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Where two third-party plaintiffs have alleged fraud, member oppression and unjust enrichment, those claims should be dismissed because they have not been proved by clear and convincing evidence.
“This matter needs no introduction. It comes back before the Court for the belated Part 2 of its Judgment after the non-jury trial addressing more specifically the claims remaining of Third-Party Plaintiffs Lee Kjos (‘Kjos’) and Zach Meyer (‘Meyer’) against Third-Party Defendant Brandon Cerecke (‘Cerecke’) from the Second Amended Third-Party Complaint. Specifically, Kjos’s and Meyer’s claims proceeding to trial were: statutory member oppression as it related to the claim of fraud (Count 1), fraud (Count 2), and unjust enrichment (Count 6).
“In light of the incorporated and above factual findings, the Court now turns to the remaining claims at trial asserted by Kjos and Meyer against Cerecke, individually, in the 2nd Amended Third-Party Complaint — member oppression based on fraud (Count I), various fraud claims (Count II), and unjust enrichment (Count VI).
“First, as to the remaining common law fraud claim that Cerecke promised Kjos to ‘move everything over to Boss’ and to the extent Meyer overheard that ‘promise’ it is hardly shown to be a material misrepresentation, upon which Kjos, a non-managing member of Boss, could reasonably rely as a clear and definite promise. … Without any evidence of Moore Capital moving forward with an offer, or what, if anything, was hindering an offer from them relative to Cerecke’s alleged promises to move the patent, trademark or ‘everything over to Boss,’ there is not a sufficient showing of a reasonable reliance or damage arising therefrom.
“Next, as to the various allegations of silent fraud, Kjos and Meyer have likewise failed to substantiate their claims through clear and convincing admissible evidence at trial.
“Further, as to those discussions occurring after the initial Operating Agreement and/or related corporate documents were executed, Kjos and Meyer have also failed to show a specific legal or equitable duty owed by Cerecke to Kjos or Meyer. All three were experienced in business, all had an opportunity to seek advice of counsel in their respective business dealings, and whether for a potential sale of Boss (and DLM) to Moore Capital, or Kjos and Meyer wanting a new structure to their current express membership arrangement so the two could buy out Cerecke, they were all negotiating at arms-length.
“Additionally, as mentioned above, reasonable reliance is an element of all forms of actionable fraud, including silent fraud.
“There was simply no showing of reasonable reliance on alleged representations or omissions to either the detriment of Kjos or Meyer. Count 2 claims for fraud fail.
“For the reasons already discussed previously and here above, Kjos and Meyer have failed to demonstrate fraud by Cerecke, including but not limited to the repurchase rights provision and the creation and maintaining of the business structure. Cerecke’s conduct was not shown, by clear and convincing evidence, to be fraudulent or with bad faith. Consequently, the remaining portion of the member oppression claim (Count 1) fails as well.
“Where there was no finding of fraud that would void the Operating Agreement and remaining corporate documents, there are express contracts covering Kjos’s and Meyer’s rights of recovery. Therefore, as a matter of law, the unjust enrichment claims are barred.”
Boss Outdoors, LLC v. Kjos; MiLW No. 10-109982, 24 pages; Berrien Circuit Court; Howard, J.
