Opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

HYC LOGISTICS, INC., )

)

Plaintiff, )

) No. 2:24-cv-02191-TLP-atc

v. )

)

LOUISE PARIS, LTD, JOSEPH )

BARNATHAN, SOLOMON )

BARNATHAN, and ABRAHAM )

BARNATHAN, )

)

Defendants. )

ORDER DENYING MOTION TO STRIKE, DENYING MOTION FOR SANCTIONS,

AND DENYING IN PART AND GRANTING IN PART MOTION FOR SUMMARY

JUDGMENT

In March 2024, Plaintiff HYC Logistics, Inc. (“HYC”) sued Joseph Barnathan, Solomon

Barnathan, Albert Barnathan,1 and Louise Paris, LTD (“LP”) (collectively “Defendants”). (ECF

No. 1.) HYC claimed breach of contract, fraud, fraudulent inducement, intentional

misrepresentation, negligent misrepresentation, unjust enrichment, quantum meruit, sworn

account, and declaratory judgment. (Id.) The Court dismissed HYC’s claims for negligent

misrepresentation, “intentional misrepresentation and fraudulent inducement [] based on the

alleged misrepresentations the Barnathans made about LP’s ability and willingness to pay under

the Services Contract and LP’s financial condition more broadly,” and sworn account. (ECF No.

42 at PageID 210.) HYC then moved for summary judgment on the remaining claims. (ECF

1 Plaintiff mistakenly referred to Albert Barnathan as Abraham Barnathan in the Complaint.

(Compare ECF No. 1 at PageID 1 with ECF No. 57-1 at PageID 317.) The Clerk is respectfully

DIRECTED to modify the docket to reflect this correction.

No. 49.) Defendants responded and included affidavits from each of the Barnathan Defendants.

(ECF Nos. 57–58.) HYC moved to strike those affidavits and for sanctions, and Defendants

responded with new affidavits, seeking to correct the issues identified by HYC. (ECF Nos. 62,

65–68.)

For the reasons explained below, the Court DENIES the HYC’s Motions to Strike and

for Sanctions and DENIES IN PART AND GRANTS IN PART HYC’s Motion for Summary

Judgment.

BACKGROUND

To begin, the Court will take the time to lay out the undisputed facts in this complex

dispute and to identify the facts which the Parties dispute.2

HYC is a family owned and operated Memphis-based logistics company that provides

freight forwarding and customs broker services to both international and domestic companies.

(ECF No. 49-2 at PageID 245.) And HYC contracts with its clients needing import services by

using the Terms and Conditions of Services issued by the National Customs Brokers &

Forwarders Association of America, Inc. (“NCBFAA”). (ECF No. 1 at PageID 3–4.) HYC

asserts that these are the standard terms in the industry. (Id.)

For clients needing both import and customs clearance services, HYC asserts that it

provides “end-to-end services,” particularly for imports coming from China. (Id. at PageID 3.)

2 Defendants failed to cite to the record, as required by Rule 56(c)(1)(A), in their Response to

Plaintiff’s Statement of Undisputed Material Facts in Support of Motion for Summary Judgment.

(See ECF No. 58 at PageID 325–40;) Fed. R. Civ. P. 56(c)(1)(A). So stating the facts here is

harder than is typical. “‘Judges are not like pigs, hunting for truffles’ that might be buried in the

record.” Emerson v. Novartis Pharmaceuticals Corp., 446 Fed. Appx. 733, 736 (6th Cir. 2011)

(quoting United States v. Dunkel, 927 F.2d 955, 956 (7th Cir.1991)). Defendants made it even

harder by filing the “inartfully drafted” first set of affidavits, leading to their filing a second set

of affidavits to clarify the first. (See ECF Nos. 65–67.)

These end-to-end services include “securing cargo containers, securing transport of the cargo

containers by an international shipping concern, receiving the cargo at a U.S. port, clearing

customs, and then either storing or transporting the goods by ground transport to either the client

or a destination provided by the client.” (Id.)

