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In re Commerce, LLC

United States District Court, D. Maryland

January 11, 2017

In re COMMERCE, LLC Debtor
CHEMENCE, INC. et al. ZVI GUTTMAN, TRUSTEE Bankr. No. 13-12598-JFS (Chapter 7) Bankr. Adv. No. 15-69-JFS


          William M. Nickerson Senior United States District Judge

         Before the Court is a Motion for Summary Judgment filed by Defendants Chemence, Inc. (CI) and Chemence Medical Products, Inc. (Chemence Medical). ECF No 26. The motion is fully briefed. Upon review of the filings and the applicable case law, the Court determines that no hearing is necessary, Local Rule 105.6, and that the motion should be granted.


         This action was initially filed as an adversary action in the bankruptcy case of Debtor Commerce, LLC. (Commerce). Plaintiff Zvi Guttman is the Debtor's Chapter 7 Trustee. Commerce was once a major wholesale distributor of lawn, garden, outdoor living, and holiday products. Malcolm Cork was the president of Commerce from 2004 until August 2012, when his employment was terminated.

         Cork, while still the president of Commerce, formed a new company, Medical Solutions International, Inc. (Medical Solutions), of which he was the sole owner. On or about January 8, 2011, Medical Solutions entered into a Sales, Marketing and Distribution Agreement (Sales Agreement) and a License Agreement with Chemence Medical, an enterprise which is engaged in the manufacture of medical adhesives. The Sales Agreement established Medical Solutions as a distributor for a particular medical adhesive manufactured by Chemence Medical, SUREࢳ®, and the License Agreement permitted Medical Solutions to use the trademark for that product in its marketing efforts. Under the terms of the License Agreement, Medical Solutions was to pay Chemence Medical the sum of $750, 000.00 in four installments: one for $100, 000.00; one for $275, 000.00; and two for $187, 500.00. On or about July 15, 2011, Cork caused Commerce to wire $187, 500.00 from Commerce's account to Chemence Medical and represented to Chemence Medical that this was Medical Solutions' third required payment under the License Agreement. Cork represented to Chemence Medical that he had the authority to make this wire transfer.

         In August of 2012, Commerce filed a suit in this Court against Medical Solutions relating to a $150, 000.00 Commerce check that Cork allegedly had issued to Medical Solutions. Commerce LLC v. Med. Solutions Int'l, Inc. Civ. No. WMN-12-2393. Also in August 2012, Commerce filed a separate suit in this Court against Cork alleging that he had breached his agreement to repay a $450, 000.00 shareholder loan made to him by Commerce. Commerce LLC v. Cork, Civ. No. RDB-12-2513. These cases were consolidated. On January 18, 2013, Commerce and Commerce's chairman of the board and president, Richard Lessans, entered into a Settlement Agreement with Cork, Cork's wife, and Medical Solutions which purported to resolve any and all claims between the parties. ECF No. 26, Ex. 8. That Settlement Agreement provided that “[t]he parties wish to enter into a complete and final resolution of all disputes, business dealings and other matters between them and related Parties, and have reached a full, complete, voluntary and amicable settlement of any and all disputes, claims and causes of action between them.” Id. at 4. The agreement specifically identified as one of the claims being settled the “$187, 500, paid via wire transfer on or about July 15, 2011, and noted that “this claim is not the subject of a currently pending lawsuit, but has been asserted in correspondence between legal counsel.” Id. at 2.

         Pursuant to the Settlement Agreement, Cork made an initial payment of over one half a million dollars. On February 19, 2013, the parties submitted a stipulation of dismissal, with prejudice, which the Court granted on February 21, 2013. Cork, however, has defaulted on subsequent payments due under the Settlement Agreement. On March 20, 2014, Cork was indicted in this Court on wire fraud charges related to the July 15, 2011, wire transfer of funds from Commerce to Chemence Medical. United States v. Cork, Crim. No. CB-14-134.[2]

         On March 26, 2014, Cork and Medical Solutions entered into an Asset Purchase Agreement with Chemence Medical. Under the terms of that agreement, Chemence Medical purchased back Medical Solution's SUREࢳ® business and related assets, including the license to use the SUREࢳ® trademark, for the sum of $1, 060, 000.00. The agreement also included an indemnification provision whereby Medical Solutions and Cork agreed to indemnify Chemence Medical for any losses, damages, or liabilities related to Medical Solutions' business operations.

