United States District Court, D. Colorado
A. BRIMMER United States District Judge.
matter is before the Court on Plaintiff's Motion for
Partial Summary Judgment Regarding Defendants' Lost
Profits and Fiduciary Duty Counterclaims [Docket No. 55] and
Defendants' Motion for Partial Summary Judgment Regarding
Plaintiff's Claim for Lost Profits [Docket No. 56]. This
Court has jurisdiction pursuant to 28 U.S.C. § 1332.
action arises out of a dispute regarding the ownership and
operations of a bowling and recreation center (the
“Center”) in Colorado Springs. Defendant Summit
Entertainment Centers, LLC (“Summit”) is the
owner of the Center. Docket No. 56 at 2, Defendants'
Statement of Undisputed Material Fact (“DSUMF”)
1. Plaintiff Leiserv, LLC and its affiliate companies own or
operate numerous family entertainment centers around the
country, many under the trade name “Brunswick XL
Zone.” See Plaintiff's Statement of
Undisputed Material Fact (“PSUMF”) 7-8; Docket
No. 55 at 5, ¶¶ 7-8. Summit and Leiserv, Inc.
(plaintiff's predecessor company) entered into an
Operations Services Agreement (the “Agreement”),
whose effective date was April 15, 2011. PSUMF 1; Docket No.
55 at 3, ¶ 1; see also Docket No. 29 at 3,
Agreement includes a disclaimer that reads, in part:
Disclaimer. Although the Service
Provider [Leiserv] shall act in good-faith in
performing Services, the Service Provider warrants neither
the efficacy of the Services nor the eventual profitability
of the Center.
No. 19-1 at 13, ¶ 14 (emphasis in original).
to and incorporated into the Agreement is Schedule A,
entitled “Services to be provided by Service Provider,
” which requires that the “Center shall be
operated and marketed in a manner consistent with the
operational standards and policies in effect at least
seventy-five percent (75.0%) or more of the Brunswick Zone XL
bowling facilities owned or operated by Service Provider or
its affiliates.” Docket No. 19-1 at 22, ¶ 3.
Schedule A further provides for the creation of operating
accounts “solely for use related to the operation of
the Center. Owner-Operator shall provide Service Provider
with access to the Operating Accounts for the purpose of
depositing monies generated by the Center, processing checks
related to expenses of the Center, and for other purpose
generally related to the operation of the Center and agreed
to by the parties, which access shall be deemed necessary for
the Service Provider to perform its duties hereunder.”
Id. at 23, ¶ 12. The Agreement allowed
plaintiff “to withdraw any funds necessary to reimburse
Service Provider for expenses of the Center paid by Service
Provider on behalf of the Center in accordance with the terms
of this Agreement and any fees due Service Provider pursuant
to the terms of this Agreement from the Operating Accounts by
automatic pre-authorized payment plan or electronic funds
transfer.” Id. at 24, ¶ 13.
Center opened in April 2012. Defendants' Statement of
Additional Disputed Facts (“DSADF”) 1; Docket No.
63 at 8, ¶ 1. At the time of the opening, the general
manager was Mike Marquez. DSADF 6; Docket No. 63 at 9, ¶
6. In July 2013, plaintiff transferred Mr. Marquez from the
Center, which plaintiff operated but did not own, to a
different Brunswick Zone XL bowling center that it did own.
DSADF 3, 7; Docket No. 63 at 8, ¶ 3 and at 9, ¶ 7.
This occurred the same month that Summit hired
plaintiff's former Vice President of Operations to help
develop and operate a different family fun center in
Colorado. DSADF 14; Docket No. 63 at 10, ¶ 14.
Center was very successful. In 2013, the Center was the top
performing Brunswick Zone XL bowling center in the country.
PSUMF 7; Docket No. 55 at 5, ¶ 7. In 2014, it was the
second highest performing center. PSUMF 8; Docket No. 55 at
5, ¶ 8. In the first quarter of 2015, the last quarter
plaintiff operated the Center, the Center outperformed its
financial results from 2014's first quarter. PSUMF 13;
Docket No. 55 at 5, ¶ 13.
the time plaintiff operated the Center, the parties changed
the way the Center's property taxes were paid. Summit
made the first installment payment of property taxes in 2012.