I. LP, the Services Contract, and the Indemnity

HYC provided these types of services to Defendant LP. The Individual Defendants

here—Joseph Barnathan, Albert Barnathan, and Solomon Barnathan—are the “majority, if not

exclusive, owners of LP and both control and operate LP.” (Id. at PageID 4.) Furthermore, each

of the Barnathans “is an officer, director, or executive with LP.” (Id.) Solomon Barnathan is

LP’s Chief Executive Officer and Joseph Barnathan is LP’s Vice President. (Id.) Solomon

Barnathan owns all of LP’s shares. (ECF No. 57-3 at PageID 323.)

On November 15, 2022, HYC and LP executed a contract, the NCBFAA Terms and

Conditions of Services (“Services Contract” or “Contract”). (ECF No. 49-2 at PageID 245.) In

the Services Contract, HYC agreed to provide, freight, forwarding, and customs brokerage

services for the goods LP planned to purchase and transport from a manufacturer in China. (Id.)

The Parties agree that “[t]he Contract was signed by Joseph Barnathan, Vice President of LP, on

behalf of LP.” (Id. at PageID 246; ECF No. 58 at PageID 326.) As HYC explains, “[u]nder the

Contract, HYC provided services to LP on account which LP agreed to promptly pay upon

receipt of HYC’s monthly invoice.” (ECF No. 1 at PageID 4.) The Contract further required LP

“to pay its bills and all ‘expenses of collection and/or litigation, including reasonable attorney[s’]

fee[s].’” (ECF No. 49-2 at PageID 246.) LP admitted that it executed the Services Contract and

is bound by its terms. (Id.)

And so HYC claims it began providing services to LP under the Services Contract. (ECF

No. 1 at PageID 4.) HYC explained how the business relationship functioned.

After LP ordered goods from a Chinese manufacturer, LP would contact HYC and HYC

would coordinate the transport of the containers from China to the United States. Upon

arrival at the port in the United States, the Bills of Lading would be released to HYC -

evidencing that LP had paid the manufacturer in full - and HYC would release the goods

to LP by transporting the containers to LP’s warehouse.

(ECF No. 49-2 at PageID 246.)

In December 2022, the month after LP and HYC signed the Services Contract, HYC

became concerned that LP had not paid the Chinese manufacturer for some goods in containers

HYC was importing and that the manufacturer would not release the Bills of Lading to HYC.

(Id.) HYC told LP that it could not release the goods without Bills of Lading because that would

create financial liability for HYC and its international affiliates. (Id.) But LP assured HYC that

they could release the goods to LP without the Bills of Lading, as LP told HYC that it had

worked out payment arrangements. (Id. at PageID 247.) To convince HYC to release the

containers to LP without the Bills of Lading, LP entered into an indemnity agreement with HYC

(“Indemnity”). (Id.) Under the Indemnity, “LP agreed to fully indemnify and reimburse HYC

for any and all damages, fees, and/or costs, associated with HYC releasing the goods to LP

without receipt of the Bills of Lading.” (Id.) LP admits that it executed the Indemnity and is

bound by it. (Id.) For the next twelve months, HYC imported and transported goods for LP

without issue. (Id.)

II. Detail Fashion Ltd.

In 2023, LP ordered goods from Detail Fashion Ltd. (“Detail Fashion”), a textile

manufacturer located in China. (Id.) LP hired HYC to handle the transport of goods that LP

ordered from Detail Fashion. (Id.) HYC then hired HECNY Group (“HECNY”), a company in

China, to facilitate the export of the goods. (Id. at PageID 248.) HECNY’s role was “to receive

the goods from Detail Fashion, deliver the goods to the port in Shanghai, load the goods onto a

container ship, and transport the goods to Los Angeles.” (Id.)

But, when the goods arrived at the port in Los Angeles, HYC discovered that LP had not

fully paid Detail Fashion and “that Detail Fashion had not released the Bill of Lading.” (Id.) In

fact, LP failed to pay Detail Fashion $791,000.91. (Id.) Even so, “[t]he Barnathan Defendants

demanded that HYC release the goods,” and HYC did. (Id.)

