shifts to the nonmoving parties to demonstrate that genuine issues remain for trial as to those dispositive matters for which they carry the burden of proof. Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990); see Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). To carry their burden, the nonmoving parties may not rest on their pleadings but must instead set forth specific facts supported by competent evidence. Nahno-Lopez, 625 F.3d at 1283.

         The Court views the record in the light most favorable to the nonmoving parties. Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991). It may grant summary judgment if the nonmoving parties' evidence is merely colorable or is not significantly probative. Liberty Lobby, 477 U.S. at 250-51. In response to a motion for summary judgment, parties cannot rely on ignorance of facts, speculation or suspicion, and may not escape summary judgment in the mere hope that something will turn up at trial. Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988); Olympic Club v. Those Interested Underwriters at Lloyd's London, 991 F.2d 497, 503 (9th Cir. 1993). The heart of the inquiry is “whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law.” Liberty Lobby, 477 U.S. at 251-52.

         Analysis

         Except for part of Count V, defendants seek summary judgment on all claims.[6]Specifically, defendants argue that the evidence does not create genuine issues of material fact on plaintiffs' claims regarding (1) breach of contract by Madison and Horsepower (Count I), (2) breach of fiduciary duty by Madison and Horsepower (Count II), (3) fraud by Madison and Horsepower (Count III), (4) tortious interference by Madison and Horsepower (Count IV) and (5) successor liability of Kaaboo, KDM, KaabooWorks, KWS and WarDawgz (Count V). Defendants also seek summary judgment on the issue of damages.

         I. Breach Of ...


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