Jeffrey Reider, Appellant-Defendant/Cross-Appellee v. Ursula Hoover, Appellee-Plaintiff/Cross-Appellant (2024)

MEMORANDUM DECISION

[1] Jeffrey Reider appeals the Marion Superior Court's judgment for Ursula Hoover on one of four counts she presented in her complaint for damages, namely, unfair competition. Reider presents a single dispositive issue for our review: whether the judgment is clearly erroneous because he is not personally liable for the actions of his LLC.

[2] Hoover cross-appeals and alleges that the trial court abused its discretion when it awarded her damages in an amount that did not include future lost profits.

[3] We affirm the trial court's award of damages,¹ but we reverse the judgment entered against Reider.

Facts and Procedural History

[4] Hoover was married to Richard Hogshire, who owned and operated a business known as Mr. Dan's through his LLC, Fresh Grill (“Fresh Grill”). In the final dissolution decree, the trial court awarded Hoover “the assets associated with Fresh Grill LLC, including Mr. Dan's and ‘all other items of value associated ․ with the businesses. ․’ ” Appellant's App. Vol. 2, p. 34 (citation omitted). The court ordered Hogshire to turn everything over to Hoover by May 14, 2016. Hogshire did not meet that deadline, but, on June 8, he “surrendered control of Mr. Dan's to Hoover” when he made Hoover the “sole owner of Fresh Grill—and Mr. Dan's.” Id. at 36. But Hogshire began plotting a way to get the restaurant back. On June 13, Hogshire emailed his contact at Sysco, a food vendor, stating: “Hi Tom, [w]ould you be able to keep my account alive? I will need it later on.” Id. at 52.

[5] Meanwhile, in late May, Joe Romano, a “family friend” to Reider, had approached Reider to discuss “the possibility of purchasing the real estate located at 5925 Massachusetts Avenue” in Indianapolis, the location of Mr. Dan's (“the real estate”). Id. at 35. The owner of that real estate, Marathon Petroleum Company, had listed it for sale. Fresh Grill had a right of first refusal, which it did not exercise.

[6] In October, “Reider was engaged in discussions with Marathon[,] which included Reider conditioning his agreement to purchase [the real estate] on Marathon terminating Fresh Grill's year-to-year lease, effective at the end of 2016, and converting it to a month-to-month lease.” Id. at 38. On October 20, Reider created an LLC called 5925 Mass Ave LLC (“5925 LLC”), of which he is the sole member. Also on that date, 5925 LLC submitted an offer to purchase the real estate.² The offer required that Fresh Grill's lease would be changed to month-to-month with an option by either 5925 LLC or Fresh Grill to terminate the lease with thirty days’ notice.

[7] On November 11, Hogshire emailed another contact at Sysco “to inquire about rebates and inventory amount for 12x12 printed wax for Mr. Dan's and to direct communications between Sysco and Mr. Dan's store manager, Sara.” Id. at 40. On December 11, Hogshire emailed the Sysco contact “asking for a Sysco credit application for ‘a new LLC.’ ” Id. (citation omitted). Hogshire later clarified that the name of the new LLC was 5925 Mass Ave LLC.

[8] On January 20, 2017, Reider called Hoover's son and told him that he was buying the real estate and planned to operate his own restaurant there. On January 27, 5925 LLC closed on the purchase of the real estate. 5925 LLC also “assumed all of Marathon's rights and obligations under the Lease with Fresh Grill LLC.” Id. at 43. Then, on January 30, 5925 LLC sent Fresh Grill a notice that its lease would terminate in thirty days. Hoover sued 5925 LLC alleging breach of lease and seeking injunctive relief. Following an evidentiary hearing, the trial court found in favor of 5925 LLC.

[9] On March 6, 5925 LLC began operating its own restaurant out of the former Mr. Dan's building. 5925 LLC branded its restaurant as “Big Dan's Hamburgers” (“Big Dan's”). The new restaurant had the same phone number as Mr. Dan's, the same equipment, and most of the same employees. Further, the Big Dan's menu was “virtually identical” to Mr. Dan's, with many items being called by the same names, like the “Big Dan Burger,” the “Double Dan,” etc. Id. at 47.

