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Smith v. Georgia Energy Usa, LLC

United States District Court, S.D. Georgia, Brunswick Division

November 4, 2014

JONATHAN SMITH, et al., Plaintiffs,
GEORGIA ENERGY USA, LLC, et al., Defendants.


J. RANDAL HALL, District Judge.

This matter is now before the Court on Defendants Tammy Cisco Walker and Aletha Cisco Shave's Motion for Summary Judgment. (Doc. 190.) In this class action, Plaintiffs assert claims for fraud/negligent misrepresentation, negligence, money had and received, unjust enrichment, and violation of Georgia's Uniform Deceptive Trade Practices Act arising from the alleged fraudulent calibration of gasoline and diesel pumps at three filling stations in Camden County, Georgia. Fairley Cisco formed and owned, or had a controlling interest in, the three filling stations until 2000 when he transferred ownership to his daughters, Ms. Walker and Ms. Shave. Despite this transfer, Ms. Walker and Ms. Shave assert that they did not personally manage the stations at any point or involve themselves in any capacity in corporate decision making - functions they left to their father's unfettered discretion. Accordingly, Ms. Walker and Ms. Shave contend there is no basis to impose personal liability against them, either on the grounds of (1) personal participation in the fraudulent scheme or (2) piercing the corporate veil. The Court agrees. For the reasons set forth below, the Court GRANTS Defendants Tammy Cisco Walker and Aletha Cisco Shave's Motion for Summary Judgment. (Doc. 190.)


As the history of this litigation is long, the Court previously outlined the facts in thorough form in its August 10, 2009 Order granting class certification. (Doc. 127.) Of particular relevance to the instant motion, however, is the following:

The three filling stations at issue in this case were owned and operated by Cisco Travel Plaza, Inc., Cisco Travel Plaza II, Inc., and Cisco Express, Inc. (hereinafter, the "Cisco entities" or the "businesses") until 2006. (Shave Dep., Doc. 209-3, at 11, 16-17.) At formation, Mr. Cisco was the owner, but around the year 2000, he conveyed his entire interest to his daughters. (Id. at 9-10.) Despite this transfer, Mr. Cisco retained the roles of CEO and CFO, and he continued to manage nearly all aspects of the businesses. (Id. at 10; Cisco Dep., Doc. 209-1, at 6; Walker Dep., Doc. 209-2, at 6.) Indeed, Ms. Walker devoted "zero" hours per week to the businesses, "never worked at any of the Plazas[, ] or had any kind of relations to the Plazas." (Walker Dep. at 12, 19, 20.) Ms. Shave similarly testified that she had "no involvement" with the businesses. (Shave Dep. at 21, 27.) Instead, Mr. Cisco oversaw the entities' finances and accounting, and Ms. Walker and Ms. Shave "left everything up to their father." (Defs.' Statement of Material Facts ("DSMF"), Doc. 190-2, ¶¶ 6, 9; Pis.' Statement of Material Facts ("PSMF"), Doc. 245-1, ¶¶ 6, 9.) 0nly on occasion would Ms. Walker and Ms. Shave meet with their father to discuss the businesses, and this usually occurred informally at family gatherings. (DSMF ¶ 11; PSMF ¶ 11.) Mr. Cisco would ask for their advice sometimes, but Ms. Walker and Ms. Shave "left most of the decisions up to him." (Walker Dep. at 10.) When together, the family tended to talk about the entities as if they were one ongoing business. (Id. at 9.)

In 2006, Mr. Cisco negotiated the sale of the filling stations on behalf of the entities to Kuldeep Sekhon. (DSMF ¶¶ 12, 13; PSMF ¶¶ 12, 13.) Ms. Walker and Ms. Shave had no role in deciding the value of the businesses or the price for which they were sold. (Walker Dep. at 12-13.) Ms. Walker and Ms. Shave used approximately $8 million of the proceeds to pay off various bank debts owed by the Cisco entities, as well as the mortgage on a personal residence. (Shave Dep. at 13.) An additional $8 million in profit from the sale was deposited into an account at Jax Federal Credit Union in the name of Cisco Travel Plaza II. (Walker Dep. at 6-7.) Ms. Walker and Ms. Shave periodically distributed funds to Mr. Cisco from that account for living expenses up until his death. (Shave Dep. at 15.) After the sale in 2006, there was no ongoing business for any of the entities. (Id. at 15-16; Walker Dep. at 7.)


