John Kendle v. WHIG Enterprises, LLC ( 2019 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 19a0009n.06
No. 18-3574
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
JOHN KENDLE, ) Jan 09, 2019
) DEBORAH S. HUNT, Clerk
Plaintiff-Appellant, )
)
v. ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
WHIG ENTERPRISES, LLC et al., ) COURT FOR THE SOUTHERN
) DISTRICT OF OHIO
Defendants, )
)
MITCHELL CHAD BARRETT, ) OPINION
)
Defendant-Appellee. )
)
Before: COLE, Chief Judge; SUHRHEINRICH and MOORE, Circuit Judges.
KAREN NELSON MOORE, Circuit Judge. John Kendle once worked as a distributor
for Mitchell Chad Barrett’s company, WHIG Enterprises, LLC. The relationship ended on
unhappy terms, and eventually Kendle brought suit against WHIG Enterprises, LLC, two of its co-
owners, and another affiliated entity. This appeal, however, is concerned only with Kendle’s
claims against Barrett; Barrett cannot be held liable for any of the misconduct Kendle alleges.
Therefore, we AFFIRM the judgment of the district court.
I. BACKGROUND
John Kendle is a medical salesman. R. 144-12 (Kendle Dep. at 7) (Page ID #1814). He
has sold medical devices and pharmaceutical products, both as a representative for pharmaceutical
companies and as an independent salesman. Id.
No. 18-3574, Kendle v. Whig Enterprises, LLC et al.
Mitchell Chad Barrett was a co-owner of WHIG Enterprises, LLC (“WHIG”) at all relevant
times. R. 144-20 (Rutland Dep. at 7–8) (Page ID #2297–98). WHIG is a Florida company that
manufactures and markets compounded medications. R. 114 (Second Am. Compl. at ¶¶ 1, 6)
(Page ID #981–82). “Compounding is custom preparing medications to meet the individual needs
of an individual patient. . . . The idea is you have the doctor, the pharmacy and the patient all
working together to develop an ideal remedy.” R. 144-17 (Kodman Dep. at 7–8) (Page ID #2045).
Kendle’s relationship with WHIG began in 2013, when Barrett and Jason Rutland, another
WHIG co-owner, approached Kendle with the idea of working together. R. 144-12 (Kendle Dep.
at 9–13) (Page ID #1817–21). Kendle was to serve as a distributor for WHIG. Id. Two contracts
governed their business relationship: a Distributor Consultant Agreement (“DCA”) and a
Memorandum of Understanding (“MOU”). R. 114-1 (DCA) (Page ID #997); R. 114-2 (MOU)
(Page ID #1002).
The DCA was a contract between “WHIG, LLC and affiliates, Florida entities (hereinafter’
[sic] The Company’) and John Kendle.” R. 114-1 (DCA at 1) (Page ID #997). It defined Kendle’s
duties as an independent contractor and described his compensation. Id. at 1–2 (Page ID #997–
98). The DCA was to last for a three-year period commencing on September 1, 2013, unless a
party terminated the agreement prematurely for a listed reason. Id. at 1–3 (Page ID #997–99). The
DCA was signed by Kendle and by Barrett “as CEO of WHIG, LLC.” Id. at 5 (Page ID #1001).
The MOU was signed on August 27, 2013 by John Kendle and by Barrett as “CEO.”
R. 114-2 (MOU at 7) (Page ID #1008). This contract gave Kendle an interest in an as-yet-
unformed limited liability corporation called BAMBRWV, LLC (“BAMBR”). Id. at 1 (Page ID
2
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#1002). (It seems as though this LLC was never created.) Kendle v. WHIG Enterprises, LLC, No.
2:15-cv-1295, 2018 WL 1855189, at *2 (S.D. Ohio Apr. 18, 2018). The MOU was entered into
“by and between WHIG, LLC and John Kendle.” R. 114-2 (MOU at 1) (Page ID #1002).
Kendle and WHIG’s relationship started off strong. Kendle—one of WHIG’s many
distributors—had a team of around thirty representatives1 marketing WHIG’s product. R. 144-12
(Kendle Dep. at 26–33) (Page ID #1834–41). Kendle’s team of representatives would distribute a
branded prescription pad2 to doctors. If a doctor prescribed a medication using that pad, the
medication would be compounded at a pharmacy associated with WHIG, and Kendle would
receive revenue from these sales. At some point in time, Kendle’s team was generating around
one million dollars per month in revenue. Id. at 27–33 (Page ID #1835–41).