[10] Nearly two years later, in February 2019, Hoover filed her complaint against Reider in which she alleged that he had engaged in both a conspiracy to commit fraud and also the intentional interference with a contractual relationship. Reider filed a Trial Rule 12(B)(6) motion to dismiss. Before the trial court ruled on that motion, however, Hoover filed an amended complaint naming both Reider and Hogshire as defendants and alleging criminal conversion, theft, unfair competition, and unjust enrichment. The amended complaint alleged in relevant part that Reider and Hogshire had “engaged in unfair competition by copying elements of [Hoover]’s business in such a way as to confuse consumers as to the source of [Reider and Hogshire's] goods and services.” Id. at 92.

[11] Reider and Hogshire filed their answers and asserted counterclaims. Reider attached an exhibit to his counterclaim showing that, in settlement negotiations with Hoover, he had asserted that naming him personally as a defendant instead of 5925 LLC was, “at best, improper.” Id. at 110. Notably, Hogshire's counterclaim pertained only to the dissolution of his marriage to Hoover. Reider and Hogshire also jointly filed a motion for summary judgment, which the trial court denied.

[12] The trial court conducted a bench trial on Hoover's complaint and Reider's counterclaim in February and March 2023. The court ordered that Hogshire's counterclaim would be tried separately and after judgment was entered on Hoover's complaint. After the initial phase of the trial, the court found in Hoover's favor only on her claim of unfair competition and against her on the other three counts.

[13] The trial court made extensive findings and conclusions in support of the judgment. With respect to the unfair competition claim, the court found and concluded as follows:

Hogshire and Reider worked together to deprive Hoover of her ability to operate the Mr. Dan's restaurant. Indeed, prior to March 2017, both Hogshire and Reider purported to represent Mr. Dan's at the 5925 Massachusetts Ave. address in contacts with vendors and in filings with the State of Indiana when only Hoover was operating the business at that location. It is true that neither Hogshire nor Reider precluded Hoover from operating a Mr. Dan's at any other locations after Reider essentially evicted her from the 5925 Massachusetts Ave location. However, they used virtually identical names for the business, the menu items and signage which said, “Big Dan's since 1950”, as opposed to 2017 when Big Dan's was created. And, because the Defendants cooperated and acted in concert in causing Hoover's damages, they are jointly and severally liable.

Id. at 56. The court awarded Hoover $350,000 in damages, which was the value assigned to Mr. Dan's by the trial court in Hoover's dissolution. Reider filed a motion to correct error, and Hoover filed a motion to correct the judgment. The trial court denied both motions.³ This appeal and cross-appeal ensued.

Discussion and Decision

Issue One: Reider's Appeal

[14] Reider contends that the judgment against him is clearly erroneous because the evidence shows that he acted through his LLC and not personally. He appeals the trial court's findings and conclusions after a bench trial. As our Supreme Court has made clear, in such cases

[w]e may not set aside the findings or judgment unless they are clearly erroneous. In our review, we first consider whether the evidence supports the factual findings. Second, we consider whether the findings support the judgment. Findings are clearly erroneous only when the record contains no facts to support them either directly or by inference. A judgment is clearly erroneous if it relies on an incorrect legal standard. We give due regard to the trial court's ability to assess the credibility of witnesses. While we defer substantially to findings of fact, we do not defer to conclusions of law. We do not reweigh the evidence; rather we consider the evidence most favorable to the judgment with all reasonable inferences drawn in favor of the judgment.

State v. Int'l Bus. Machs. Corp., 51 N.E.3d 150, 158 (Ind. 2016) (citations and quotation marks omitted).

[15] As Reider points out, Hoover sued him personally and did not name 5925 LLC as a defendant. As this Court has explained,

[t]he purpose of a limited liability company is to provide individuals the same protection enjoyed by shareholders of a corporation through creation of a distinct legal entity, while at the same time featuring pass-through taxation similar to that enjoyed by partners. Five Star Concrete, L.L.C. v. Klink, Inc., 693 N.E.2d 583, 586 (Ind. Ct. App. 1998). The Indiana Business Flexibility Act controls the creation and operation of limited liability companies in Indiana. Brant v. Krilich, 835 N.E.2d 582, 592 (Ind. Ct. App. 2005). In terms of personal liability, the Indiana Business Flexibility Act states:

A member, a manager, an agent, or an employee of a [l]imited liability company is not personally liable for the debts, obligations, or liabilities of the limited liability company, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other member, manager, agent, or employee of the limited liability company. A member, a manager, an agent, or an employee of a limited liability company may be personally liable for the person's own acts or omissions.

