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Rangeline Capital, LLC v. Preston

United States District Court, E.D. Missouri, Eastern Division

May 22, 2018

RANGELINE CAPITAL, LLC, Plaintiff,
v.
FORREST L. PRESTON, LC HEALTHCARE HOLDING COMPANY, LLC, and LIFE CARE CENTERS OF AMERICA, INC., Defendants.

          MEMORANDUM AND ORDER

          STEPHEN N. LIMBAUGH, JR. UNITED STATES DISTRICT JUDGE.

         This case is about an alleged oral contract. Plaintiff claims the parties agreed to the following: plaintiff “would be exclusively responsible for performing all [f]inancing [s]ervices for” defendant Life Care Centers of America; in return, plaintiff would receive 1% of the total financed amount when Life Care Centers of America closed the transaction. (#45 at 2.) Plaintiff alleges it performed financing services to help defendant Life Care Centers of America buy properties. Despite doing this work and finding four potential lenders, defendant Life Care Centers of America obtained its own financing through a different third-party lender (not one of the four plaintiff found). Defendant Life Care Centers of America closed on the $69 million transaction and, according to plaintiff, stiffed plaintiff on the 1% fee of $690, 000.

         Defendants claim the parties never entered into a valid, enforceable contract because the parties' oral agreement lacked essential terms and mutual assent. As such, plaintiff was not entitled to the 1% fee. Defendants have moved for summary judgment (#32), and the issue is ripe. Because plaintiff has presented evidence showing a genuine issue of material fact for each of its claims, the motion will be denied.

         I. Factual Background

         The Parties.

         Plaintiff performs consulting and brokerage-related services relating to debt and equity financing.

         The defendants are all connected. Defendant Forrest Preston is the “chief manager” of defendant LC Healthcare Holding Company and the sole shareholder of defendant Life Care Centers of America. LC Healthcare entered into the lease (explained below) that is at the heart of this dispute. Life Care Centers of America owned and operated the subtenants of the lease, all of which were affiliated with defendant Preston.

         The Oral Agreement.

         The parties disagree on the terms of the oral agreement. Although the Court must resolve the evidentiary conflicts in the plaintiff's favor, the Court will still explain the defendants' positions when relevant.

         Plaintiff alleges, in 2001, defendant Preston met with plaintiff's sole member and manager (“plaintiff's manager”) at a restaurant in Missouri. During this meeting, “[t]he parties agreed that [plaintiff] would be exclusively responsible for performing all [f]inancing [s]ervices for [Life Care Centers of America], meaning, that no other third-party broker would be used.” (#45-1 at 14, ¶ 4.) “In exchange for the [f]inancing [s]ervices, [defendant] Preston agreed to pay (or cause the borrowing entity to pay) [plaintiff] a fee, calculated as one percent (1%) of the total financed amount[.]” (#45-1 at 14, ¶ 5.) “The [f]ee was to be paid to [plaintiff] upon closing of a transaction for which it provided [f]inancing [s]ervices.” (#45-1 at 14, ¶ 6.) Plaintiff would receive no fee if it provided financing services on a transaction that failed to close. That is, plaintiff got nothing if Life Care Centers of America obtained no funding.

         Defendants' understanding of the oral agreement is similar to plaintiff's: “Mr. Preston orally agreed-in exchange for being made a partner in [plaintiff]-to allow [plaintiff] to perform [Life Care Centers of America]'s loan placement and advisory services for a 1% fee of the total financed amount.” (#33 at 11) (footnote omitted). But defendants note “the alleged agreement did not define ‘exclusive, ' and whether it precluded the ability of [Life Care Centers of America] to finance its projects internally without use of a broker.” (#33 at 11) (footnote omitted). As such, defendants argue plaintiff “was only to be paid if [Life Care Centers of America] closed on a deal with a lender procured by [plaintiff].” (#49 at 1.)

         Both parties agree they never reduced their agreement to writing.

         Parties' Course of Conduct.

         Plaintiff provided financing services for Life Care Centers of America from early 2001 until late 2012. Not once during this time did Life Care Centers of America use any other outside broker. In this time, plaintiff assisted Life Care Centers of America in closing at least ninety-nine loans. Of these ninety-nine, plaintiff was paid at closing for ninety-seven loans, and plaintiff received a 1% fee for at least eighty-six loans. Also during this time, Life Care Centers of America arranged its own financing for eight loans. Plaintiff did not assist with these loans and received no fee in connection with them.

         Over time, plaintiff began helping Life Care Centers of America obtain financing through the U.S. Department of Housing and Urban Development (“HUD”). For the HUD loans, “the parties agreed that [plaintiff]'s services warranted a reduced fee of 0.5% of the total financed amount.” (#45-1 at 16, ¶ 20.) From early 2001 until late 2012, plaintiff assisted Life Care Centers of America in closing at least fifty-seven HUD loans, and plaintiff received a 0.5% fee for fifty-six of them. In the sole exception, plaintiff's manager and defendant Preston “had a joint ownership interest” in the project. (#45-1 at 17, ¶ 22.) This was a recognized exception to the agreement, according to plaintiff, and plaintiff “waived its [f]ee for [f]inancing [s]ervices performed on behalf of entities in which [plaintiff's manager] and [defendant] Preston had a joint ownership interest on three . . . occasions.” (#45-1 at 17, ¶ 24.)

         In sum, plaintiff generally received a 1% fee for the non-HUD loans it assisted with, so long as Life Care Centers of America closed on the loan. For HUD loans, plaintiff received a reduced fee. For projects in which plaintiff's manager and defendant Preston had a joint ownership interest, plaintiff waived its fee. It's unclear why plaintiff did not receive the 1% fee for the thirteen non-HUD loans, and it's also unclear what fee plaintiff in fact received for those loans.

         Defendants interpret the parties' course of conduct differently. Instead of an agreed-to fee of 1% with carved out exceptions for HUD loans and joint ownership projects, defendants argue “the parties' course of dealing as to the fee paid to [plaintiff] for services was fluid[.]” (#33 at 15.) Defendants claim “the 1% fee was neither assumed nor guaranteed, ” and the parties instead discussed the plaintiff's fee before a project closed. (#33 at 14.)

         This ...


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