United States District Court, D. Kansas
ERIC L. MCRAE, Plaintiff,
v.
TAUTACHROME, INC., Defendant.
MEMORANDUM AND ORDER
ERIC
F. MELGREN, UNITED STATES DISTRICT JUDGE
This
action arises out of a failed business relationship between
Plaintiff Eric L. McRae and Defendant Tautachrome, Inc. McRae
asserts seven claims against Tautachrome. Count 1 asserts a
claim for breach of contract for 35 million shares of company
stock McCrae believes he is entitled to under the Engagement
Agreement executed by the parties. McRae now moves for
partial summary judgment on this claim. For the reasons
discussed below, the Court denies McRae's Motion for
Partial Summary Judgment (Doc. 55).
I.
Factual and Procedural Background[1]
Tautachrome
is a Delaware corporation with its principal place of
business in the state of Arizona. It is a publicly traded
company in the business of digital image verification
software. Tautachrome holds patents to its software, and it
markets that software to companies who can benefit from
having verifiable, original digital images that have not been
modified or tampered.
McRae
is an investor and a resident of Kansas. He became a
shareholder in Tautachrome in December 2015. Initially, McRae
provided informal consulting to Tautachrome's executives,
but in November 2016, Tautachrome appointed him
“Business Operations Manager.” Tautachrome issued
a press release on November 28, 2016, announcing this
appointment and describing McRae's position as follows:
“In addition to managing the day to day business
activities of the Company, Mr. McRae will be responsible for
the financial controls of the Company and will participate in
Company strategic planning.”
On
January 13, 2017, Tautachrome's Board of Directors
executed a Resolution by Unanimous Consent (the
“Resolution”). That Resolution states in part:
Now
therefore it is resolved:
That the agreements with Eric L McRae, Luke Stewart Willie
Tucker, and Billy D. Beam are hereby ratified and affirmed in
all particulars, that the Company's CEO, Jon N. Leonard,
is hereby empowered and directed to undertake all actions
required under these agreements, and all such actions
undertaken are hereby affirmed and ratified in advance, and
that any other resolutions required by the Board in order to
implement these actions are hereby deemed so resolved.
That
same day or sometime after, Tautachrome provided McRae an
unsigned version of the agreement referenced in the
Resolution. Titled “Eric McRae Engagement
Agreement” and dated November 28, 2016, the Engagement
Agreement provides that McRae “shall participate in
Company strategic planning, and shall oversee day-to-day
operations.” It also contains a
“Compensation” provision, stating that McRae will
be granted 35 million shares of Tautachrome common stock
“upon execution of this Engagement Agreement.”
McRae
alleges, and Tautachrome disputes, that he delivered a signed
copy of the Engagement Agreement to Tautachrome on February
2, 2017. As of that date, there were 4 billion authorized
shares and 1, 677, 590, 057 shares of Tautachrome common
stock. McRae continued providing services under the
Engagement Agreement after February 2, primarily from
Wichita, Kansas.
From
the end of February until June 10, McRae exchanged several
emails with Tautachrome's Chief Executive Officer, Jon
Leonard, concerning his “employment contract” and
compensation. During that time period, Leonard never asked
McRae about the status of the Engagement Agreement or
indicated that he did not have a signed copy of the
Engagement Agreement. On the morning of February 27, 2017,
McRae sent an email to Leonard stating: “By Wednesday,
I will get you my latest travel expenses, employment
contract, and make sure my shares are up to date. I have been
too busy to do it but I will get it done this week. My
affairs should be in order as our future is uncertain.”
Less than an hour later, McRae sent another email to Leonard
stating, in part: “Beginning Wednesday, March 1, 2017,
I will be taking an indefinite leave of absence. I will take
this time to evaluate my future with the company. In the
interim, If [sic] you wish to terminate my employment, then
act. My employment contract has not yet been signed, so fire
me today if you wish.”
On May
26, McRae sent Leonard a lengthy email discussing his and his
brother Charles' compensation. At the beginning of that
email, McRae states: “In December of 2016 when we came
out on business, I had asked you about giving us shares. You
did that. I never did execute the paperwork.” Later in
the email, McRae proposes that Tautachrome issue him,
Charles, and a third employee, “Spartan Dawg, ” a
total of 1.4 billion shares to compensate them for
“strategy” and other services. Leonard did not
accept McRae's 1.4 billion share offer.
On June
1, McRae emailed Leonard asking for an update “on
compensating Charles, myself, and Spartan Dawg with
shares.” He later states, “I understand that a
contract must be executed and one that is favorable to both
parties.”
On June
16, Tautachrome terminated McRae “effective
immediately” and without prior notice. McRae
subsequently provided Tautachrome a signed copy of the
Engagement Agreement. Tautachrome did not execute the
Engagement Agreement or return it to McRae. In addition,
McRae never received any of the shares contemplated by the
agreement.
McRae
filed this lawsuit on October 10, 2017. He filed a Third
Amended Complaint on August 14, 2018, asserting seven claims:
(1) breach of the Engagement Agreement, (2) breach of implied
covenant of good faith and fair dealing, (3) promissory
estoppel, (4) fraud, (5) fraudâ promise of future events, (6)
fraud through silence, and (7) breach of convertible
...