Ind. Code § 23-18-3-3(a). Thus, individuals associated with a limited liability company are not personally liable merely because of their ownership in the entity, while at the same time, association with a limited liability company does not preclude liability for one's own actions or omissions.[ ]

Because the Indiana Business Flexibility Act provides protections to limited liability companies like those of corporations, to circumvent those protections we apply an analysis similar to that for determining the personal liability of a corporation's officers. Brant, 835 N.E.2d at 590․

In Aronson v. Price, 644 N.E.2d 864, 868 (Ind. 1994), our supreme court explained that proper adherence to corporate formalities is a factor in determining whether a plaintiff has met its burden of proof in seeking to impose personal liability on a shareholder for acts of the corporation. “Lack of observance of formalities can provide circumstantial evidence of shareholder abuse and shareholder use of the corporation as a conduit for personal affairs.” Id. To meet its burden, the plaintiff may also present evidence showing:

(1) undercapitalization; (2) absence of corporate records; (3) fraudulent representation by corporate shareholders or directors; (4) use of the corporation to promote fraud, injustice, or illegal activities; (5) payment by the corporation of individual obligations; (6) commingling of assets and affairs; ․ or (8) other shareholder acts or conduct ignoring, controlling, or manipulating the corporate form.

Brant, 835 N.E.2d at 590. Thus, in deciding whether to pierce the corporate veil or circumvent the protections of a limited liability corporation, “[a] court engages in a highly fact-sensitive inquiry.” Id.

Troutwine Ests. Dev. Co., LLC v. Comsub Design & Eng'g, Inc., 854 N.E.2d 890, 898-900 (Ind. Ct. App. 2006), trans. denied.

[16] Thus, here, it was Hoover's burden to prove that Reider was personally liable for the acts of 5925 LLC.⁴ But Hoover made no effort at trial to pierce the corporate veil, and the trial court entered no findings or conclusions on this issue. Indeed, when the issue of Hoover's failure to pierce the corporate veil came up during the hearing on Reider's motion to correct error, Hoover stated:

[T]his whole LLC, limited liability, veil-piercing argument, we'd submit, Your Honor, is a red herring. And that's because we didn't plead it; we didn't argue it; we're not taking the position that the liability shield of 5925 Mass Ave LLC should be disregarded. And we don't need to, because the Court found ample evidence of Mr. Reider acting individually – prior to, and therefore without the protection of the limited liability company.

Tr. Vol. 3, pp. 32-33 (emphasis added).

[17] For the first time on appeal, Hoover argues that Reider should be held personally liable for the acts of 5925 LLC because “the record contains ample evidence of Reider's acts in furtherance of his conspiracy with Hogshire that took place before 5925[ LLC] existed.” Appellee's Br. at 18 (emphasis added). But,

[a]s a general principle, “[a] civil conspiracy is a combination of two or more persons engaging in a concerted action to accomplish an unlawful purpose, or to accomplish some lawful purpose by unlawful means.” Hardy v. South Bend Sash & Door Co., Inc., 603 N.E.2d 895, 902 (Ind. Ct. App. 1992). The elements of an action for civil conspiracy are an object to be accomplished, a meeting of the minds on the object or course of action, one or more overt acts, and damages proximately caused by those acts. 16 Am. Jur.2d Conspiracy § 51. “While an agreement between the parties is a necessary element of civil conspiracy, such agreement need not extend to all the details of the conspiratorial scheme.” Id.

Carmichael v. Separators, Inc., 148 N.E.3d 1048, 1058 (Ind. Ct. App. 2020), trans. denied.

[18] Notably, Hoover's initial complaint alleged a conspiracy to commit fraud between Reider and Hogshire. But she abandoned that claim in her amended complaint. Instead, Hoover alleged in relevant part that Reider and Hogshire had “engaged in unfair competition by copying elements of [Hoover]’s business in such a way as to confuse consumers as to the source of [Reider and Hogshire's] goods and services.” Appellant's App. Vol. 2, p. 92. Our review of the record shows that, at trial, Hoover made no argument to the trial court that Reider and Hogshire had conspired to put her out of business. Because she raises this issue for the first time on appeal, it is waived. See Breneman v. Slusher, 768 N.E.2d 451, 463 (Ind. Ct. App. 2002), trans. denied.

