The opinion
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
HOT SPRINGS DIVISION
PREFERRED FAMILY
HEALTHCARE, INC. PLAINTIFF
v. Case No. 6:20-cv-6055
QUAPAW HOUSE, INC., et al. DEFENDANTS
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Pat Parker’s Motion for Summary Judgment. ECF No. 42.
Plaintiff has responded. ECF No. 53. Defendant Pat Parker has replied. ECF No. 58. The Court
finds the matter ripe for consideration.
I. BACKGROUND
Plaintiff Preferred Family Healthcare, Inc. (“PFH”) is a non-profit corporation based in
Missouri that operated healthcare services facilities in Arkansas until October 2018. ECF No. 2, p.
1-3. Defendant Quapaw House, Inc. (“Quapaw”) is an Arkansas registered non-profit corporation
that provides healthcare services in Arkansas, for which it regularly receives Medicare and Medicaid
reimbursements. Id. at p. 1. Defendant Casey Bright is a citizen of Arkansas and was the Chief
Executive Officer of Quapaw. Id. Defendant Pat Parker is a citizen of Arkansas and served as
Chairman of Quapaw’s Board of Directors. Id. at p. 2. On October 12, 2018, PFH and Quapaw
entered into a Master Lease and Promissory Note agreement (“First Lease”) in which PFH agreed to
lease its facilities in Arkansas to Quapaw. ECF No. 2-1. On April 7, 2019, PFH sold one of the
properties rented by Quapaw. ECF No. 2, p. 3. Therefore, PFH and Quapaw entered into a modified
lease agreement (“Second Lease”) to reflect the reduced lease payments resulting from the sale. ECF
No. 2-2.
By June 1, 2019, Quapaw had defaulted on most of the rent payments and the carryback note
in the lease agreement. ECF No. 2, p. 3. PFH states that it allowed Quapaw to continue operating its
facilities out of concern for those receiving healthcare services at the facilities and because Quapaw
gave assurances that it would obtain additional funding. Id. at p. 3. On June 17, 2019, after
negotiations and assurances from Quapaw that it could obtain financing to pay its obligations, PFH
and Quapaw entered into another amended lease and promissory note agreement (“Third Lease”).
ECF Nos. 2, p. 3; 2-3. Quapaw subsequently failed to make any payments to PFH from July 1, 2019,
through October 1, 2019. ECF No. 2, p. 4. Quapaw eventually made a partial payment in October
2019, but did not make any payments during the remainder of 2019 or any payments during 2020.
Id. PFH states that at the time it filed its Complaint, Quapaw owed approximately $2.6 million in
unpaid rent payments and interest on promissory notes. Id. at p. 5.
On October 25, 2019, Quapaw executed a business loan and promissory note agreement with
Malvern National Bank (“MNB”). ECF No. 53-1; 53-2. Communications from Defendants Casey
Bright and Pat Parker to PFH in anticipation of the loan explained that funding was imminent and
Quapaw would soon be able to pay its obligations to PFH. ECF No. 2, p. 3-5; ECF No. 53, p. 4-9.
This loan agreement eventually led MNB to bring claims against Quapaw and its officers for making
misrepresentations in its loan application, and that litigation is ongoing. ECF No. 52, p. 2; Malvern
National Bank v. Quapaw House, Inc., et al., No. 26CV-20-377 (Garland County Circuit Court
2021). In November 2020, the state court entered a default judgment against Defendant Casey Bright
noting that he had left the state and failed to appear or defend the claims against him. ECF No. 51-1.
On May 22, 2020, PFH filed its Complaint in this Court pursuant to 28 U.S.C. § 1332(a).
ECF No. 2, p. 2. PFH brings claims for breach of contract and fraud against all Defendants. Id. at p.
5-7. PFH’s breach of contract claims concern Quapaw’s failure to pay its rent obligations under the
multiple lease agreements between the parties. Id. at p. 5-6. PFH’s fraud claims relate to
misrepresentations it claims Defendants Quapaw, Pat Parker, and Casey Bright knowingly made to
PFH regarding Quapaw’s financial situation, the likelihood of securing additional funding, and the
likelihood of paying the outstanding rental payments under the lease agreements. Id. at p. 6-7. All
Defendants initially failed to file an answer to PFH’s Complaint, and the Court entered defaults
against all Defendants. ECF Nos. 14; 15; 16. Defendant Pat Parker moved to set aside the default
against him (ECF No. 20), and the Court subsequently granted his request. ECF No. 33. The
defaults against Defendants Quapaw and Casey Bright have not been set aside.1
On April 26, 2021, Defendant Pat Parker filed his Motion for Summary Judgement. ECF No.