         On February 13, 2015, Plaintiff filed the instant adversary action seeking to recover from Chemence Medical the $187, 500.00 that was wired to it by Cork. The Complaint includes counts for “Unjust Enrichment” (Count I), “Constructive Trust” (Count II), “Declaratory Relief” (Count III), and “Turnover” (Count IV) and names the following entities as Defendants: Chemence Medical; CI; Chemence Medical, Inc.; and Chemence, LLC.[3] Chemence Medical and CI have answered the Complaint, the other two entities have not. On July 1, 2015, this Court granted a motion filed by Chemence Medical and CI, and opposed by Plaintiff, to withdraw the reference over this action to the bankruptcy court. ECF No. 5. On July 8, 2015, Chemence Medical filed a third party complaint against Cork and Medical Solutions for indemnification. On January 7, 2016, the Clerk of the Court entered default against the third party defendants for want of answer.

         Chemence Medical and CI have now moved for summary judgment as to all claims brought against them. Defendant CI asserts that it had no connection, whatsoever, with the wire transfer and has never conducted business with Commerce, Medical Solutions, or Cork. Chemence Medical argues that Commerce fully and finally settled all claims related to the wire transfer when it settled the previous suits against Cork and Medical Solutions. In the alternative, Chemence Medical argues that it was not unjustly enriched by the wire transfer because it provided equivalent value for the payment in the form of the SUREࢳ® trademark license. As for the remaining three counts, this Court has already concluded that these counts are more in the nature of remedies, not causes of action, and each are dependent on a finding of liability under the unjust enrichment claim. ECF No. 4 at 7.


         A motion for summary judgment will be granted only if there exists no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Summary judgment is inappropriate if any material factual issue “may reasonably be resolved in favor of either party.” Liberty Lobby, 477 U.S. at 250; JKC Holding Co. LLC v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). The moving party bears the burden of showing that there is no genuine dispute as to any material fact. However, no genuine dispute of material fact exists if the nonmoving party fails to make a sufficient showing on an essential element of his or her case as to which he or she would have the burden of proof. Celotex, 477 U.S. at 322-23. Therefore, on those issues on which the nonmoving party has the burden of proof, it is his or her responsibility to confront the summary judgment motion with an “affidavit or other evidentiary showing” demonstrating that there is a genuine issue for trial. See Ross v. Early, 899 F.Supp.2d 415, 420 (D. Md. 2012). “A mere scintilla of proof ... will not suffice to prevent summary judgment.” Peters v. Jenney, 327 F.3d 307, 314 (4th Cir. 2003). A “party cannot create a genuine dispute of material fact through mere speculation or compilation of inferences.” Shin v. Shalala, 166 F.Supp.2d 373, 375 (D. Md. 2001) (citation omitted). Indeed, this court has an affirmative obligation to prevent factually unsupported claims and defenses from going to trial. See Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993) (quoting Felty v. Graves- Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987)).


         In arguing that the January 18, 2013, Settlement Agreement also released the claim against it, Chemence Medical relies on a decision of the Maryland Court of Special Appeals, Chicago Title Insurance Company v. Lumbermen's Mutual Casualty Company, 707 A.2d 913 (Md. Ct. Spec. App. 1998). In Chicago Title, a title insurance company sued one of its agents and the principal of that agent alleging that the agent had misappropriated funds from its escrow account. The insurance company also sued the entity that had provided the agent's surety bond. Previously, the agent and its principal had entered into an agreement with that surety to indemnify it for any losses on the bond. While the litigation was pending, the plaintiff title ...

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