United States District Court, S.D. Alabama, Southern Division
LARRY E. SLOAN, Plaintiff,
JAMES P. CUNNINGHAM, Defendant/Counterclaim Plaintiff,
ECOVERY, LLC, Counterclaim Defendant.
K. DuBOSE CHIEF UNITED STATES DISTRICT JUDGE
matter is before the Court on Larry Sloan's Motion for
Summary Judgment as to Count One of his Claim, and Sloan and
Ecovery, LLC's joint Motion for Summary Judgment as to
all counterclaims asserted by James P. Cunningham (Doc. 46),
Cunningham's Response (Doc. 55) and Sloan and Ecovery,
LLC's Reply (Doc. 59). The Court also relied upon
supplemental briefing that addressed whether Alabama law
requires additional consideration when parties to a contract
mutually assent to a modification. (See Doc. 62, 63,
& 64). For the reasons provided below, summary judgment
is GRANTED as to Count One. Because
Cunningham does not contest Sloan's motion “as it
relates to [his] counterclaims, ” (Doc. 55 at 1),
against both Sloan and Ecovery, Sloan and Ecovery's
Motion for Summary Judgment as to each counterclaim is
Findings of Fact 
P. Cunningham and Larry Sloan began working together on a new
venture in the spring of 2008. (Doc. 55-1 at 2). The
collaboration resulted in the formation of Ecovery, LLC.
(Id. at 5). Ecovery's articles of organization
were filed on July 17, 2008. (Doc. 47-1 at 1). Members of
Ecovery included both Sloan and Cunningham along with two
other individuals, Walter Norris and Mauro Guidetti. Ecovery
originally divided each member's stake in the company in
the following manner: Cunningham and Norris each had a 20%
stake, Guidetti had a 5% stake, and Sloan held the remaining
stake of the company. (Doc. 47-2 at 19). The 20% stake
Cunningham owned was valued at $180, 000. (Doc. 55 at 3
(citing Doc. 55-1 at 8)).
acquired a 20% stake in Ecovery without investing any of his
own money in the venture. Instead, Sloan fronted the money on
Cunningham's behalf for Ecovery's start-up expenses.
(Doc. 55 at 3). Cunningham claims he executed a promissory
Note in favor of Mr. Sloan evidencing the $180, 000
indebtedness in 2008. (Doc. 48 at 2 (citing Doc.
47-6 at 15)).Cunningham testified that he understood he
was obligated to repay Sloan under the 2008 Note. (Doc. 47-6
at 16). Cunningham is unable to locate the promissory Note
(Id. at 15), but he specifically remembers signing
one. (Id. at 15). Sloan said he
“expected” Cunningham to repay him, but he does
not remember a written agreement executed in 2008 to that
effect. (Doc. 48 at 2).
believed his 20% stake would be repaid to Sloan from future
Ecovery distributions. (Doc. 55 at 3-4). The foundation for
his belief stemmed from a verbal representation Sloan
allegedly made in 2008 at the time of Ecovery's
inception. (Doc. 55-2 at ¶ 4). Cunningham, in return,
agreed to contribute his recycling industry expertise to
Ecovery. (Doc. 55-1 at 9). As part of the oral agreement
Sloan purportedly made with Norris and Cunningham, the three
decided whatever profit they derived from Ecovery would first
go toward taxes on the profits then be paid back to Sloan to
settle the debt. (Doc. 55-1 at 4-5). Sloan denies the
existence of the verbal agreement regarding the method of
repayment. (Doc. 48 at 3).
addition to the Articles of Incorporation, Ecovery's
members also signed an Operating Agreement
(“OA”). (Doc. 47-2). The OA detailed
Ecovery's operating rules, including how it received
financing. (Id. at 5). Specifically, Article Two
addressed the company's finances. Section 2.1 detailed
initial capital contributions. (Id.) In relevant
part, § 2.1 reads: “The Company shall be
capitalized by each Member contributing the property and cash
set forth in the books and records of the Company” in
exchange for a percentage membership interest. (Id.)
