United States District Court, E.D. Michigan, Southern Division
Judge Stephanie Dawkins Davis
OPINION AND ORDER GRANTING IN PART AND DENYING IN
PART CROSS MOTIONS FOR SUMMARY JUDGMENT  AND DENYING
PLAINTIFF'S MOTION FOR LEAVE TO AMEND 
E. LEVY UNITED STATES DISTRICT JUDGE.
case arises out of the fractured business relationship
between defendant Ronald Thomas, a local real-estate
investor, and plaintiff David Nolan, an Australian
businessman. Plaintiff brings this suit alleging that
defendant froze him out of their joint business, violating
the Uniform Partnership Act and the duties partners owe each
other in the course of running a business.
parties move for summary judgment, and plaintiff moves for
leave to amend his complaint. For the reasons set forth
below, the summary judgment motions are denied in part and
granted in part, and the motion for leave to amend the
complaint is denied.
parties' relationship began in July 2015, when they met
for the first time in Las Vegas. (Dkt. 81-14.) Defendant
followed up on their in-person meeting with an email laying
out their business plan, suggesting that they would
“split equity generated, cash profits from any
transactions and any other positive cash flows 50/50.”
(Id. at 3.) Defendant also laid out the role that
each party would take in the business: “I would see
[plaintiff's] role as primarily arranging capital for
projects, evaluating deals with me and of course continuing
to fine-tune strategy and direction. My role would be
overseeing everything here on the ground, initially
evaluating deals and making sure the business stays on
reply to this email, plaintiff generally agreed with
defendant's plan, and suggested that he would come to
Michigan “every 6 weeks or so as needed.” (Dkt.
87-5 at 2.) In addition, on plaintiff's first visit the
parties would “set up [their] LLC and associated
accounts.” (Id.) Plaintiff explained in his
deposition that it was always their intent for the legal
structure of the entity to be an LLC. (Dkt. 87-2 at 5.)
Instead of setting up a new LLC, the parties “agreed to
use Rise Above Asset Management LLC, which [defendant] had
already registered, with the view that we would register the
name Thomas Nolan LLC.” (Id.)
in an August 2015 email, plaintiff asked defendant what
information he needed to set up the LLC, defendant replied
that doing so was a “simple task” and that
information about owners, officers, and directors would be
spelled out in an operating agreement between the parties.
(Dkt. 81-5 at 3.) Defendant followed through on this
“simple task” and changed Rise Above Asset
Management LLC's name to Thomas Nolan LLC on October 19,
2015; however, the parties never signed the operating
agreement. (Dkt. 87-4.)
the parties discussed the initial financing of the business.
At the end of September 2015, they agreed that they would
each contribute $7, 000 as initial capital into the
company's bank account. (Dkt. 87-24.) Defendant disputes
whether plaintiff ever made this payment, alleging that, at
most, plaintiff only paid $4, 127.90. (Dkt. 87 at 12; Dkt.
roughly September 2015, through March or April 2016,
plaintiff and defendant operated their business buying,
selling, and renting real estate. (See, e.g. Dkts.
87-10 (Nolan proposing investing/funding model for the
business), 87-25 (parties discussing leads and initial
purchases), 87-26 (same), 81-25 (discussing the plan for
paying interest on a loan secured by plaintiff).) In
February, 2016, plaintiff found a third party investor to put
$150, 000 Australian into the company. (Dkt. 81-25.) Also
during that time, the parties engaged legal counsel to write
the operating agreement mentioned previously. (Dkt. 81-20.)
Defendant emailed plaintiff a final draft of this operating
agreement on April 19, 2016, but it is not clear from the
record why the parties never signed it. (Dkt. 87-14; see
also Dkt. 87-21 at 3.)
end of March 2016, defendant began to be concerned with
plaintiff's contributions to their business. He emailed
plaintiff on March 30, 2016 regarding the imbalance between
his investment - both capital and labor - and
plaintiff's. (Dkt. 87-13.) In response, plaintiff
expressed his willingness to find a solution to the
imbalance, but offered various deferrals regarding his
inability to find investors. (Id.) Six days later,
on April 5, 2016, defendant wrote to plaintiff updating him
on various deals in progress and on the company's
financial situation. (Dkt. 87-19.) In that email, defendant
explained that in order to close on the next deal, both
parties would need to make another capital contribution, in
addition to the $11, 350 contribution defendant placed in the
company's bank account to keep it afloat in the meantime.
(Id.) Plaintiff never made this contribution. (Dkt.
13, 2016, defendant emailed plaintiff to suggest that they
dissolve their business relationship. (Dkt. 87-21.) Defendant
acknowledged that he “run[s] Thomas Nolan, which [he]
own[s] 50% of, ” and suggested that “Thomas Nolan
LLC sign a promissory note to [plaintiff] to pay [him] half
of all cash flows (rents and sales) resulting from all 10 of
the properties.” (Id.) He also stated that
plaintiff would be paid back for his entire investment.
(Id.) Plaintiff then responded, demanding full
immediate repayment of his investment, as well as a $300, 000
payment representing his equity interest in the company.
(Id.) In exchange, he would sign over all of his
rights in Thomas Nolan, LLC to defendant. (Id.)