42. Pat Parker argues that PFH’s claims must fail because he was not a party to any contract with
PFH and because any alleged misrepresentations he made to PFH fall outside of statements that can
be considered for fraud claims. ECF No. 43, p. 3-6.
II. Legal Standard
“Summary judgment is appropriate 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.” Hess v. Union Pac. R.R.
Co., 898 F.3d 852, 856 (8th Cir. 2018) (citation omitted). Summary judgment is a “threshold inquiry
of . . . whether there is a need for trial—whether, in other words, there are genuine factual issues that
properly can be resolved only by a finder of fact because they reasonably may be resolved in favor of
either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). A fact is material only
when its resolution affects the outcome of the case. See id. at 248. A dispute is genuine if the
evidence is such that it could cause a reasonable jury to return a verdict for either party. See id. at
252.
In deciding a motion for summary judgment, the Court must consider all the evidence and all
reasonable inferences that arise from the evidence in a light most favorable to the nonmoving party.
See Nitsche v. CEO of Osage Valley Elec. Co-Op, 446 F.3d 841, 845 (8th Cir. 2006). The moving
1 The Court is not considering Defendant Quapaw’s Motion for Partial Summary Judgment (ECF No. 45) because
the entry of default against it (ECF No. 15) has not been set aside. Quapaw has neither filed an answer to PFH’s
Complaint nor moved to set aside the default against it. Quapaw’s first filing in this matter is its attempted Motion
for Partial Summary Judgment. ECF No. 45. While the Court denied (ECF No. 34) PFH’s Motion for Default
Judgment (ECF No. 24) against Quapaw, the default against Quapaw remains in place. Accordingly, the Court will
continue to treat Quapaw as a non-participant in this matter.
party bears the burden of showing that there is no genuine issue of material fact and that it is entitled
to judgment as a matter of law. See Enter. Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996).
The nonmoving party must then demonstrate the existence of specific facts in the record that create a
genuine issue for trial. See Krenik v. Cnty. of LeSueur, 47 F.3d 953, 957 (8th Cir. 1995). However, a
party opposing a properly supported summary judgment motion “may not rest upon mere allegations
or denials . . . but must set forth specific facts showing that there is a genuine issue for trial.”
Anderson, 477 U.S. at 256.
III. Discussion
A. Applicable Law
The Court has jurisdiction over this claim pursuant to 28 U.S.C. § 1332(a) because of the
diverse citizenship between PFH and Defendants and because the amount in controversy exceeds
$75,000. Courts sitting in diversity apply the substantive law of the forum state. See Gasperini v.
Center for Humanities, Inc., 518 U.S. 415, 426-27 (1996). Each party argues their positions pursuant
to Arkansas law. Accordingly, the Court will apply Arkansas substantive law to this matter.
B. Breach of Contract
Defendant Pat Parker (“Parker”) argues that PFH’s breach of contract claim must fail as a
matter of law because there exists no contract between Parker and PFH. ECF No. 43, p. 3. Parker
notes that every lease agreement referenced by PFH in its Complaint is between PFH and Quapaw.
Id. Parker contends that PFH has failed to put forth any factual allegations that indicate that Parker
was a party to the lease agreements between PFH and Quapaw for the use of PFH’s facilities. Id.
Parker concludes that PFH has failed to show that an agreement ever existed between Parker and
PFH. Id. Therefore, Parker is entitled to summary judgment on this claim. Id.
PFH’s response argues that Parker is personally liable for Quapaw’s breach of contract. ECF
No. 53, p. 10. PFH notes that Arkansas requires that the directors of a corporation have various
fiduciary duties that they must discharge in good faith. Id. PFH further notes that so long as
directors of a corporation take an action in good faith, they are not personally liable for that action.
Id. at p. 10-11. PFH then contends that its allegations of Parker’s knowledge regarding the
financially precarious status of Quapaw and its allegations of his misrepresentations regarding
Quapaw’s ability to pay its obligations show that Parker did not execute his role as Chairman of
Quapaw’s board of directors in good faith. Id. at p. 11-12. PFH then concludes that there is a
genuine question of fact as to whether Parker should be considered a party to the lease agreements
and held liable for Quapaw’s breach of contract. Id. at p. 12.
Responding to PFH’s arguments, Parker asserts that PFH did not attempt to put forth any
allegations showing that an agreement existed between Parker and PFH. ECF No. 58, p. 5. Parker
contends that PFH’s references to the Arkansas conduct requirements for members of a board of
directors does nothing to show that he personally entered into or executed a contract for which he is
liable. Id. at p. 5-6. Parker also notes that PFH admits that Defendant Casey Bright executed the
lease agreements with PFH on behalf of Quapaw and that PFH consistently describes PFH and
Quapaw as the parties to the lease agreements. Id. at p. 6. Parker concludes that PFH has failed to
put forth sufficient proof to show that there is a genuine question of fact as to whether a contract
existed between Parker and PFH. Id.
