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Morrison v. MC Express LLC

United States District Court, E.D. Arkansas, Jonesboro Division

January 9, 2018

GARY W. MORRISON, PLAINTIFF
v.
MC EXPRESS LLC, et al., DEFENDANTS

          ORDER

         Defendants' motion to dismiss the second amended complaint [Doc. No. 24] is denied as to the breach of contract claim and granted as to the breach of fiduciary duty claim. Defendants' motion to dismiss the first amended complaint [Doc. No. 5] is denied as moot.

         I. BACKGROUND

         This lawsuit arises out of an alleged breach of a stock transfer agreement. Plaintiff Gary Morrison claims that defendants breached an implied term in the parties' contract and violated certain fiduciary duties owed to Morrison. The facts, as alleged in the second amended complaint, are as follows:

         In the late 1980s or early 1990s, defendant Chuck Mitchell started a trucking business, defendant MC Express, Inc. (“MC Express”). Because MC Express was a relatively new company without proven on-time rates or safety records, Mitchell turned to Morrison for assistance in obtaining shippers. Morrison agreed to help Mitchell and MC Express in exchange for commission-based compensation and stock in MC Express.

         Morrison and Mitchell executed a stock transfer agreement on March 29, 2002. The contract required Mitchell to transfer 10% of the “stock equity” of MC Express to Morrison upon “the removal of Chuck Mitchell's personal liability by the holders of the debts owed by MC Express, Inc.” Despite the fact that the stock had not yet changed hands, Morrison considered himself to be a “current and/or future part-owner” of MC Express. With Mitchell's knowledge and consent, Morrison held himself out to prospective shippers as a “minority owner” of MC Express.

         For over ten years, the stock did not transfer under the terms of the agreement. Then, on November 28, 2012, and without Morrison's knowledge, Mitchell changed the name of MC Express to “MC Express Leasing” and founded a new Arkansas limited liability company called MC Express, LLC. Mitchell proceeded to transfer many of MC Express Leasing's assets to Express LLC. This diminished the value of MC Express Leasing and left it undercapitalized. In December 2016, Mitchell informed Morrison that because Mitchell never signed a personal guaranty for MC Express's bank debt, Morrison would never be entitled to 10% of MC Express Leasing's stock.

         Morrison alleges that Mitchell breached the stock transfer agreement and violated fiduciary duties owed to Morrison as a minority shareholder. Mitchell, however, argues that the removal of his personal liability on the debts owed by MC Express is a condition precedent to the transfer of Morrison's stock. As that condition has not yet been satisfied, there has been no breach of the stock transfer agreement. Moreover, Mitchell asserts that because Morrison's stock has not yet been transferred, Mitchell owes him no fiduciary duties.

         Defendants now move to dismiss.

         II. LEGAL STANDARD

         Rule 12(b)(6) permits dismissal when the plaintiff fails to state a claim upon which relief may be granted. To meet the 12(b)(6) standard, a complaint must allege sufficient facts to entitle the plaintiff to the relief sought. See Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009); Bell Atl. Corp. v. Twombly, 55 U.S. 544 (2007). Although detailed factual allegations are not required, threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, are insufficient. Iqbal, 556 U.S. at 663. In ruling on a motion to dismiss, all well plead allegations in the complaint must be accepted as true and construed in the light most favorable to the plaintiff. Id.

         III. DISCUSSION

         The motion to dismiss the breach of contract claim is denied because Morrison has sufficiently stated a claim. The motion to dismiss the fiduciary duty claim is granted because Morrison has failed to plead that he was an actual shareholder of MC Express (now MC Express Leasing) to whom Mitchell owed a fiduciary duty.

         A. Breach of Contract

         Defendants' motion to dismiss is denied with respect to the breach of contract claim. The parties' stock transfer agreement states that the “stock transfer will take place no later than 30 days following the removal of Chuck Mitchell's personal liability by the holders of the debts owed by MC Express, Inc.” The complaint further alleges that Mitchell informed Morrison that the stock transfer would never occur because Mitchell never signed a personal guaranty for MC Express's bank debt. Given, however, that Mitchell never allegedly signed a guaranty on MC Express's bank loan nor had any other personal liability on the corporation's debt, the condition precedent has arguably ...


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