Handmaker v. CertusBank, N.A., 3:15-cv-00129

Background

Jonathan Handmaker and George Vredeveld sold Quadrant Financial, Inc. (Quadrant II) to CertusBank via a Stock Purchase Agreement on October 31, 2012; one asset was a $5.5 million SBA-mandated escrow account.
Handmaker and Vredeveld were hired by Certus and had a separate Retention Agreement providing $1 million payable after two years of employment; they were allegedly terminated 10 days before the retention payment became due.
Certus alleges it did not obtain control of the $5.5 million escrow and that Handmaker (as authorized signatory) and Vredeveld failed to transfer or return the funds.
Certus counterclaimed for breach of contract, unjust enrichment, conversion, and fraud (including fraudulent inducement); plaintiffs moved to dismiss several of those claims.
The court considered contractual provisions requiring seller notice of events making representations untrue (Section 4.6) and a "Further Assurance" clause (Section 5.6) as bases for individual liability of Handmaker and Vredeveld.
Ruling: court granted Certus leave to amend its answer/counterclaims; dismissed Certus’s claims for unjust enrichment and fraud/fraudulent inducement; allowed breach of contract and conversion claims to survive.

Issues

Issue	Plaintiffs' Argument	Defendant's Argument	Held
Whether Handmaker and Vredeveld can be liable for breach of the Stock Purchase Agreement for failure to transfer the $5.5M escrow	Only Quadrant II (the Company) made asset-transfer representations in the agreement, so individual sellers cannot be liable	Sellers had contractual duties (notice provision §4.6 and Further Assurance §5.6) to notify Certus and to take steps to effect transfers, so individual liability is plausible	Breach claim survives — factual allegations under §4.6 and §5.6 are sufficient at pleading stage
Whether unjust enrichment claim may proceed alongside breach of contract	Unjust enrichment is a valid alternative remedy	Same facts are governed by an existing contract; unjust enrichment duplicates contract remedy	Dismissed — unjust enrichment barred when valid contract governs parties' relationship
Whether conversion claim is adequately pleaded against Handmaker and Vredeveld	Conversion fails if breach claim is dismissed and because defendant didn’t allege specific acts of dominion	Certus alleges defendants exercised dominion over the escrow and that Handmaker was authorized to transact on the account	Conversion claim survives — allegations of control/authorization are sufficient at this stage
Whether fraud and fraudulent inducement claims survive (or are barred by economic loss rule)	Plaintiffs argue economic-loss doctrine bars tort recovery tied to contract; also challenge specificity of false statements	Certus alleges defendants misrepresented ability to transfer escrow and induced the deal	Dismissed — fraud/fraudulent inducement claims arise from same facts as breach and are barred by the economic loss doctrine

Key Cases Cited

Lawrence v. Chancery Court of Tenn., 188 F.3d 687 (6th Cir. 1999) (standard for Rule 12(b)(6) — accept allegations as true)
Blakely v. United States, 276 F.3d 853 (6th Cir. 2002) (court will disregard legal conclusions masquerading as facts)
Andrews v. Ohio, 104 F.3d 803 (6th Cir. 1997) (complaint must allege all material elements of a viable theory)
Am. Bank, FSB v. Cornerstone Cmty. Bank, 733 F.3d 609 (6th Cir. 2013) (definition of conversion under applicable law)
Westlake Vinyls, Inc. v. Goodrich Corp., 518 F. Supp. 2d 955 (W.D. Ky. 2007) (economic loss rule precludes fraud recovery intertwined with breach of contract)
Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845 (6th Cir. 2002) (economic loss rule bars tort recovery for purely economic losses)
Guarantee Electric Co. v. Big Rivers Electric Corp., 669 F. Supp. 1371 (W.D. Ky. 1987) (elements of unjust enrichment)