Because LP had not paid Detail Fashion, Detail Fashion sued HECNY in Chinese court

and alleged that HECNY should not have released the goods without the Bills of Lading. (Id.)

The Chinese court then froze around $700,000.00 of HECNY’s funds to secure LP’s unpaid

balance to Detail Fashion. (Id.) In response, HECNY focused on HYC. (Id.) “HECNY

demanded that HYC pay Detail Fashion $791,009.90 for the cost of goods sold to LP, plus an

additional $23,812.00 in legal fees incurred by Detail Fashion and another $20,607.00 in legal

fees incurred by HECNY.” (Id. at PageID 248–49.) In addition, “HECNY held in port and/or

suspended delivery of HYC’s other customers’ containers in route from China.” (Id. at PageID

249.) HECNY also threatened legal action and “sought to terminate its business relationship

with HYC.” (Id.)

HYC then communicated directly with LP asking it either to make the required payment

or to perform under the Indemnity, both of which LP refused to do. (Id.) Neither Detail Fashion

nor HECNY would release or resolve any legal claims until LP paid its debt to Detail Fashion in

full. (Id.) “The Barnathan Defendants told HYC that LP was not in a financial position to

satisfy the debt or perform under the [Indemnity].” (Id. at PageID 250.) HYC was then facing a

hard choice either to pay off LP’s debt and liability or to defend the claims against it. (Id.) LP

also admitted that it failed to pay HYC for its services in the amount of $447, 288.28. (Id.) LP

owed Detail Fashion $791,009.90 for past due invoices. (Id.) And Detail Fashion claimed legal

fees of $23,813.00, while HECNY claimed legal fees of $20,607.72. (Id.)

III. Settlement Agreement

HYC took out a loan and paid Detail Fashion $791,009.90 to cover LP’s debt. (Id.)

HYC wired the funds to Detail Fashion on December 28, 2023. (Id). Joseph Barnathan denies

any knowledge of the terms of HYC’s loan or that he received any documents supporting HYC’s

claim of taking out a loan. (See ECF No. 57-2 at PageID 321; ECF No. 66 at PageID 482.)

Before HYC made that payment, on December 26, 2023, Joseph Barnathan, while acting on

behalf of LP, allegedly negotiated the terms for and agreed to enter into a settlement agreement

with HYC (“Settlement Agreement”). (ECF No. 1 at PageID 10; ECF No. 49-3 at PageID 260–

61.) During a conference call with HYC that same day, Joseph Barnathan allegedly agreed to

three things—that they were liable for the debt, that they would sign the Settlement Agreement,

and that they would make payments under that agreement. (ECF No. 49-3 at PageID 261)

Likewise, HYC asserts that each of the Barnathans agreed to guarantee LP’s payment under the

Settlement Agreement.3 (Id.)

With its verified Complaint and Motion for Summary Judgment, HYC attached an

unsigned, undated document entitled “Settlement Agreement.” (ECF No. 1-5; ECF No. 49-6.)

HYC asserts that this document memorializes the Settlement Agreement that HYC, LP, and the

Barnathans agreed to. (ECF No. 49-2 at PageID 252.) According to the written Settlement

Agreement, LP agreed to pay HYC a total of $1,238,288.00 by making monthly installments

starting in January 2024 and ending in March 2024. (ECF No. 49-6 at PageID 274.)

3 As the Complaint states, “As part of the Settlement Agreement, HYC required, and each of the

Barnathan Defendants agreed to be, guarantors for the repayment obligation, jointly and

severally.” (ECF No. 1 at PageID 10.)

That total covers the money HYC paid to Detail Fashion on LP’s behalf. (Id.) It also

includes the $447,288.28 that LP still owed HYC under the Services Contract. (Id.) The

Settlement Agreement contains this guaranty provision (“Guaranty”): “In order to induce HYC

to enter into this Agreement with LP, the Guarantors unconditionally guarantee the payment of

all sums due under the Agreement on the part of LP … and agree to be jointly and severally

liable for LP’s payments and prompt performance under this Agreement.” (Id. at PageID 275.)