After defendant then reminded plaintiff of plaintiff's
failure to invest an additional $20, 000 as needed to close
on an upcoming property (id.), plaintiff replied
with a long email reiterating his request for reimbursement
in full. (Dkt. 87-22.) On May 24 and May 29, the parties
exchanged a final round of emails about the state of the
company and information needed to wind it down. (Dkts. 81-8,
filed this lawsuit alleging the existence of a partnership
and violations of the Uniform Partnership Act, among other
causes of action, on June 16, 2016. On March 27, 2017, the
Court issued an opinion and order granting plaintiff's
motion to amend the complaint. (Dkt. 43.) Plaintiff's
amended complaint re-pleaded his fraud and constructive fraud
claims as two separate counts, but his attempt to add a
conversion claim was denied as futile.
addition, during the course of litigation, the Court
appointed a receiver to manage the properties at issue and to
provide an accounting of the parties' assets. (Dkt. 27.)
The receiver returned his final report on November 30, 2017,
which showed that ten of the fifteen properties at issue were
owned by Thomas Nolan LLC. (Dkt. 85.) It also showed that
every capital contribution made by either party went into the
LLC eventually known as Thomas Nolan. (Id. at
parties now bring cross motions for summary judgment.
Plaintiff moves for partial summary judgment on counts II and
III of the first amended complaint for violations of the
fiduciary duties partners owe one another and violations of
the Michigan Uniform Partnership Act. (Dkt. 81.)
Plaintiff's motion is for liability only and does not
include damages. Plaintiff also moves for summary judgment on
defendant's three counterclaims, for unjust enrichment,
promissory estoppel, and fraud. Defendant cross-moves for
summary judgment on all claims in plaintiff's complaint.
judgment is proper 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). The Court may not grant summary judgment if “the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court
“views the evidence, all facts, and any inferences that
may be drawn from the facts in the light most favorable to
the nonmoving party.” Pure Tech Sys., Inc. v. Mt.
Hawley Ins. Co., 95 Fed.Appx. 132, 135 (6th Cir. 2004)
(citing Skousen v. Brighton High Sch., 305 F.3d 520,
526 (6th Cir. 2002)).
start, defendant argues that plaintiff does not have standing
to bring his claims inasmuch as they seek to recover funds a
third party investor loaned to plaintiff. Defendant asserts
that the third party investor is the actual party in interest
with respect to these funds, not plaintiff, and, thus,
plaintiff cannot bring these claims.
argument lacks merit. A plaintiff has standing to bring a
claim when he can demonstrate that he was (1) injured, (2)
the defendant caused the injury, and (3) the court can
provide a remedy that redresses the injury. Lujan v.
Defs. of Wildlife, 504 U.S. 555, 560 (1992).
defendant argues plaintiff was not actually injured when he
did not recover the funds loaned by the third party because
only the third party suffered the injury. However, there is
no indication from the pleadings or briefing that plaintiff
is asserting the claim on behalf of the third party. Instead,
plaintiff brings his claims to remedy an injury he suffered
when he did not recover the funds he invested in his business
relationship with defendant. It does not matter that
plaintiff obtained those funds from a third party because,
once given to him, they were his funds until repaid.
Accordingly, losing those funds was an injury sufficient to
second and third elements of standing are also satisfied
here. Plaintiff alleges he was unable to recover the funds as
a result of defendant's malfeasance, and, if the Court
were to find in his favor, it could issue a judgment for
damages that would compensate for his losses.
these reasons, plaintiff has standing to pursue this case.
Existence of a Partnership
alleges defendant breached the parties' contract to carry
on as fifty-fifty partners, failed to adhere to the fiduciary
duties partners owe to each other, and violated various
provisions of Michigan's Uniform Partnership Act. (Dkt.
44 at 7-11 (Counts I-III of the First Amended Complaint).)
These three claims all depend on the existence of a
partnership, and can only succeed if one is found to exist.
Plaintiff argues judgment should be entered in his favor
because the parties' business relationship and dealings
were sufficient to form a partnership. Defendant
counterargues that they could not have formed a partnership
because plaintiff failed to meet various conditions precedent
required to become part of defendant's business.
the parties submitted their briefs on the motions, the Court
ordered supplemental briefing on the partnership issue. (Dkt.
102.) The order asked the parties to address the
applicability of Mich. Comp. Laws § 449.6(2), which bars
the existence of a partnership when a different corporate
form is present. In the supplemental briefing, defendant
argues that under Michigan law a partnership and an LLC are
mutually exclusive corporate forms, and, accordingly, one
entity cannot be both a partnership and an LLC at the same
time. (Dkt. 104.) Plaintiff responds by arguing that
plaintiff was a member of defendant's LLC because of his
investment,  and, in the alternative, that the LLC was
improperly formed and thus a partnership existed. (Dkt. 105.)
implemented the Uniform Partnership Act of 1917
(“UPA”), a law adopted by a number of states
around that time to “make uniform the law relating to
partnerships.” See Mich. Comp. Laws Ann.
§ Ch. 449, Refs & Annos (West); see also Byker
v. Mannes, 465 Mich. 637, 644 (2002). This statute
defines a partnership as “an association of 2 or more
persons . . . to carry on as co-owners a business for
profit.” Mich. Comp. Laws § 449.6(1). It also
disclaims as a partnership “any association formed
under any other statute of this state.” Mich. Comp.
Laws § 449.6(2). The UPA's drafters included
comments explaining the various provisions of the act, and
those comments make clear that “[s]ubsection (b)
provides that business associations organized under other
statutes are not partnerships. Those statutory associations
include corporations, limited ...