Kendle was also working on the BAMBR project. The BAMBR business model was that
WHIG would compensate physicians and other providers who prescribed WHIG products by
offering those providers “ownership interests in BAMBR Marketing Groups.” R. 114 (Second
Am. Compl. at ¶ 22) (Page ID #986). Kendle says that he brought two or three doctors into the
BAMBR program while working for WHIG. R. 144-12 (Kendle Dep. at 41) (Page ID #1849).
Finally, Kendle helped WHIG “expand their pharmacies.” Id. at 41–42 (Page ID #1849–
50). Barrett and Rutland had asked Kendle to “go out and basically interview pharmacies or seek
1
Kendle paid the representatives out of the commission he received from WHIG; they were not
employed by or contractors for WHIG. R. 144-12 (Kendle Dep. at 30, 33) (Page ID #1838, 1841).
2
The prescription pads were for “Rx Pro,” a pharmacy affiliated with WHIG. R. 144-10 (Froehlich
Dep. at 7–8) (Page ID #1749–50).
3
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out pharmacies or pharmacy owners and talk with them about becoming part of the team.” Id. at
42 (Page ID #1850). Kendle was successful at least once. He helped negotiate a contract between
WHIG and Jim Kodman, the owner of Gatti Compounding in Indiana, Pennsylvania. Id. at 42–
43 (Page ID #1850–51).
Eventually the relationship with WHIG soured. R. 144-12 (Kendle Dep. at 44) (Page ID
#1852). On February 25, 2014, Kendle organized a meeting of WHIG’s distributors. Id. at 47–48
(Page ID #1855–56). Some of those other distributors “express[ed] concerns” to Kendle about
their relationships with WHIG. Id. at 55 (Page ID #1863). They were nervous about whether they
were being credited for all prescriptions originating from pads they distributed. Id. at 55–57 (Page
ID #1863–65). They had other concerns also, including worries about “transparency” regarding
their compensation and pay disparities between the distributors. Id. at 55–68 (Page ID #1863–76).
The distributors met at a hotel in Atlanta and developed a list of demands, including paid-for
marketing materials and a standardized compensation rate. Id. at 61–70 (Page ID #1869–78).
Rutland and Barrett—Kendle’s primary contacts at WHIG—stopped communicating with
him not long after the distributors’ meeting, and Kendle stopped actively generating business for
WHIG thereafter. Id. at 72–79 (Page ID #1880–87). Barrett and other WHIG executives thought
that Kendle was “call[ing] together all of [their] major marketing affiliates . . . to basically do a
strike on our company and say, ‘Hey, we’re not going to market for you unless you pay us more
money.’” R. 144-20 (Rutland Dep. at 49) (Page ID #2340). Barrett and WHIG considered Kendle
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to be in breach of contract3 and stopped talking to him. Id. at 34 (Page ID #2325). But WHIG did
continue talking to Kendle’s representatives—it reached out to some of them to let them know that
they could work for WHIG directly. R. 144-12 (Kendle Dep. 87–88) (Page ID #1895–96); R. 144-
15 (Sales Team List) (Page ID #1975); R. 151-1 (Lee E-Mail) (Page ID #2790); R. 151-3 (Lee
Dep. at 14–15) (Page ID #2882–83).
In this fallout, Kendle brought suit in the United States District Court for the Southern
District of Ohio. His Second Amended Complaint names as defendants WHIG, Rx Pro
Mississippi, Inc.,4 Barrett, and Rutland.5 R. 114 (Second Am. Compl.) (Page ID #980). This
appeal, however, addresses only the claims against Barrett as an individual. Barrett moved for
summary judgment as to all of Kendle’s claims against him, and the district court granted Barrett’s
motion on April 18, 2018. Kendle, 2018 WL 1855189. This appeal followed.
II. ANALYSIS
Jurisdiction in this case is found under the diversity statute 28 U.S.C. § 1332. John Kendle
is a citizen of Ohio; defendant WHIG Enterprises, LLC is a Florida corporation with its principal
place of business in Mississippi; defendant Rx Pro Mississippi is a Mississippi corporation with
3
Paragraph 4.2 of the DCA says that WHIG may terminate the DCA “immediately without notice
at any time for . . . conflict of interest or competitive business activities where as determined by [WHIG]
in its reasonable discretion, shall cause material harm . . . to [WHIG] or any Affiliates’ [sic] interest.” R.