The OA also defined “Capital Calls.” Capital
calls, according to the OA, occur upon the affirmative vote
of the Members and are used to infuse funding into the
company. Finally, the OA detailed the procedures for when a
member defaulted. These procedures are limited to capital
than two years after Ecovery's inception, both Cunningham
and Norris executed a promissory Note in favor of Sloan.
(Doc. 55 at 4; Doc. 47-3). It is this Note, executed on
November 15, 2010, and Cunningham's failure to repay that
lie at the heart of this dispute.
agrees that the 2010 Note evidenced a debt he owed for his
initial membership contribution. (Doc. 55-2 at ¶ 8).
Cunningham states that the 2010 Note represented the initial
valuation of his 20% stake ($180, 000) and interest accrued
at the Wall Street Journal prime rate.
(Id.) The Note did not provide Cunningham any
additional funds nor did it provide him with an increased
stake in Ecovery.
2010 Note begins with the words “For value
received.” (Doc. 47-3). This statement of the
consideration fails to identify when Cunningham actually
received the value or the value he received. However,
although the parties dispute the precise terms of the 2008
agreement (and dispute whether the 2008 agreement was
memorialized into a written Note), neither party disputes the
fact that Sloan provided $180, 000 to Ecovery on
Cunningham's behalf in 2008. (Doc. 55-2 at ¶ 3).
2010 Note contains a deadline for full repayment of the
principal and interest. (Doc. 47-3). According to
Cunningham's recollection, the 2008 Note was open-ended;
it had no date of maturity. (Doc. 47-6 at 16). Under the
unambiguous terms of the 2010 Note, Cunningham had to repay
his debt by November 15, 2015.
executing the 2010 Note, Sloan's son, Kevin, purchased a
20% interest in Ecovery from his father. (Doc. 55-7 at 3).
Both Norris and Cunningham retained their original 20% stake
in Ecovery. In the same month, Ecovery members began
discussion to bifurcate Ecovery. (Id. at 4). The
Sloans wanted to divide the company, with one focused on the
equipment sales and one devoted to the processing aspect of
the company. (Doc. 55-7 at 5). At the time of the separation
discussions, Sloan told Cunningham he desired the separation
occur “without any money changing hands[.]” (Doc.
55-2 at ¶ 9).
parties executed a Separation Agreement to effectuate the
bifurcation. (See Doc. 47-4). As part of the
Separation Agreement, Cunningham received $1, 311, 447.94 in
assets from Ecovery and assumed a corresponding $1, 311,
447.94 in Ecovery liability. (Id. at 4). In return,
Cunningham executed a Transfer and Assignment of Membership
Interest in Ecovery, LLC by which Cunningham transferred his
20% stake in Ecovery to Ecovery “for no monetary
compensation” and subject to the terms of the Operating
Agreement. (Doc. 55 at 6). On April 4, 2012, Cunningham
signed a Mutual Release, which specifically excluded from the
release “obligations of the parties under the . . .
Promissory Note dated November 15, 2010 from James P.
Cunningham to Larry E. Sloan.” (Doc. 47-5 at 2).
the course of Cunningham's membership, Ecovery did not
make any distributions or profits. (Doc. 55-2 at 3). In 2015,
after Cunningham's departure in 2012, remaining Ecovery
members received distributions. (Doc. 55 at 6). Norris
received a distribution of $215, 933. (Doc. 55-5 at 7).
Following Norris' receipt of the distribution, he paid
Sloan $105, 225 and indicated the payment on his November
2010 promissory Note. (Id. at 3).
Conclusions of Law
Standard of Review
court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). Rule 56(c) provides as follows:
(1) Supporting Factual Positions. A
party asserting that a fact cannot be or is genuinely
disputed must support the assertion by:
(A) citing to particular parts of materials in
the record, including depositions, documents, electronically
stored information, affidavits or declarations, stipulations
(including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials;
(B) showing that the materials cited do not
establish the absence or presence of a genuine dispute, or
that an adverse party cannot produce admissible evidence to
support the fact.
(2) Objection That a Fact Is Not Supported by
A party may object that
the material cited to support or dispute a fact cannot be
presented in a form ...