The Court shall grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." Hickson Corp. v. N. Crossarm Co. , 357 F.3d 1256, 1259-60 (11th Cir. 2004); Fed.R.Civ.P. 56(c). The "purpose of summary judgment is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587 (1986) (internal citation omitted). "[The] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the [record before the court] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). If - and only if - the movant carries its initial burden, the non-movant may avoid summary judgment by demonstrating that there is indeed a genuine issue as to the material facts of its case. Clark v. Coats & Clark, Inc. , 929 F.2d 604, 608 (11th Cir. 1991). Facts are "material" if they could affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986). A dispute of those material facts "is genuine'... [only] if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id.

When ruling on the motion, the Court must view all the evidence in the record in the light most favorable to the non-moving party and resolve all factual disputes in the non-moving party's favor. Matsushita , 475 U.S. at 587. The Court must also avoid weighing conflicting evidence. Anderson , 477 U.S. at 255; McKenzie v. Davenport-Harris Funeral Home , 834 F.2d 930, 934 (11th Cir. 1987). Nevertheless, the non-moving party's response to the motion for summary judgment must consist of more than conclusory allegations, and a mere "scintilla" of evidence will not suffice. Walker v. Darby , 911 F.2d 1573, 1577 (11th Cir. 1990); Pepper v. Coates , 887 F.2d 1493, 1498 (11th Cir. 1989).


There are two distinct legal theories on which Ms. Walker and Ms. Shave, as owners of the Cisco entities, could be personally exposed to liability for the "ill-gotten gains realized from the scheme" (Doc. 28 at 2): (1) they took part in the commission of the fraudulent calibration scheme, or (2) they abused the corporate form to such a degree that the Court should disregard the established principle that a corporation is a separate entity distinct and apart from its shareholders. The Court addresses each in turn.

A. Personal Participation

"[A] corporate officer, director, or shareholder who takes part in the commission of a tort by the corporation is personally liable therefor." Meredith v. Thompson , 719 S.E.2d 592, 594 (Ga.Ct.App. 2011) (citations omitted). Such liability arises not only in the instance of active "participation, " but also where an officer, director, or shareholder "specifically direct[s] the particular act to be done" or "cooperate [s] therein." Id . Ms. Walker and Ms. Shave argue there is no genuine dispute as to any material fact in support of Plaintiffs' allegations that they (1) played a role in the fraud that occurred at the filling stations and (2) had any knowledge of the fraudulent calibration scheme until the allegations appeared on the news. (DSMF ¶ 14; Shave Dep. at 21; Walker Dep. at 10.) Plaintiffs respond with a laundry list of facts that largely emphasize Ms. Walker's and Ms. Shave's status as owners of the Cisco entities and their alleged failure to observe corporate formalities. (PSMF ¶ 14.)

Plaintiffs' argument misses the mark under this theory of recovery. In this action, Plaintiffs allege that Defendants collectively misrepresented to the class the cost per gallon of gasoline and negligently maintained the fuel pumps at the filling stations in furtherance of the fraud. (Compl., Doc. 1, at 6-7.) The only relevant evidence before the Court to prove such allegations as to Ms. Walker and Ms. Shave is the depositions of Ms. Walker, Ms. Shave, Mr. Cisco, and Michael Robert Clark.[1] Contrary to Plaintiffs' assertion, Mr. Clark's deposition does not finger all named Defendants in the pump-rigging scheme, but quite clearly Mr. Cisco and other low level filling station employees. (See Doc. 206-1 at 8, 10, 12-16.) Mr. Cisco's deposition likewise is of little value to prove any participation by his daughters as he invoked the Fifth Amendment in response to every question. (See Doc. 209-1.) Although the Court may draw an adverse inference from Mr. Cisco's silence against ...

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