114-1 (DCA at 3) (Page ID #999).
Rx Pro Mississippi, Inc. “is an affiliate of WHIG.” R. 114 (Second Am. Compl. at 2) (Page ID
4
#981). Rx Pro is seeking Chapter 11 Bankruptcy. See R. 144-1 (Rx Pro Bankruptcy Stay) (Page ID #1282).
5
The FBI was or is investigating Rutland, Barrett, or WHIG and affiliates. R. 112 (June 7, 2017
Op. at 2) (Page ID #937).
5
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its principal place of business in Mississippi; defendant Mitchell Chad Barrett is a citizen of
Mississippi; defendant Jason Rutland is a citizen of Mississippi. R. 114 (Second Am. Compl. at
¶¶ 3, 5) (Page ID #981–82). Kendle is seeking damages in excess of $75,000. Id. at ¶¶ 50, 54, 58,
64, 71 (Page ID #992–95). The district court issued an order under Rule 54(b) of the Federal Rules
of Civil Procedure that granted final judgment in favor of Mitchell Chad Barrett, and so appellate
jurisdiction is proper. R. 170 (Rule 54(b) Order) (Page ID #3021).
We review de novo a district court’s decision to grant summary judgment. Rogers v. Henry
Ford Health Sys., 897 F.3d 763, 771 (6th Cir. 2018). Summary judgment is appropriate if “there
is no genuine dispute as to any material fact.” FED. R. CIV. P. 56(a). We view all facts and draw
all inferences “in the light most favorable to the party against whom summary judgment was
entered.” Villegas v. Metro. Gov’t of Nashville, 709 F.3d 563, 568 (6th Cir. 2013).
Kendle asserts three legal bases for Barrett’s liability: breach of contract, tortious
interference, and unjust enrichment. We address each in turn.
A. Breach of Contract
As to his breach of contract claims, Kendle is hamstrung by one simple fact: he did not
enter into a contract with Barrett.
The DCA is a contract between “WHIG, LLC and affiliates, Florida entities” and “John
Kendle, or his assigns.” R. 114-1 (DCA at 1) (Page ID #997). The MOU is an agreement between
“WHIG, LLC and John Kendle.” R. 114-2 (MOU at 1) (Page ID #1002). Barrett signed both
agreements, but he signed as CEO of WHIG, LLC. R. 114-1 (DCA at 5) (Page ID #1001); R. 114-
2 (MOU at 7) (Page ID #1008).
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Kendle attempts to overcome this substantial obstacle by invoking the doctrine that a
person who enters into a contract as an agent for an undisclosed principal may be held individually
liable on the contract. Appellant Br. at 12. This argument fails.
Florida law, which governs the DCA,6 and West Virginia law, which likely governs the
MOU,7 both dictate that the plain language of a contract controls in the absence of ambiguity.
Fifth Third Bank v. McClure Props., Inc., 724 F. Supp. 2d 598, 605 (S.D. W. Va. 2010) (citing
Blake v. Slate Farm Mut. Auto. Ins. Co., 685 S.E.2d 895, 901 (W. Va. 2009)); Landmark Am. Ins.
Co. v. Pin-Pon Corp., 155 So. 3d 432, 437 (Fla. Dist. Ct. App. 2015). Here, the language was
clear. Kendle was contracting with WHIG (and its Florida affiliates,8 in the case of the DCA).9
6
The DCA has a choice-of-law clause saying that “[t]his Agreement and the employment
relationship created by it shall be governed by Florida law.” R. 114-1 (DCA at 5) (Page ID #1001). Ohio
law generally respects contractual choice-of-law provisions, and the parties do not contest that Florida law
governs. See Jarvis v. Ashland Oil, Inc., 478 N.E.2d 786, 789 (Ohio 1985).
7
The MOU has no choice-of-law provision, but contemplates the creation of a West Virginia
corporation. Therefore, it seems likely that West Virginia law would apply. West Virginia’s interest in
contracts creating corporations under its law is high; the other potentially interested states have little
interest. See Restatement (Second) of Conflict of Laws § 6 (1971). In addition, the parties apply West
Virginia law on appeal. The court below did not explicitly rule on choice of law as to the MOU, but rather
found that “under the law of any state, no breach of contract claim will lie in the absence of a valid contract.”
Kendle, 2018 WL 1855189, at *4.