To prove a claim for a breach of contract, the complaining party must show the existence of
an agreement, a breach of that agreement, and resulting damages. See Ultracuts Ltd. v. Wal-Mart
Stores, Inc., 33 S.W.3d 224, 231-32 (Ark. 2000). “A member of a corporation is not, as such,
personally liable for the acts, debts, liabilities, or obligations of the corporation.” Ark. Code Ann. §
4-33-612. A member of a corporation’s board of directors must discharge his duties in good faith,
and so long as a member does, they will not be liable for actions taken as a director. See Ark. Code
Ann. § 4-27-830(a)(1); Ark. Code Ann. § 4-27-830(d).
The Court finds that PFH has failed to show a genuine factual issue as to whether Defendant
Pat Parker was a party to any agreement with PFH. PFH’s allegations as to Parker’s knowledge of
the poor financial situation of Quapaw and his alleged misrepresentations to PFH are unconvincing
as to the breach of contract claim. Any party bringing a claim for breach of contract against a
defendant must show an agreement between that party and the defendant. See Ultracuts, 33 S.W.3d
at 231-32. PFH correctly notes that directors may be liable for actions not taken in good faith. See
Ark. Code Ann. § 4-27-830(d). However, PFH has failed to sufficiently explain how being
personally liable for alleged bad faith representations on behalf of Quapaw has made Parker a party
to any of the lease agreements. All lease agreements at issue in this matter were between PFH and
Quapaw and were executed by Casey Bright. ECF Nos. 2-1; 2-2; 2-3. PFH has not attempted to
show that Parker himself executed the agreement between Quapaw and PFH, or that the execution
would be an action for which he may be personally liable under Ark. Code Ann. § 4-27-830(d).2
Assuming that PFH has shown that Parker acted in bad faith in his communications with PFH prior
to the Third Lease, PFH has nevertheless failed to put forth a sufficient showing that could lead a fact
finder to conclude that Parker was a party to any agreement. See Anderson at 250. Accordingly, the
Court finds that there is no genuine question of fact that Parker was a party to any agreement with
PFH. Thus, Parker is entitled to judgment as a matter of law as to PFH’s breach of contract claim.
C. Fraud
Defendant Parker argues that PFH’s fraud claim fails as a matter of law because the
statements and representations PFH brings as evidence are not applicable to fraud claims. ECF No.
43, p. 4-. Parker notes that a fraud claim must involve representations of present or past
circumstances. Id. at p. 4-6. Parker then contends that all the misrepresentations PFH alleges Parker
made, such as Quapaw making future rent payments and the certainty of obtaining additional
financing, were all in regard to future circumstances or events. Id. at p. 5-6. Parker also points to
2 Even if Parker signed on behalf of Quapaw, representatives of a corporation that act within their power to contract
on behalf of the corporation are not personally liable for the contract unless that agent agrees to be liable for the
contract. See McCullough v. Johnson, 816 S.W.2d 886, 887 (Ark 1991). Perhaps Parker would be liable if he was
the individual that executed the agreement with PFH on behalf of Quapaw and did so in bad faith. See Ark. Code
Ann. § 4-27-830(d)
affidavits from himself and Quapaw’s counsel which emphasize that all statements to PFH regarding
Quapaw’s ability to pay its obligations and obtain financing were in honest expectation of future
events. Id (citing ECF Nos. 42-1; 42-2). Parker concludes that there is no genuine issue of fact as to
PFH’s failure to present a potentially successful fraud claim and that he should be granted summary
judgment for this claim. Id. at p. 6.
In its response, PFH argues that the fraud claim should proceed because evidence indicates
Parker knew the representations at issue were false when he made them. ECF No. 53, p. 3-7. PFH
first contends that fraud claims can be founded on representations as to future circumstances if the
individual making those representations knows them to be false when they are made. Id. at p. 3-4.
PFH then contends that Parker’s representations fit into this exception for future circumstances
because he knew the statements he made regarding Quapaw’s ability to pay back its obligations were
false because he knew financing from MNB was bound to fail. Id. PFH notes that Parker signed all
of the loan documents between Quapaw and MNB, which PFH also notes contained multiple
misrepresentations on the tax and financial status of Quapaw. Id. at p. 4. PFH contends that Parker’s
responses to MNB’s interrogatories in its separate suit against Quapaw indicate that Parker was
likely aware of Quapaw’s unpaid payroll taxes at the time he signed the loan documents. Id. PFH
also points to the affidavit of its Chief Financial Officer, Thomas Weber (“Weber”), in which Weber
declares that Parker stated on the phone that he was “intimately” involved with the loan application
to MNB and that the financing would permit Quapaw to pay back the rent it owed to PFH. Id. at p.
