Bill Johnson's Restaurants, Inc. v. Plattner, Schneidman, Schneider, Jeffries & Plattner, P.C.
255 F. Supp. 3d 927
D. Ariz.2017Background
- Plaintiffs: Bill Johnson’s Restaurants, Inc. (BJRI) and the CT Trust; defendants include accounting firm Harmon Dugwyler & Company and Blake Harmon. BJRI filed bankruptcy in August 2011; trustee/third‑party CEO later pursued claims against shareholders and Harmon.
- Harmon served as BJRI’s accountant (since 1968) and advised/assisted the Johnson family shareholders; plaintiffs allege Harmon was the ‘‘go‑to’’ advisor for major decisions.
- Two challenged transactions: (1) November 24, 2008 cashless dividends (~$1.53M total) enabling shareholders to purchase split‑dollar life insurance policies previously paid by BJRI; (2) 2009 dividend (~$2.06M) enabling shareholders’ LLC (Folks, LLC) to acquire BJRI real property (leaseback), also a cashless transaction.
- Plaintiffs allege these dividend transactions drained corporate assets, rendered BJRI insolvent, and caused bankruptcy; damages claimed include creditors’ claims (notably pension underfunding) and bankruptcy costs.
- Procedural posture: cross‑motions for summary judgment; Plattner defendants settled (motions deferred); court ruled on Harmon defendants’ summary judgment motion and plaintiffs’ partial summary judgment motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations | Claims accrued when transactions occurred (2008–2009) but tolled by adverse domination until third‑party CEO appointment | Transactions occurred >2 years before filing; accrual then bars suit | Tolling via adverse‑domination applied; claims timely (tolled until Jan 2013) |
| In pari delicto (imputation of shareholders’ wrongdoing to corporation) | Shareholders’ approval shouldn’t bar recovery because Harmon’s approval makes BJRI less culpable | Shareholders’ conduct imputable to BJRI, barring recovery under in pari delicto | Questions of fact on adverse‑interest exception and relative guilt—summary judgment denied on this ground |
| Professional negligence (duty, breach, causation, damages) | Harmon owed duties of integrity, objectivity, competence; failed to advise/oppose transactions causing insolvency | No duty to give unrequested advice; recession and other factors caused insolvency; no proximate cause | Material factual disputes on duty, breach, and proximate causation—summary judgment denied |
| Aiding/abetting and civil conspiracy | Harmon knowingly assisted shareholders’ torts (breach of fiduciary duty, fraudulent transfers) | Insufficient evidence Harmon knew conduct was tortious or substantially assisted | Evidence weak but not conclusively lacking; summary judgment denied (claims survive to trial) |
| Damages (inclusion of creditors’ claims) | Damages include creditors’ unpaid claims and pension liabilities caused by insolvency from dividends | Creditor claims are ordinary business expenses that would have been incurred regardless; cannot be recovered as damages | Court grants summary judgment limiting damages: creditors’ claims (including pension claims) not recoverable as damages |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden allocation)
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard and view of evidence)
- T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626 (Ninth Circuit on drawing inferences at summary judgment)
- F.D.I.C. v. Jackson, 133 F.3d 694 (Ninth Circuit recognizing adverse‑domination tolling)
- USACM Liquidating Trust v. Deloitte & Touche, 754 F.3d 645 (Ninth Circuit discussing adverse‑domination doctrine)
- Taylor v. State Farm Mut. Auto. Ins. Co., 913 P.2d 1092 (Arizona law on accrual and when plaintiff should know of wrongful conduct)
- Gipson v. Kasey, 150 P.3d 228 (214 Ariz. 141) (Arizona rule that existence of duty is a question of law)
- Standage v. Jaburg & Wilk, P.C., 866 P.2d 889 (177 Ariz. 221) (proximate causation in professional malpractice)
- McDowell v. Davis, 448 P.2d 869 (104 Ariz. 69) (definition of proximate cause under Arizona law)
- Smith ex rel. Estates of Boston Chicken, Inc. v. Arthur Andersen L.L.P., 175 F. Supp. 2d 1180 (in pari delicto doctrine and its application)