And it lists the Barnathans as the guarantors. (Id. at PageID 273.)

HYC alleges that “[o]n December 29, 2023, Counsel for LP emailed HYC stating that the

Settlement Agreement was signed by LP and that LP and the Barnathan Defendants agreed to

perform thereunder.” (ECF No. 1 at PageID 10; see ECF No. 62-2.4) And Defendants allegedly

made three installment payments under the Settlement Agreement, although these payments were

less than the amounts set forth in the Settlement Agreement. (ECF No. 49-2 at PageID 252–53.)

For instance, they paid $220,000.00 on December 28, 2023, $75,000.00 on January 22, 2024,

and $70,000 on February 20, 2024.5 (Id.) LP made six other payments for $25,000, less than

they allegedly agreed to in the payment plan. (Compare ECF No. 49-3 at PageID 262–63 with

4 Typically the Court does not consider items in the record filed after the motion for summary

judgment. But Plaintiff has attached an email chain to its Motion to Strike (ECF No. 62-2.),

which they purport to be the communications between the Parties during their negotiations of the

Settlement Agreement. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Since

Defendants did not contest the accuracy of the emails in their response to the Motion to Strike,

but instead filed the second set of Barnathan Affidavits which implicitly accept the accuracy of

the emails and because the emails are otherwise permissible to support a factual position under

Federal Rule of Civil Procedure 56, the Court will consider the emails in its review of the Motion

for Summary Judgment. See Fed. R. Civ. P 56. That said, the emails do not change the

outcome.

5 According to the Settlement Agreement, the first payment should have been $260,000 followed

by seven payments of $100,000 and then smaller payments afterward. (ECF No. 1-5 at PageID

36.)

ECF No. 49-6 at 274.)6 LP and the Barnathans made no more payments to HYC after May 10,

2024, despite HYC’s request that they do so. (Id.)

Even though they made several payments, Defendants refused to provide signed copies of

the Settlement Agreement. (Id. at PageID 254.) HYC further asserts that, rather than turning

over signed copies of the Settlement Agreement, Defendants tried to renegotiate the terms of the

settlement. (Id. at PageID 253.) The parties agree that LP owes HYC $772,297, but the

Barnathans deny that they owe any money. (Id. at PageID 254; See ECF Nos. 65–67.)

Defendants deny that they ever entered the Settlement Agreement. (See ECF Nos. 65–

67.) They admit that they were aware of the ongoing negotiations with HYC; but they deny

signing standalone personal guaranties, a confession of judgment, or a loan agreement. (ECF

No. 66 at PageID 481–82.) But they do not deny signing a proposed version of the Settlement

Agreement, which their former counsel was holding, pending HYC’s compliance with certain

conditions, including HYC’s representative signing the Agreement. (Id.)

According to the Barnathan Defendants, when they realized that the proposed Settlement

Agreement had a personal guaranty clause, they directed their former attorney not to provide

HYC with the signed proposed Settlement Agreement. (See ECF Nos. 65–67.) Both Solomon

and Albert deny taking any part in the negotiations apart from LP’s delegate, Joseph Barnathan,

keeping them up to date. (Id.) The Barnathan Defendants deny any knowledge of the loan that

HYC took out so it could pay off LP’s debt and they deny entering into the Settlement

Agreement on December 26, 2023, or any later date. (See ECF Nos. 57-1, 57-2, 57-3.)

6 They made these payments on March 22, April 2, April 5, April 12, May 3, and May 10 of

2024. (ECF No. 49-3 at PageID 253.)

The Court will now set out the relevant legal standards and then analyze HYC’s Motions

to Strike, for Sanctions, and for Summary Judgment.