Docket No. 63 at 6-7, ¶ 22. Thereafter, at
plaintiff's request, plaintiff began receiving the
property tax bills and paying them. Id. Each month,
plaintiff would request and withdraw money from the
Center's Operating Account to pay future taxes as they
came due and would deposit that money in plaintiff's own
account. Id. Defendants claim that, despite accruing
funds, plaintiff did not make required property tax payments
in 2014 and 2015. PSUMF 24; Docket No. 55 at 7, ¶ 24.
between Leiserv and Summit arose after Leiserv was purchased
by Bowlmor AMF Corp. in the summer of 2014. Plaintiff's
Statement of Additional Disputed Facts (“PSADF”)
1; Docket No. 66 at 2, ¶ 1. On April 19, 2015, Summit
took over operations of the Center. PSUMF 2; Docket No. 55 at
3, ¶ 2. On June 17, 2015, Leiserv notified Summit of its
intent to exercise a purchase option in the agreement based
on an alleged appraised value of $5, 100, 000. PSADF 7;
Docket No. 66 at 3, ¶ 7; Docket No. 43 at 3. Before the
filing of litigation, the parties unsuccessfully participated
in non-binding mediation. DSUMF 3; Docket No. 56 at 2, ¶
18, 2015, Leiserv filed a complaint in this Court alleging,
in part, that defendants breached the Agreement by not
negotiating the fair market value of the Center in good
faith. Docket No. 1 at 5-6. Plaintiff alleges that
defendants' failure to negotiate in good faith is
“delaying its ownership and enjoyment of the profits of
the Center.” Docket No. 1 at 6, ¶ 27. On July 10,
2015, defendants filed counterclaims alleging, in part, that
plaintiff breached its obligations of good faith and fair
dealing under the Agreement by “mismanaging the
business affairs of the Center (through personnel and other
maneuverings) to deflate the value of the Center.”
Docket No. 13 at 13, ¶ 31. Defendants also
counterclaimed that plaintiff breached its fiduciary duty to
Summit by failing to pay the Center's property taxes with
funds it accrued for that purpose. Id. at 17-18.
31, 2016, the parties filed the present cross-motions for
partial summary judgment. Docket Nos. 55, 56. Plaintiff's
motion argues that it disclaimed all warranties of
profitability in the Agreement and, therefore, defendants
cannot seek lost profits under their counterclaims. Docket
No. 55 at 9-11. Plaintiff's motion also argues that
defendants cannot show that plaintiff was a fiduciary with
respect to holding business proceeds to pay taxes or, in the
alternative, that the claim is barred under the economic
value rule because it is properly a breach of contract claim.
Id. at 11-13. Defendants' motion argues that
plaintiff cannot prove lost profits damages because potential
damages are speculative and evidence of defendants'
conduct during the mediation is not admissible. Docket No. 56
STANDARD OF REVIEW
judgment is warranted under Federal Rule of Civil Procedure
56 when the “movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a);
see Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248-50 (1986). A disputed fact is “material” if
under the relevant substantive law it is essential to proper
disposition of the claim. Wright v. Abbott Labs.,
Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). Only
disputes over material facts can create a genuine issue for
trial and preclude summary judgment. Faustin v. City
& Cty. of Denver, 423 F.3d 1192, 1198 (10th Cir.
2005). An issue is “genuine” if the evidence is
such that it might lead a reasonable jury to return a verdict
for the nonmoving party. Allen v. Muskogee, 119 F.3d
837, 839 (10th Cir. 1997).
“the moving party does not bear the ultimate burden of
persuasion at trial, it may satisfy its burden at the summary
judgment stage by identifying a lack of evidence for the
nonmovant on an essential element of the nonmovant's
claim.” Bausman v. Interstate Brands Corp.,
252 F.3d 1111, 1115 (10th Cir. 2001) (quoting Adler v.
Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir.
1998) (internal quotation marks omitted)). “Once the
moving party meets this burden, the burden shifts to the
nonmoving party to demonstrate a genuine issue for trial on a
material matter.” Concrete Works of Colo., Inc. v.
City & Cty. of Denver, 36 F.3d 1513, 1518 (10th Cir.
1994) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 325 (1986)). The nonmoving party may not rest solely on
the allegations in the pleadings, but instead must designate
“specific facts showing that there is a genuine issue
for trial.” Celotex, 477 U.S. at 324;
see Fed. R. Civ. P. 56(e). “To avoid summary
judgment, the nonmovant must establish, at a minimum, an
inference of the presence of each element essential to the
case.” Bausman, 252 F.3d at 1115 (citation
omitted). When reviewing a motion for summary judgment, a
court must view the evidence in the light most favorable to
the non-moving party. Id.; see McBeth v.
Himes, 598 F.3d 708, 715 (10th Cir. 2010).
PLAINTIFF'S SUMMARY JUDGMENT MOTION