The opinion of the court was delivered by: Charles P. Kocoras, District Judge:
This matter comes before the Court on (1) Plaintiff C.H. Robinson Worldwide, Inc.'s ("C.H. Robinson"), Plaintiff Jack Tuchten Wholesale Produce, Inc.'s ("Jack Tuchten"), and Intervening Plaintiffs' (collectively, "Plaintiffs") motions for summary judgment against Auster Acquisitions, LLC (Auster), and (2) Plaintiffs' and Defendant Paul J. Duggan's ("Duggan") cross motions for summary judgment.*fn1 For the reasons set forth below, Plaintiffs' motions for summary judgment against Auster are granted, Duggan's motion for summary judgment against Plaintiffs is granted, and Plaintiffs' cross-motions for summary judgment against Duggan are denied.
Since 1993, Duggan owned and managed Jackson Capital Management, LLC ("Jackson Capital"), a hedge fund and private partnership managing company. In addition to his work at Jackson Capital, Duggan was an investor, having invested considerable amounts of money in over 35 different ventures, spanning an array of interests and business models. He was not involved in the daily operations of these enterprises.
In 2006, Duggan met with Dennis Nardoni ("Nardoni") and Thomas Bastounes ("Bastounes") to discuss a potential investment opportunity in a motion picture project.
During this meeting, Duggan learned that Bastounes operated The Auster Company, Inc. ("The Auster Company"), a produce company. Bastounes informed Duggan that he was open to selling The Auster Company. Although neither Duggan nor Nardoni had any previous experience in the produce industry, they decided to pursue a business venture in The Auster Company. They formed Auster to purchase the assets of The Auster Company. Duggan, Nardoni, and Bastounes each held a one-third interest in Auster.
Immediately after the purchase of The Auster Company, Duggan executed written employment agreements with Bastounes and John Cyscon ("Cyscon") to run Auster. The agreements provided that Bastounes and Cyscon were to serve as Auster's Manager of Daily Operations and Assistant Manager of Daily Operations, respectively, which included managing the day-to-day operations of the business and making decisions regarding the company's financial operations. Bastounes signed every check issued by Auster, approved and paid all invoices, oversaw inventory, and was in a position to control the proceeds of all inventory sales. Standard Bank considered Bastounes the Auster contact for issues relating to day-to-day management and operational matters, such as sales, overdrafts, and vendor payments. Standard Bank employees contacted Duggan only when they were unable to reach Bastounes.
Bastounes was primarily responsible for Auster's day-to-day business operations. Accordingly, Duggan's role in Auster's daily business was limited. Duggan never met with Auster's clients or negotiated or brokered any sales for Auster. Additionally, he never purchased or sold produce, collected receivables, deposited money, or signed any checks in connection with Auster's business operations. Apart from executing employment agreements with Bastounes and Cyscon, he did not hire or fire employees, visited Auster only two or three times per year, and did not even have keys to the building. Duggan did not receive any payments from Auster, either as salary or as a return on his investment.
However, Duggan was not completely removed from Auster's business relationships. Duggan was designated as Auster's "tax matters partner" and, at Auster's inception, Duggan executed many of Auster's financial documents, including a Commercial Guaranty for a loan with Standard Bank, a Commercial Security Agreement between Auster and Standard Bank, a Promissory Note, and a Business Loan Agreement. Duggan renewed these agreements with Standard Bank throughout Auster's existence. Additionally, Auster's K-1 schedules for 2007-2008 list Duggan as a managing member or general partner, although the same statements for 2009-2010 list Duggan as a "Limited Partner or other LLC member," while Bastounes is identified as a "General Partner or member manager."
As a produce company, Auster was obligated to comply with the Perishable Agriculture Commodities Act ("PACA"), 7 U.S.C. § 4991, et seq. Duggan executed Auster's original PACA license application and was identified as one of Auster's principals on the public records published by the U.S. Department of Agriculture. Duggan, Nardoni, and Bastounes were each authorized to contractually bind Auster. Additionally, both Duggan and Bastounes were authorized signatories on Auster's bank accounts with Standard Bank and Trust Company ("Standard Bank").
For most of its existence, Auster was not profitable. In 2008 and 2009, Auster's Schedule K-1 showed a loss of over one million dollars and nearly $900,000, respectively. Duggan signed Auster's tax return for both of these years. Additionally, between 2007 and 2010, Auster began to increasingly overdraft on its bank accounts. In 2010, Duggan was aware that Auster was in financial distress and received notifications from Standard Bank whenever Auster's account was overdrawn or when the balance in the account fell below $100,000. Additionally, Duggan met on several occasions with Standard Bank representatives to discuss Auster's financial status, as well as Duggan's other accounts with Standard Bank involving unrelated businesses.
On September 21, 2010, Kevin Boyle ("Boyle") of Standard Bank sent Duggan an e-mail, notifying him that Auster's account was overdrawn in excess of $300,000. Duggan testified that he contacted Bastounes about the overdraft, and based on his conversation with Bastounes, reported to Boyle that Auster would be freezing 90% of vendor payments for a week, which would help bring the account current. Ultimately, Auster did not freeze vendor payments.
Duggan also attempted to ease Auster's financial woes, personally covering bounced checks in excess of $100,000 and investing a total of $2.8 million into Auster in 2010 alone. Additionally, an entity known as Jackson Boulevard Equities, of which Duggan and his family members were general partners, loaned money to Auster sometime in 2009, which was never repaid. Duggan attempted to restructure Auster's loans at Standard Bank and communicated with Standard Bank about how to bring Auster's accounts current.
Plaintiffs further maintain that Duggan was involved with Auster's produce suppliers. Lisa Garcia ("Garcia"), the Controller of the Central Produce Region at C.H. Robinson, stated that C.H. Robinson's representatives had personally discussed Auster's account with Duggan, including whether certain checks to C.H. Robinson had cleared. Duggan allegedly requested a statement of Auster's account with C.H. Robinson as well as copies of ...