LEGAL STANDARD

Federal Rule of Civil Procedure 56(c)(4) requires affidavits to “be made on personal

knowledge, set out facts that would be admissible in evidence, and show that the affiant . . . is

competent to testify on the matters stated.” If an affidavit does not meet one of these

requirements, it is subject to a motion to strike. See Nationwide Recovery, Inc. v. City of Detroit,

Michigan, 163 F.4th 977, 987 (6th Cir. 2026); Jordan v. Caruso, No. 06–CV–10979, 2011 WL

4502266, at * 2 (E.D. Mich. Aug. 4, 2011).

Courts grant summary judgment only “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party is entitled to a judgment as a

matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is “material” if

“proof of that fact would establish or refute an essential element of the cause of action or

defense.” Bruederle v. Louisville Metro Gov’t, 687 F.3d 771, 776 (6th Cir. 2012) (citing Kendall

v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984)). And courts construe all reasonable inferences

in favor of the nonmoving party when they consider a motion for summary judgment. Robertson

v. Lucas, 753 F.3d 606, 614 (6th Cir. 2014) (citing Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986)).

If the moving party shows there is no genuine issue of material fact, the burden shifts to

the nonmoving party to set forth specific facts showing a triable issue of material fact.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986). In arguing that

a genuine issue exists, “the nonmoving party must present significant probative evidence that

will reveal that there is more than some metaphysical doubt as to the material facts.” Wiley v.

City of Columbus, Ohio, 36 F.4th 661, 667 (6th Cir. 2022) (internal quotations and citing

references omitted). Put differently, “in the face of a summary judgment motion, the nonmoving

party cannot rest on its pleadings but must come forward with some probative evidence to

support its claim.” Lansing Dairy, Inc. v. Espy, 39 F.3d 1339, 1347 (6th Cir. 1994) (citing

references omitted). Indeed, Federal Rule of Civil Procedure 56(c)(1)(A) requires that the

nonmoving party cite specific places in the record to show a genuine dispute of fact exists. Fed.

R. Civ. P 56(c)(1)(A) (emphasis added). Even more, “[t]he mere existence of a scintilla of

evidence in support of the plaintiff's position will be insufficient; there must be evidence on

which the jury could reasonably find for the plaintiff.” Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 252 (1986).

Likewise, if the nonmoving party “fails to make a sufficient showing of an essential

element of his case on which he bears the burden of proof,” then the moving party is entitled to

“judgment as a matter of law and summary judgment is proper.” Martinez v. Cracker Barrel Old

Country Store, Inc., 703 F.3d 911, 914 (6th Cir. 2013) (quoting Chapman v. United Auto

Workers Loc. 1005, 670 F.3d 677, 680 (6th Cir. 2012) (en banc)). But if the Court finds there is

a genuine dispute over material facts, then it must deny summary judgment, and the case should

proceed to trial. George v. Youngstown State Univ., 966 F.3d 446, 458 (6th Cir. 2020). Now the

Court will turn to its analysis of HYC’s Motions.

ANALYSIS

I. Motion to Strike Affidavits

HYC moved to strike the first set of Barnathan Affidavits because “each of those

affidavits contains demonstrably false statements” in violation of the requirements of Rule

56(c)(4).7 (ECF No. 62-1 at PageID 445.) The Parties rely on cases that prohibit parties from

submitting affidavits that contradict earlier deposition testimony, or sham affidavits. See e.g.,

Aerel, S.R.L. v. PCC Airfoils, L.L.C., 448 F.3d 899 (6th Cir. 2006); Kennett-Murray Corp. v.

Bone, 622 F.2d 887 (5th Cir. 1980); Trustees of Plumbers and Steamfitters Loc. Union No. 43

Health and Welfare Fund v. Crawford, 573 F. Supp. 2d 1023 (E.D. Tenn. 2008) (applying the

sham affidavit doctrine to determine whether affidavits contradicted by later depositions should

have been disregarded). The facts here do not line up cleanly with the situations in the cases the

Parties cite. Those cases deal with situations in which an affidavit is offered after and in

contradiction to earlier deposition testimony or in which the affidavit is contradicted by later

deposition testimony. And the courts were determining whether to strike the later or

contradictory affidavits. Here we have two sets of affidavits, no deposition testimony, and the

claim that the first set of affidavits contradict earlier statements made by the Barnathans and their

counsel to HYC during the negotiation of the Settlement Agreement. The Court is therefore

considering whether to strike affidavits that amount to the Barnathan Defendants’ first instance

of sworn testimony.