4-5. PFH concludes that this evidence creates a genuine factual issue as to whether Parker knew his
representations regarding Quapaw’s loan with MNB and Quapaw’s ability to pay PFH were false.
Id. at p. 5.
In his reply, Parker argues that PFH has failed to present adequate evidence to counter his
motion for summary judgment. ECF No. 58, p. 2-3. Parker contends that the references to the court
proceedings between Quapaw and MNB are not relevant to PFH’s fraud claim. ECF No. 58, p. 2-3.
Parker also contends that the documents and evidence presented by PFH fail to show direct
representations made by Parker to PFH and instead involves Defendant Bright more than Parker. Id.
at p. 3-4. Parker then reiterates that the only representations PFH can point to Parker making involve
hopes for future occurrences that are typically inapplicable to fraud claims. Id. at p. 4-5. Parker
concludes that PFH failed to meet his motion with enough evidence to create a genuine issue of fact
as to the fraud claim. Id.
A claim for fraud consists of five elements: “(1) a false representation of a material fact; (2)
knowledge that the representation is false or that there is insufficient evidence upon which to make
the representation; (3) intent to induce action or inaction in reliance upon the representation; (4)
justifiable reliance on the representation; and (5) damage suffered as a result of the reliance.” Tyson
Foods, Inc. v. Davis, 66 S.W.3d 568, 580 (Ark. 2002). “In general, fraud actions must be based on
misrepresentations related to a past event or a present circumstance, not on an intention or a
prediction about a future event.” Downum v. Downum, 274 S.W.3d 349, 353 (Ark. App. 2008). “It
is well-established that representations that are promissory in nature, or of facts that will exist in the
future, though false, will not support an action for fraud.” Hobson v. Entergy Arkansas, Inc., 432
S.W.3d 117, 124 (Ark. App. 2014). A broken promise is typically subject to a breach of contract
claim instead of a fraud claim. See id. However, the general rule against fraud applying to future
conditions or circumstances does not apply if the individual making the representation about the
future knows that it is false at the time it is made. See Delta School of Commerce, Inc. v. Wood, 766
S.W.2d 424, 427 (Ark. 1989). The exception for applying a fraud claim to representations regarding
future events requires producing enough evidence to “permit an inference” that the individual making
the representation “lacked an honest belief” about the representation. Hobson 432 S.W.3d at 125.
The Court finds that there is a genuine issue of fact as to PFH’s fraud claim and that Parker’s
motion for summary judgment must be denied as to this claim. PFH has presented evidence to
support its claim that Parker knew his representations as to Quapaw’s future ability to get financing
and pay back its obligations were false. This allows PFH’s claim to potentially fit into the exception
for fraud claims regarding future circumstances. See Delta School of Commerce, Inc. S.W.2d at 427.
The evidence presented by PFH includes: Parker’s answers to MNB’s interrogatories suggesting he
knew of Quapaw’s poor financials prior to the loan application (ECF No. 53-5), the loan documents
between Quapaw and MNB, all signed by Parker, that misrepresented Quapaw’s financial state (ECF
Nos. 53-1; 53-2; 53-3; 53-4), and the affidavit of Thomas Weber stating that Parker informed Weber
that he was “intimately” involved in Quapaw’s attempt to get financing and that the loan would allow
Quapaw to pay its obligations to PFH (ECF No. 53-6). Taken together, this evidence can “permit an
inference” that Parker did not have an honest belief as to Quapaw’s future ability to get financing and
pay back what it owed to PFH. Hobson 432 S.W.3d at 125. Therefore, PFH has not simply rested
on the allegations in its pleadings but has presented facts and evidence to counter Parker’s motion
and preclude summary judgment. See Anderson, 477 U.S. at 256. Also, the Court must view all of
this evidence and draw all reasonable inferences from it in the light most favorable to PFH as the
non-moving party. See Nitsche 446 F.3d at 845. Accordingly, the Court finds that PFH has presented
a genuine issue of fact as to whether Parker knew his representations to PFH regarding Quapaw’s
financing and ability to pay were false. Therefore, Parker’s motion for summary judgment as to
PFH’s fraud claim must be denied.
IV. CONCLUSION
For the reasons stated above, the Court finds that Defendant Parker’s Motion for Summary
Judgment (ECF No. 42) should be GRANTED IN PART and DENIED IN PART. PFH’s breach
of contract claims against Defendant Parker are hereby dismissed with prejudice. PFH’s fraud claims
against Defendant Parker may proceed to trial.
IT IS SO ORDERED, this 1st day of September, 2021.
/s/ Susan O. Hickey
Susan O. Hickey
Chief United States District Judge