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Equity Solutions LLC v. Fowler

United States District Court, Ninth Circuit

January 27, 2014

Equity Solutions LLC, Plaintiff,
Reginald D. Fowler; Spiral Inc., Defendants.



The court has before it plaintiff Equity Solutions LLC's ("Equity") motion for partial summary judgment on its first and third claims for relief (doc. 61), defendants' response (doc. 70), and Equity's reply (doc. 76). We also have before us defendants' motion for partial summary judgment on Equity's alter ego theory of recovery (doc. 63), Equity's response (doc. 72), and defendants' reply (doc. 77).

I. Background

Defendant Reginald D. Fowler is the president and sole shareholder of defendant Spiral Inc, which has numerous subsidiaries and affiliates. From September 2009 through January 2010, the German entity CSA Beteiligungsfonds 5 AG & Co. ("CSA") advanced approximately 13 million in investment capital to Spiral in exchange for an equity investment by CSA into the Spiral affiliates.[1]

Between April 2010 and December 2011, Spiral and its affiliates returned approximately 10 million of the 13 million advanced by CSA, leaving a balance due of approximately 3 million. On December 21, 2011, Fowler approved the transfer by CSA of its interest in the Spiral affiliates to CSA's successor entity, Equity Solutions LLC, "in full and without reservation." ("Approval") PSOF ¶¶ 9, 10. The Approval was signed by "Reggie Fowler." On that same day, Fowler also executed a "Statement of Commitment" which provided in relevant part:

I, Mr. Reggie Fowler, hereby irrevocably confirm that I will take over and purchase from the Equity Solutions LLC the shares of the Spiral-Group, ... as originally held by the CSA Beteiligungsfonds... at the agreed upon total price in the amount of 3 million EUR.

PSOF ¶ 11 ("Statement of Commitment"). Again, the agreement was signed "Reggie Fowler." Equity contends that this language conclusively demonstrates that Fowler signed the documents in his individual capacity, making him personally liable on the Spiral debt to Equity. Neither Fowler nor Spiral has repaid Equity. This lawsuit followed.

Plaintiff now moves for summary judgment on its breach of contract claims against Fowler and Spiral asserted in Counts 1 and 3, respectively. Defendants seek summary judgment on plaintiff's alter ego claims of liability and their condition precedent argument.

II. Equity's Motion for Summary Judgment

A. Fowler Liability (Count 1)

Equity argues that Fowler is personally liable on Spiral's debt to Equity as evidenced by his signature on the Statement of Commitment and Approval. Fowler signed the agreements "I, Mr. Reggie Fowler, " without any reference to Spiral. Nevertheless, Fowler argues that he executed both agreements as president of Spiral, and that CSA and Equity had actual knowledge of his corporate role. He contends that during the eight-year relationship with CSA, all business matters were conducted by Fowler as president of Spiral. According to Equity, however, Fowler did not disclose his corporate capacity at the time he signed the agreements and any evidence to the contrary is barred by the parol evidence rule.

Courts will generally attempt to enforce a contract according to the parties' intent. Taylor v. State Farm Mut. Auto. Ins. Co. , 175 Ariz. 148, 152, 854 P.2d 1134, 1138 (1993). Extrinsic evidence, including negotiations, prior understandings, and subsequent conduct, is admissible for purposes other than varying or contradicting the terms of a final agreement. Id .; Pinnacle Peak Devs. v. TRW Invest. Corp. , 129 Ariz. 385, 389, 631 P.2d 540, 544 (1980) (considering parol evidence "to prove the usages and customs in relation to which the parties contracted"). In the absence of fraud or mistake, however, parol evidence "may not be used to change, alter or vary the express terms in a written agreement." Brand v. Elledge , 101 Ariz. 352, 358, 419 P.2d 531, 537 (1966).

We reject Equity's argument that the documents unambiguously demonstrate that Fowler signed the agreements in his individual capacity. Although the documents are signed "I, Reggie Fowler, " there is no express indication of Fowler's capacity. In fact, there is no mention of individual or corporate capacity at all. The absence of a reference to corporate capacity does not conclusively demonstrate personal liability. Therefore, an ambiguity exists as to Fowler's capacity in executing the documents and we may consider parol evidence to determine the parties' intent.

It is undisputed that when the debt originated, the agreement was between CSA and Spiral. Therefore, when CSA transferred its interest in the debt to Equity, it transferred Spiral's corporate obligation. Fowler approved the transfer and, by way of the Statement of Commitment, agreed to pay Equity instead of CSA. If this was a personal guarantee by Fowler to pay Spiral's ...

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