HYC claims that many statements in the first set of Barnathan Affidavits are false. These

statements reference (1) whether the Barnathans signed and entered the Settlement Agreement,

(2) whether they authorized their attorney to provide HYC with the signed Settlement

Agreement, (3) whether they were aware of the conversations between their attorney and HYC,

(4) whether they personally agreed to guarantee any loan with HYC, (5) whether the Barnathans

7 HYC seeks to strike these affidavits because of Paragraphs 2, 3, 4, 6, 7, 8, and 9 in Albert

Barnathan’s First Affidavit; Paragraphs 2, 3, 4, 5, 8, 9, 10, 11, and 12 in Joseph Barnathan’s First

Affidavit; and Paragraphs 2, 3, 4, 6, and 7 in Solomon Barnathan’s First Affidavit. (ECF No. 62-

1 at PageID 453–54.) HYC argues these paragraphs contain false statements and should be

stricken from the Court’s consideration of HYC’s Motion for Summary Judgment. (Id.)

were aware of the loan that HYC took out to pay off LP’s outstanding balance to Detail Fashion

and HECNY. (See ECF Nos. 57-1, 57-2, 57-3, 62-1, 65–67.)

The Parties rely on two district court cases from this circuit: Barnes v. SRI Surgical Exp.,

Inc., No. 1:09-CV-204, 2012 WL 1059935 (E.D. Tenn. Mar. 28, 2012) and Reddy v. Good

Samaritan Hosp. & Health Ctr., 137 F. Supp. 2d 948 (S.D. Ohio 2000). (See ECF No. 62-1 at

PageID 454; ECF No. 68 at PageID 489.) In Barnes, the district court struck an affidavit after

the later deposition of the affiant confirmed the affidavit’s suspected falsity. Barnes, 2012 WL

1059935 at *12–15. In Reddy, the district court refused to strike two affidavits that were

contradicted by other evidence such that they were suspected of omitting material facts. 137 F.

Supp. 2d at 955. The court reasoned that the defendant in that case could question the veracity of

the affidavits through the cross-examination of the witnesses at trial. Id.

The Court finds that the facts here are closer to those in Reddy than those in Barnes. The

initial Barnathan affidavits conflict with the emails HYC attached to its Motion to Strike, but

they do not conflict with any earlier sworn testimony or the later affidavits from the Barnathans.

The Court therefore has competing versions of events from the parties, which is typical for

litigation. But it does not have two sources of contradictory sworn testimony from one party.

The question of the credibility of the Barnathan Affidavits is one for the trier of fact. The Court

therefore DENIES Plaintiff’s Motion to Strike. The Court will consider both sets of affidavits

when it evaluates Plaintiff’s Motion for Summary Judgment.

II. Motion for Sanctions

Rule 56(h) allows a court to sanction a party that submits an affidavit or declaration in

support of or in opposition to a summary judgment motion in bad faith or solely for delay. Fed.

R. Civ. P. 56(h). “Bad faith” occurs “where affidavits contained perjurious or blatantly false

allegations or omitted facts concerning issues central to the resolution of the case.” Sutton v.

U.S. Small Bus. Adm., 92 Fed. Appx. 112, 118 (6th Cir.2003) (quoting Jaison, Inc. v. Sullivan,

178 F.R.D. 412, 415–16 (S.D.N.Y. 1998)). “Awarding sanctions under Rule 56(g) is ‘rare’ and

the conduct involved generally must be ‘egregious.’” Abdelkhaleq v. Precision Door of Akron,

653 F.Supp.2d 773, 787 (N.D. Ohio 2009).

Since the Court determined in the section above that the first set of Barnathan Affidavits

contradicted no other sworn testimony, it also declines to find that they were submitted in bad

faith or solely for delay. The Court lacks information from which to conclude that the affidavits

contained perjurious or blatantly false allegations or omitted facts related to issues central to the

case, especially given the clarification of the second set of Barnathan Affidavits. This is not one

of the rare or egregious situations warranting sanctions, and the Court therefore DENIES HYC’s

Motion for Sanctions under Rule 56(h). The Court would note, though, that it agrees with

Defendant Joseph Barnathan that the first set of affidavits were “inartfully drafted,” to say the

least.