8
Kendle asserts that “[t]he District Court read language into the DCA which does not exist. The
DCA does not limit its application to WHIG’s Florida affiliates.” Appellant Br. at 12. We disagree. The
DCA says that it is a contract between Kendle and “WHIG, LLC and affiliates, Florida entities.” R. 114-1
(DCA at 1) (Page ID #997). Although not a model of graceful English, the appended “Florida entities” is
clearly modifying what comes before it: “affiliates.” Thus, “WHIG, LLC and affiliates” is limited to
WHIG’s Florida affiliates.
9
The MOU does not include mention of WHIG’s affiliates at all. The contract creates an entity of
which John Kendle “or his assigns” will be a member. R. 114-2 (MOU at 1) (Page ID #1002). There is
absolutely no potential for ambiguity in the MOU; it is between WHIG and Kendle.
7
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Kendle attempts to insert ambiguity into the DCA by saying that the definition of
“affiliates”—“any Company’s parent, subsidiary or related entity and/or [] any entity directly or
indirectly controlled or beneficially owned in whole or part by the Company or Company’s parent,
subsidiary or related entity”—creates ambiguity via the phrase “related entity.” R. 114-1 (DCA at
1) (Page ID #997); Appellant Br. at 12. This argument does not help Kendle. The doctrine he
tries to invoke—agents working on behalf of undisclosed principals—applies when a principal is
undisclosed. “If defendant want[s] to escape personal liability, it [is] his duty to disclose his
principal in some unmistakable manner, in order that plaintiff might know to whom to look for his
pay.” Curtis v. Miller, 80 S.E. 774, 775 (W. Va. 1914). “In order for an agent to avoid personal
liability on a contract negotiated in his principal’s behalf, he must disclose not only that he is an
agent but also the identity of the principal.” Petit-Bois v. A to Z Express of NH, Inc., No. 3:06-
CV-261, 2006 WL 1529549, at *4 (M.D. Fla. May 24, 2006) (quoting Van D. Costas, Inc. v.
Rosenberg, 432 So. 2d 656, 658 (Fla. Dist. Ct. App. 1983)). Granted, the contract reveals the name
of only one principal (WHIG) and leaves others unnamed (the affiliates). But Kendle cites no
caselaw showing that a boilerplate addition of “and affiliates” to the name of a company creates
such confusion regarding the identity of the principal that the agent must be held liable. The lack
of such caselaw makes sense. A doctrine holding an agent liable when the principal is undisclosed
is logical—it allows a contractor to know whom he or she may sue, should it come to that.
Here, Kendle clearly knew WHIG was the principal—he sued it. This is not a case where
a person does not know for whom the agent was acting. Barrett was not acting in his own name;
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he signed the contracts with Kendle on behalf of WHIG. The principal, WHIG, was clearly
disclosed. Regardless of what Kendle believed, the clear language of the contract governs.
Summary judgment was appropriate on this claim.
B. Tortious Interference
Next, Kendle claims that Barrett is liable for tortious interference with his business
relationships. Mississippi law, which the parties do not dispute governs this claim,10 recognizes
causes of action for tortious interference with contract and with non-contractual business
relationships. Coleman & Coleman Enters., Inc. v. Waller Funeral Home, 106 So. 3d 309, 315–
16 (Miss. 2012); MBF Corp. v. Century Bus. Commc’ns, Inc., 663 So. 2d 595, 598 (Miss. 1995).
Both causes of action require an act. There is no evidence in the record that Barrett
undertook any act that could constitute tortious interference with Kendle’s relationship with his
sales team. True, WHIG terminated Kendle’s contract. And, true also, WHIG solicited some of
Kendle’s representatives to work directly for it. But it is equally true that it was Rutland who did
the soliciting. See R. 151-1 (Lee E-Mail) (Page ID #2790); R. 151-3 (Lee Dep. at 13–15) (Page
ID #2881–83) (describing an e-mail from Jason Rutland); R. 144-10 (Froehlich Dep. at 19) (Page
ID #1761) (“Q. Did you have any direct communication with Chad Barrett? A. I did not.”). Kendle
points out that Barrett ordered the termination of the DCA and MOU. Appellant Br. at 14. The
termination of the business relationship between WHIG and Kendle, though, is not an act that
10
WHIG’s principal place of business is in Jackson, Mississippi, and Barrett and Rutland are
Mississippi residents. R. 114 (Second Am. Compl. at 2–3) (Page ID #981–82). The district court used
Mississippi law to analyze the tortious interference claim, and neither party contests choice of law on
appeal.
