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Bielfeldt v. Graves

United States District Court, C.D. Illinois, Peoria Division

October 26, 2017

DAVID L. BIELFELDT, et al., Plaintiffs,
v.
LEE C. GRAVES, et al., Defendants.

          ORDER AND OPINION

          JONATHAN E. HAWLEY U.S. MAGISTRATE JUDGE

         Before the Court are cross motions for summary judgment, as well as Defendant, Elm One Call Locators, Inc.'s (“ELM”), motion for summary judgment on Counts I and IX filed at the invitation of the Court. (D. 124, 127, 128, & 136). Specifically, Plaintiffs David Bielfeldt and Karen Wales seek summary judgment on the counterclaim against them for declaratory judgment filed by Defendants ELM and James Bourazak. The Defendants seek summary judgment in their favor on the same counterclaim. ELM also seeks summary judgment in its favor on Counts I and IX. For the reasons stated, infra, ELM's motion for summary judgment on Counts I and IX is GRANTED (D. 136). Because the grant of that motion resolves the only federal claims in this case and the Court, as explained, infra, declines to exercise supplemental jurisdiction over the remaining state law claims, the remaining motions for summary judgment are MOOT. (D. 124, 127, & 128).

         I

         A

         The undisputed facts relevant to ELM's motion for summary judgment on Counts I and IX are as follows.[1]

         ELM was incorporated on June 5, 2003. At the time of incorporation, Bielfeldt and Graves were each issued 50% of the Class A Voting Shares of ELM. ELM, Bielfeldt, and Graves entered into a Class A Stock Restriction Agreement (“SRA”) in 2003. Bielfeldt and Graves accepted appointments to the board of directors and, during the time relevant to this case, Graves was the CEO of ELM.

         In 2013, Graves contributed approximately $1.8 million to ELM to avoid ELM going into default on its liability insurance and to allow it to meet its payroll obligations. After doing so, Graves sent an email to Bielfeldt on January 16, 2014 stating:

As we discussed, our shortfall was in the $1.8m to $2m range.
Since you left the meeting with this issue unresolved and I did not hear back from you on options and the immediate threat of not being able to pay our liability insurance down payment or meet payroll, I personally put up $1.8m. The threat of not making payroll for hundreds of employees and families as well as defaulting on our liability insurance requirements was unthinkable.
While I have done this to solve our immediate problem, I can't do this alone. Therefore, we have a couple of options. First and preferred option, is for you to come up with $900K to equalize our contributions and risk. If this option is not preferred then let's have your ownership valued and work on an exit strategy. This is not the same business model we acquired over 10 yrs ago but we have survived and are having something to talk about. If you have another option, please let me know as I value our friendship and would like to see this worked out.

(D. 126 at ECF pp. 3-4).

         Bielfeldt responded to this email the same day with, “Let's talk . . .” Id. Thereafter, Bielfeldt and Graves executed a Fourth Amendment to Business Loan Agreement wherein Graves was given the authority, in light of his pledge of capital to:

borrow money in the name of the Corporation, sign execute and deliver promissory notes or other evidence of indebtedness of the Corporation; and, endorse, assign, transfer, mortgage or pledge bills receivable, real estate or other property now owned or hereafter owned or acquired by the Corporation as security for sums borrowed.

Id. at 5.

         Various communications occurred between Bielfeldt and Graves, but Bielfeldt never took action to address the additional capital Graves put into ELM. Finally, on May 12, 2014, Graves sent a letter to Bielfeldt on company letterhead. That letter in its entirety is as follows:

Mr. David Bietfcldt
4737 N, Grand view Drive
Peoria Heights, IT, ...

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