III. Summary Judgment

A. Breach of the Service Contract and Indemnity by LP

Defendants concede that LP breached both the Services Contract and the Indemnity. (See

ECF No. 57 at PageID 294.) And Defendants concede that LP owes HYC $791,000.90—the

amount LP owed Detail Fashion—and HYC is seeking $772,297.00, which includes a claim for

the legal fees that HYC paid to Detail Fashion on behalf of LP. (Id.; ECF No. 49-2 at 254.)

HYC is also seeking damages and attorney’s fees. (ECF No. 49-1 at PageID 242–43.)

Defendants agree that summary judgment should be entered against LP, but as to liability

only because HYC has not offered enough proof to support summary judgment on damages.

(ECF No. 57 at PageID 294–95.) Defendants rely on the requirement under Tennessee law that

attorney’s fees must be reasonable and supported by an affidavit of the lawyer who performed

the work. (Id. (citing Wright v. Wright, No. M2007-00378-COA-R3-CV, 2007 WL 4340871,

at*5 (Tenn. Ct. App. Dec. 12, 2007)).) As to LP, HYC seeks summary judgment as to liability

for the breach of the Services Contract and Indemnity only. (ECF 49-1 at PageID 235.)

HYC seeks attorney’s fees without providing the requisite affidavit from its attorneys.

And the Parties disagree about the amount LP owes HYC under the Services Contract and

Indemnity. HYC is also seeking additional damages. The Court finds there is no genuine

dispute over any material facts about whether LP breached the Services and Contract and

Indemnity and therefore GRANTS summary judgment for HYC as to liability only on those

claims. The question of damages will be left for trial.

B. Breach of the Settlement Agreement

HYC’s final contract claim is that both LP and the Barnathans have entered into and then

breached the Settlement Agreement. (ECF No. 1 at PageID 11–12.) HYC notably argued for

summary judgment against only the Barnathan Defendants for breach of the Settlement

Agreement. (ECF No. 49-1 at PageID 235–37.) Their final request, though, asks for summary

judgment against LP “on its claims for [] Breach of Contract . . . .” (Id. at PageID 243.) Because

that request may include the claim against LP for breach of the Settlement Agreement, the Court

will analyze the Motion for Summary Judgment for breach of the Settlement Agreement as it

relates to all Defendants.

The elements for breach of contract are: “(1) the existence of an enforceable contract, (2)

nonperformance amounting to a breach of the contract, and (3) damages caused by the breach of

the contract.” Tolliver v. Tellico Vill. Prop. Owners Ass'n, Inc., 579 S.W.3d 8, 25 (Tenn. Ct.

App. 2019). The Court’s role when interpreting an unambiguous contract is to determine the

intention of the parties based on the language of contract. Kiser v. Wolfe, 353 S.W.3d 741, 747

(Tenn. 2011). A contract need not be reduced to writing; under Tennessee law, a contract “must

result from a meeting of the minds of the parties in mutual assent to the terms, must be based

upon sufficient consideration, free from fraud or undue influence, not against public policy and

sufficiently definite to be enforced.” Johnson v. Central Nat’l Ins. Co. of Omaha, 356 S.W.2d

277, 281 (Tenn. 1962).