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interfered with Kendle’s relationship to his sales team. There is nothing showing that Barrett had
anything to do with the solicitation of Kendle’s sales team or customers.11
In the absence of any evidence showing Barrett took an act to interfere tortiously with
Kendle’s business relationship with his sales team, summary judgment was appropriate.
C. Unjust Enrichment
Barrett’s final theory of liability is unjust enrichment. He argues that he is owed damages
in three categories: “(1) unpaid sales commissions for prescriptions originating with Kendle and
the sales team from January 2014 through 2016; (2) unpaid profits from the BAMBR Program
and; (3) unpaid profits from the Pennsylvania pharmacy business.” Appellant Br. at 16.
The parties agree that Mississippi law governs this claim.12 Under Mississippi law, unjust
enrichment applies only when the defendant received payment from the plaintiff by mistake. Willis
v. Rehab Sols., PLLC, 82 So. 3d 583, 588 (Miss. 2012); Union Nat’l Life Ins. Co. v. Crosby, 870
So. 2d 1175, 1180 (Miss. 2004). In addition, Mississippi law “is clear on unjust enrichment—it is
based upon a mistaken payment, and it applies only where no legal contract exists.” Willis, 82 So.
3d at 588 (emphasis added). These two principles dispose of Kendle’s unjust-enrichment claims.
11
Kendle asserts in a declaration that “Barrett contacted and instructed others to contact numerous
members of my sales team.” R. 149-1 (Kendle Dec. at 3) (Page ID #2776). This declaration, which is not
based on any firsthand knowledge, is not probative evidence and therefore cannot create a genuine issue of
material fact. Am. Speedy Printing Ctrs., Inc. v. AM Mktg., Inc., 69 F. App’x 692, 696–97 (6th Cir. 2003).
12
The reasons to apply Mississippi law to this claim are the same as applied to the tortious
interference claim: the majority of the participants resided in Mississippi, and the majority of the relevant
action took place in Mississippi. In addition, as with the tortious interference claim, the parties agree that
Mississippi law applies. See Appellant Br. at 15; Appellee Br. at 14–16.
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The first two categories of claims fail because they are governed by a contract. The claim
for unpaid sales commissions seeks money owed to Kendle under the DCA; the claim for unpaid
profits from BAMBR seeks money owed to Kendle under the MOU. Unjust enrichment applies
only where no legal contract exists. Id. at 588. Kendle’s remedy here is simple: sue on the
contract. He cannot claim that the profits that a corporate officer derived from his work under a
contract are unjust enrichment.
The third category of unjust enrichment—profits from the Pennsylvania pharmacy
business—is not governed by a contract.13 But all of Kendle’s unjust-enrichment claims fail for a
second reason. Unjust enrichment applies only when the defendant receives a payment by mistake,
and Kendle identifies no mistake. He argues that he “certainly would not have conferred the
benefits upon [Barrett] knowing [Barrett] would unjustly retain those benefits.” Appellant Br. at
17. The benefits Kendle is referring to are the profits Barrett may have reaped from Kendle’s work
for WHIG. But “I wouldn’t have worked for you if I had known you would have breached the
contract” is not a theory of mistake. Rather, a mistake of fact is, for example, a situation in which
someone is paid more than he or she is owed for a product due to a mathematical or clerical error.
See Bessler Movable Stairway Co. v. Bank of Leakesville, 106 So. 445, 445–46 (Miss. 1925)
(finding a mistake of fact where plaintiffs-buyers accidentally paid freight costs twice).
13
The complaint does bring a breach-of-contract claim based on the Pennsylvania pharmacy. It
alleges that there was an agreement between Barrett, Rutland, and Kendle that Kendle would earn “at least
5% and up to 50% of the revenue generated by the Rx Pro Compounding Pharmacy in Indiana,
Pennsylvania.” R. 114 (Second Am. Compl. at 14) (Page ID #993). Kendle, however, does not pursue this
claim on appeal. There is no evidence in the record that such a contract existed, whether oral or written.
Therefore we proceed in this analysis as though the Pennsylvania pharmacy business was not governed by
contract, despite the fact Kendle argued otherwise in the past.
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Mathematical errors and accidental payments to the wrong person would also fall into the category
of “mistake.” What Kendle describes is not a mistake; it is regret.
Unjust enrichment is not a valid theory of liability for Kendle’s claims. Therefore,
summary judgment was appropriate.
III. CONCLUSION
For the reasons stated above, we affirm the district court’s grant of summary judgment.
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