[19] Further, the trial court did not find or conclude that Hogshire and Reider had conspired to put Hoover out of business. While the trial court found that, “prior to March 2017,” Hogshire and Reider “worked together” to deprive Hoover of her ability to operate the Mr. Dan's restaurant, the court made no findings specific to the elements of civil conspiracy, such as a meeting of the minds. Appellant's App. Vol. 2, p. 56. And in the findings and conclusions specific to Hoover's unfair competition claim, the trial court cited evidence regarding Hogshire's actions beginning in June 2016, but nothing in the court's findings implicates Reider prior to October 2016. Indeed, in her amended complaint, Hoover alleged that “as early as December 2016” Hogshire and Reider “began plotting to reclaim Mr. Dan's.” Id. at 89. As Reider established 5925 LLC on October 20, 2016, he is not personally liable for that alleged tortious conduct absent a piercing-of-the-veil analysis, which Hoover did not allege or demonstrate.

[20] In sum, Hoover did not allege or prove that the corporate veil should be pierced. And Hoover did not argue to the trial court that Reider was personally liable for engaging in a conspiracy with Hogshire, nor did the trial court make any such findings or conclusions. As the trial court found, it was the use of “virtually identical names for the business, the menu items and signage” that constituted the alleged unfair competition, and none of that occurred until well after Reider had created 5925 LLC.⁵ Id. at 56. While the court found that “both Hogshire and Reider purported to represent Mr. Dan's ․ in contacts with vendors and in filings with the State of Indiana” prior to March 2017, the court's findings show that Reider did not make any such representations until December 2016, and those representations were through his LLC. Id.

[21] We hold that the trial court clearly erred when it concluded that Reider was personally liable to Hoover on her unfair competition claim. Accordingly, we reverse the court's judgment against Reider.

Issue Two: Hoover's Cross-appeal

[22] In her cross-appeal, Hoover argues that the trial court's damages award is too low. Although our analysis above means that the damage award against Reider is no longer valid, the court ordered Reider and Hogshire to be jointly and severally liable for Hoover's damages. Thus, this issue is still ripe for appellate review.

[23] Our standard of review is well settled. The computation of damages is a matter within the trial court's discretion. Country Contractors, Inc. v. A Westside Storage of Indianapolis, Inc., 4 N.E.3d 677, 694 (Ind. Ct. App. 2014). Although mathematical certainty is not required, the amount awarded must be supported by evidence in the record. Id.

[24] Hoover contends that the trial court “correctly awarded Hoover $350,000 for the value of Mr. Dan's as a going concern,” but she maintains that she is also entitled to lost profits going forward. Appellee's Br. at 31. Hoover does not cite any legal authority to support her argument on this issue. Because the evidence shows that Mr. Dan's was valued at $350,000, we cannot say that the trial court abused its discretion when it awarded that amount to Hoover on her unfair competition claim.

Conclusion

[25] Hoover did not attempt to pierce the corporate veil to hold Reider personally liable for the actions of 5925 LLC, and she did not satisfy her burden of proof on that issue. Hoover argues for the first time on appeal that Reider conspired with Hogshire before the LLC was created, and that argument is waived. Waiver notwithstanding, Hoover did not present evidence that Reider was personally liable for engaging in unfair competition, and we reverse the judgment against Reider. Finally, we affirm the trial court's damages award.

[26] Affirmed in part and reversed in part.

FOOTNOTES

1.   The trial court also concluded that Hoover's ex-husband, Richard Hogshire, was jointly and severally liable for unfair competition. He does not participate in this appeal.

2.   The effective date of that offer was November 18, 2016, when a Marathon representative signed it.

3.   The trial court clarified that there was no just reason for delay and that the judgment was a final, appealable judgment under Trial Rule 54(B). A trial on Hogshire's counterclaim is still pending.

4.   Because this was her burden at trial, Hoover is incorrect that Reider waived this issue for our review.

5.   To the extent Hoover contends that Reider's termination of Fresh Grill's lease was evidence of unfair competition, that, too, occurred after the LLC was created on October 20, 2016. And, in any event, the trial court here found that 5925 LLC had lawfully terminated Fresh Grill's lease. Appellant's App. Vol. 2, p. 49.

Mathias, Judge.

Chief Judge Altice and Judge Bailey concur. Altice, C.J., and Bailey, J., concur.