United States District Court, N.D. Oklahoma
JOHN P. BROWN, Plaintiff,
KRUGER FAMILY HOLDINGS II, LLC, an Oklahoma limited liability company; WARREN F. KRUGER; and DAVID KRUGER, Defendants.
OPINION AND ORDER
GREGORY K. FRIZZELL, UNITED STATES DISTRICT JUDGE
matter comes before the court on the Joint Motion to Dismiss
[Doc. 11] of defendants Kruger Family Holdings II, LLC,
Warren F. Kruger, and David Kruger. For the reasons set forth
below, the motion is denied.
Allegations of the Complaint
Complaint includes the following allegations. Plaintiff John
P. Brown has long been employed in the plastics industry and
is skilled in the art of polymer formulations. [Doc. 2,
¶ 7]. Brown met defendants Warren F. Kruger and David
Kruger through their involvement in the plastics industry.
[Id. ¶ 8]. For several years prior to 2013,
Brown provided consulting services to the Krugers and their
business, Greystone Logistics, LLC, a manufacturer of plastic
delivery pallets. [Id.].
2013, the Krugers became interested in purchasing the assets
of a company in receivership-Lexington Logistics, LLC.
Lexington's assets included plastics manufacturing
equipment, and the Krugers planned to use those assets in a
new entity, Trienda. [Id. ¶ 9]. The Krugers
anticipated that Trienda could utilize the Lexington
equipment in conjunction with a formula developed by Brown to
produce less expensive plastic resin (“Brown
Formula”), and wanted Brown to go into business with
them. [Id.]. To that end, Brown, the Krugers, and
Kruger Family Holdings II, LLC, negotiated a Memorandum of
Agreement (“Agreement”). [Id. ¶ 10].
Per the Agreement, Brown provided a $250, 000 loan to
defendants, which allowed defendants to obtain financing for
the Lexington asset purchase. [Id.]. Upon the
closing of the asset purchase, the loan was converted to
purchase twelve percent (12%) equity in Trienda.
[Id.; see also Doc. 2-1, § 2.2]. Brown
serves as the Chief Executive Officer of Trienda and David
Krueger is Trienda's President. [Doc. 2, ¶ 10].
Ownership of Trienda was transferred to Kruger Brown
Holdings, LLC (“Kruger Brown”) and Brown holds a
minority interest in Kruger Brown. [Id.]. Brown
asserts that “[t]he business relationship between Brown
and Defendants amounts to a joint venture.”
[Id. ¶ 29].
Agreement further provided “[t]hat BROWN is to receive
1 USD ccp (cent per pound) royalty, in perpetuity, on any
resin material black master batch produced on behalf of
Trienda Holdings LLC.” [Id. ¶ 11; Doc.
2-1, § 3.1(d)]. The Complaint alleges the royalty
provision “was the lynch pin of [Brown's] agreement
with the Krugers, ” and that, “[w]ithout the
royalty payments, Brown would never have agreed to go into
business with the Krugers.” [Doc. 2, ¶ 12]. Brown
alleges that defendants agreed to Brown's royalty demand
because Brown's expertise and involvement was
“necessary to induce Defendants' lenders to provide
financing.” [Id. ¶ 13].
the Lexington asset purchase closed, extrusion, conveying,
and storage equipment, now owned by Trienda, was installed at
the Greystone Logistics facility. [Id. ¶ 14].
There, Brown alleges that, as a result of hundreds, if not
thousands, of hours of work by Brown, the Brown Formula was
successfully implemented, and resin was produced for resale
to Trienda. [Id.]. The price for the Brown Formula
resin sold to Trienda included a markup for the royalty
payable to Brown. [Id. ¶ 15]. Brown alleges
royalty payments were “slow to begin, ” but that
he eventually began receiving royalties on the
Greystone-produced Brown Formula resin resold to Trienda.
Brown oversaw the design and installation of equipment
necessary for producing the Brown Formula resin at
Trienda's facility. [Id. ¶ 16]. Shortly
after the Trienda process was up and running, in December
2017, David Kruger informed Brown that Brown would no longer
receive royalty payments provided for in the Agreement.
[Id.]. David Kruger took the position that Brown had
waived his right to the royalty payments. [Id.].
alleges that he never signed any document to modify the
Agreement. [Id. ¶ 17]. Further, prior to Brown
completing the installation of the equipment to produce the
Brown Formula at the Trienda facility, the Krugers allegedly
did not mention to Brown that he had “somehow
waived” his royalty right and would no longer be
receiving royalty payments on the Brown Formula resin
produced by Trienda. [Id.]. Brown asserts that
defendants never informed him of their intent to stop paying
his royalty and “never mentioned to [him] that his
royalty rights might be impacted by various Trienda
transactions-until after Brown had completed installation of
equipment necessary to produce the Brown Formula resin at
Trienda.” [Id. ¶ 30].
on the foregoing allegations, Brown asserts three claims: (1)
breach of contract; (2) unjust enrichment; and (3) breach of
fiduciary duty. [Id. at pp. 4-5]. Brown also seeks a
declaratory judgment that the Agreement is a valid contract
between Brown and the defendants, and explicitly provides
that Brown is entitled to royalties on the Brown Formula
resin produced on behalf of Trienda in perpetuity.
[Id. at p. 6].
Motion to Dismiss Standard
Rule of Civil Procedure 8 requires a pleading to contain
“a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed.R.Civ.P.
8(a)(2). “To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). “A pleading that offers
‘labels and conclusions' or ‘a formulaic
recitation of the elements of a cause of action will not
do.'” Id. (quoting Twombly, 550
U.S. at 555). “Factual allegations must be enough to
raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555. The court accepts as true
all factual allegations, but the tenet is inapplicable to
legal conclusions. Iqbal, 556 U.S. at 678.
previously stated, Brown asserts three claims for relief: (1)
breach of contract; (2) unjust enrichment; and (3) breach of
fiduciary duty. Defendants seek dismissal of the unjust
enrichment and breach of fiduciary duty claims. The court