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SGM Magnetics Corp. v. Valerio

United States District Court, N.D. Georgia, Atlanta Division

June 26, 2019

SGM Magnetics Corporation, and Rewest LLC, Plaintiffs,
Thomas A. Valerio, et al., Defendants.

          OPINION & ORDER


         Defendant Thomas Valerio owed Plaintiffs about $22 million. They agreed to forgive that debt if he gave them several patents for scrap metal recycling and sorting technologies. Defendant Valerio did so. Plaintiffs now claim the patents were worthless and Defendant Valerio always knew they were. They sued Defendant Valerio to get their money back.[1]Defendants moves for partial judgment on the pleadings, arguing that Counts I, II, and III of Plaintiffs' amended complaint should be dismissed based on a binding release agreement. (Dkt. 54.) The Court agrees and grants Defendants' motion to dismiss these counts.

         I. Factual Background

         Since 2003, Plaintiffs' principal, Didier Haegelsteen, and Defendant Valerio “have collaborated in the design, manufacture, and sales of technology and equipment related to the recycling of scrap metals.”[2] (Dkt. 38 ¶ 12.) Defendant Valerio supplied “intellectual property, ” while Plaintiffs provided “expertise in engineering, manufacturing, marketing, selling, and implementing equipment incorporating that intellectual property.” (Id. ¶ 14.) Plaintiff SGM Magnetics also supplied Defendant Valerio with a revolving line of credit, the rights to which it later assigned to Plaintiff Rewest LLC. (Id. ¶ 17.) As of January 20, 2012, Defendant Valerio owed more than $22, 000, 000 on a note he gave Plaintiff Rewest connected to that line of credit. (Id. ¶ 22.)

         On or about that day, Plaintiff Rewest and Haegelsteen entered into a transaction with Defendant Valerio for the purpose of resolving his debt. (Id. ¶ 23.) They executed several documents, including one known as the “DHTV Assignment Agreement.” (Id. ¶ 24.) In it, Defendant Valerio transferred ownership of a company known as DHTV Holdings, LLC, (“DHTV”) to Plaintiff Rewest. (Id.) At the time, DHTV held certain intellectual property rights. (Id. ¶¶ 24-25.) “DHTV's entire business consisted of granting sublicenses to third parties [in the European Union] to utilize certain intellectual property rights that Valerio had previously licensed to DHTV.” (Id. ¶ 29.) As part of the transaction, the parties executed other documents, including an operating agreement, that made Valerio the sole manager of DHTV. At the heart of the entire transaction were four patent applications that Valerio owned and to which he had granted DHTV sublicenses within the European Union. (Id. ¶ 29.) Through the transaction, Rewest acquired DHTV's sublicenses. (Id. ¶ 32.)

         Before the January 20, 2012, transaction, Valerio had represented to Plaintiffs that his patent portfolio was worth hundreds of millions of dollars and that the European rights he had granted DHTV (and Rewest wanted to acquire) were worth more than the $22 million he owed Rewest. (Id.) In the Assignment Agreement, Valerio expressly represented that he knew of no fact “which materially adversely affects the business, operations, prospects, or condition of [DHTV] or of its properties or assets which has not been set forth in this Agreement.” (Id. ¶ 33.)

         The deal was not what Rewest expected. It believes the sublicenses are worthless because the inventions at issue have already been commercialized, with three of the four licenses now having been abandoned or withdrawn. (Id. ¶ 35-36.) Plaintiffs claim that, at the time of the January 21, 2012, transaction, Valerio knew the European Union would never grant the patents and thus knew the rights he was assigning to Rewest were worthless but never disclosed that information to Rewest. (Id. ¶ 38.)

         Plaintiffs sued Valerio claiming “Valerio avoided repayment of $22, 000, 000 in debt by transferring to Rewest an LLC interest now worth nothing or close to nothing.” (Id. ¶ 37.) Plaintiffs asserted claims for breach of contract (Count I), unjust enrichment (Count II), and fraud (Count III).

         Defendant Valerio then came forward with a written release agreement that he believes prevents Plaintiffs from asserting these claims against him. The Release is dated March 15, 2015. (Dkt. 46-1 at 3.) Haegelsteen signed it on his own behalf and as the General Manager of Rewest. (Id.) Broad in scope, the Release purports to relinquish and discharge all contract and tort claims Plaintiffs may have against Valerio arising from the January 20, 2012, transaction:

I, DIDIER HAEGELSTEEN, individually and as General Manager of REWEST LLC, . . . in consideration of one hundred ($100.00) dollars and other good and valuable consideration including maintaining goodwill, do for myself, REWEST LLC, and heirs, executors, administrators, successor corporations or companies, corporate officers, members, release and forever discharge THOMAS A. VALERIO, his heirs, executors, administrators or assigns from all manner of actions, cause of actions, suits, debts, sums of money, claims, demands whatsoever, in law or equity which I now have in contract or tort, as a result of a sale of DHTV LLC on January 20, 2012.

(Id. at 1.) The Release also contains a warranty provision that the signatories “fully understand it . . . to be a final release of all claims arising out of the above facts and dispute and one that cannot be reopened at any time in the future regardless of what may take place or later occur.” (Id. at 2.) Valerio moved for judgment on the pleadings arguing that the Release bars Counts I, II, and III. (Dkt. 54 at 1.)

         II. Legal Standard

         “After the pleadings are closed - but early enough not to delay trial - a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). When considering a motion for judgment on the pleadings under Rule 12(c), a court may grant the motion only

where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law. In determining whether a party is entitled to judgment on the pleadings, [the court] accept[s] as true all material facts alleged in the non-moving party's pleading, and . . . view[s] those facts in the light most favorable to the non-moving party. If a comparison of the averments in the ...

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