Opinion ID: 3002730
Heading Depth: 2
Heading Rank: 1

Heading: A Failed Business Relationship

Text: Middleton Motors, Inc., is a Ford dealership located in Middleton, Wisconsin, and owned and operated by brothers Robert, Dave, and Dan Hudson. In the months leading up to the events at issue in this suit, Middleton was experiencing heavy financial losses, and the brothers disagreed about how to best manage the dealership. For assistance Middleton looked to Lindquist Ford, Inc., a Ford dealership located in Bettendorf, Iowa. In 2002 and early 2003, Dave Hudson and Craig Miller, Lindquist’s general manager, spoke generally about the possibility of Lindquist becoming involved in Middleton’s operations and ownership. Meanwhile, Middleton’s situation worsened. In 4 Nos. 08-1067 & 08-1689 March 2003 Dave Hudson told Miller that he and Robert had placed Dan on a leave of absence, that Middleton continued to sustain losses, and that Middleton needed Lindquist’s help. Before entering into more serious negotiations, the parties signed a confidentiality agreement drafted by Lindquist. It included the following relevant provisions: In connection with the interest of [Lindquist], in exploring the possible acquisition (the “Transaction”) of all or a portion of the business (the “Business”) owned by you, We are requesting that you or your representatives furnish certain information relating to the Business. . . . .... 6.) We acknowledge and agree that unless and until a written definitive agreement concerning the Transaction has been executed neither you, any of your Representatives, us nor any of our Representatives, will have any liability to the other with respect to the Transaction, whether by virtue of this agreement of [sic] any other written or oral expression with respect to the Transaction otherwise. On April 17, 2003, the two dealerships met to hammer out a deal. Middleton sought Miller’s services as a general manager and a cash infusion from Lindquist in exchange for a profit-sharing agreement. A general understanding was reached that Miller would take over as general manager of Middleton and Lindquist would be paid for these services on a percentage-of-net-profit basis, but the specifics of an agreement were not resolved at this meeting. Nos. 08-1067 & 08-1689 5 Nevertheless, the parties agreed that Miller would begin working at Middleton on April 21, 2003, and they would negotiate further terms and commit the agreement to writing sometime later. On April 21 Miller started working as general manager of Middleton while maintaining the same position with Lindquist. The next attempt at a written agreement came in a June 2 fax from Miller to Middleton. This proposal specified that “[t]he only compensation to [Lindquist] will be the Fee, the use of one vehicle, and the reimbursement of travel, meals and lodging costs.” The “Fee” was defined as 45% of Middleton’s profits; payment was to begin the first month that Middleton showed a net profit. On July 1, 2003, Middleton’s accountant sent an email to Lindquist’s accountant explaining that he (Middleton’s accountant) had met with Miller and rejected the June 2 proposal because it did not require Lindquist to make an up-front cash investment in Middleton. The email also asserted that Lindquist understood from the April 17 meeting that its compensation for Miller’s services would come only from Middleton’s profits once the dealership was in the black. On August 28 Middleton’s accountant circulated a letter of understanding “for the relationship among the parties to be legally formalized at a later point.” The letter stated that the parties “have agreed to enter into an agreement whereby [Lindquist] would provide a cash infusion into [Middleton] and take over management of the operations for the fees discussed below.” Those fees included, first, 15% of profits “for recovery of expenses and time associated with the assistance provided by Lindquist” and, 6 Nos. 08-1067 & 08-1689 second, 22.667% of the remaining real income to be paid for “management of the operations.” The letter of understanding reiterated that payment would begin the first month that Middleton reported a net profit. The letter also called for Lindquist to invest $500,000 in exchange for a 25% equity stake in Middleton. Over the next several months, the parties continued to negotiate but never came to terms on the specifics of an agreement; Lindquist never made a cash investment in Middleton. On March 24, 2004, fed up and still sustaining losses, Middleton fired Miller. On May 11, 2004, Miller sent a letter to Middleton demanding payment for his services. Despite Middleton’s persistent losses, Miller asked for $32,627.84 as “final payment for the calendar year 2003,” “50% of adjusted profits per the ‘Letter of Understanding’ ” for 2004-2005, and an additional 50% of adjusted profits for 2006. Middleton rejected Miller’s demand, saying it owed nothing because Miller never turned the dealership profitable. B. Lindquist Files Suit; Middleton Moves for Summary