This means that a signed writing is sometimes unnecessary for a contract to be binding on

the parties. See Remco Equip. Sales, Inc. v. Manz, 952 S.W.2d 437, 439 (Tenn. App. 1997)

(finding a single transaction insufficient to create a course of dealing). A contract that has been

reduced to writing may be binding on a party that has not signed it if that party shows consent to

its terms. S. Motor Car Co. v. Talliaferro, 14 Tenn. App. 276, 280 (Tenn. App. 1931). A party

can show consent through its course of dealings with the other party. Remco, 952 S.W.2d, at

439. And a party is estopped from denying that a meeting of the minds occurred sufficient to

bind them to a contract when they have performed under the contract and made payments in

conformity with the terms of the contract. R.J. Betterton Management Serv., Inc. v. Whittemore,

769 S.W.2d 214, 216 (Tenn. App. 1989). “[W]hether a meeting of the minds occurred is a

question of fact.” Wofford v. M.J. Edwards & Sons Funeral Home Inc, 490 S.W.3d 800, 807

(Tenn. App. 2015) (quoting Harvey v. Turner, No. M2014–00368–COA–R3–CV, 2015 WL

1451702, at *6 (Tenn.Ct.App. Mar. 26, 2015), perm. app. denied (Tenn. Aug. 14, 2015))

(internal quotation marks omitted).

“Whether an agency exists is a question of fact under the circumstances of the particular

case; and whether an agency has been created is to be determined by the relation of the parties as

they in fact exist under their agreement or acts.” White v. Revco Discount Drug Centers, Inc., 33

S.W.3d 713, 723 (Tenn. 2000) (quoting McCay v. Mitchell, 463 S.W.2d 710, 715 (1970))

(internal quotation marks omitted). Agents act with either actual or apparent authority. “An

agent's actual authority consists of the powers which a principal directly confers upon an agent or

causes or permits him to believe himself to possess.” Savage v. City of Memphis, 464 S.W.3d

326, 333 (Tenn. App. 2015) (internal quotation marks omitted). “[Apparent authority] is power

held by the agent to affect a principal's legal relations with third parties when a third party

reasonably believes the [agent] has authority to act on behalf of the principal and that belief is

traceable to the principal's manifestations.” Savage, 464 S.W.3d at 333 (internal quotation marks

omitted).

The Court finds here that there remain genuine disputes of material facts over the

question of whether HYC, LP, and the Barnathans ever had “a meeting of the minds of the

parties in mutual assent to the terms” of the contract. Johnson v. Central Nat’l Ins. Co. of

Omaha, 356 S.W.2d 277, 281 (Tenn. 1962). HYC insists that, during the conference call on

December 26, 2023, Joseph Barnathan agreed, on behalf of LP and the other Barnathans, to the

terms of the Settlement Agreement. He also allegedly stated that they would sign the Agreement

when it was formalized in writing. What is more, they assert that, after exchanging draft

versions of the final Agreement, Joseph Barnathan instructed his attorney to provide HYC with

the Settlement Agreement, including the personal guaranty, signed by all of the Barnathans.

After receiving partial payment from Defendants, HYC took out the loan to pay Detail Fashion,

only to have Defendants attempt to renegotiate the Settlement Agreement and to insist that they

had never agreed to it.

Defendants claim that they were in negotiations with HYC the entire time. And they

assert that, while they were prepared to enter the Settlement Agreement, their last-minute

realization that HYC included a personal guaranty caused them to stop and direct their attorney

to hold the copy of the Agreement that they had signed. They also deny that the payments they

made to HYC related to the Settlement Agreement. They insist therefore that there are genuine

factual disputes over whether there was a meeting of the minds enough to bind them to the

Settlement Agreement, whether their payments show that they consented to the Agreement, and

whether their attorney had the actual or apparent authority to bind them to the Agreement.

The Court agrees with Defendants. While HYC claims that Defendants revealed their

intent to sign the Agreement, said they signed the Agreement, and made payments under the

Agreement, Defendants assert that they never agreed to the Settlement Agreement. Both Parties

support their contentions with affidavits. (Compare ECF No. 49-2 with ECF Nos. 57-1, 57-2,

57-3, 65–67.) The Court is then left with questions of fact over what authority the Barnathan’s

gave their attorney, when they gave it, and whether and when they revoked any authorization to

provide HYC the signed Settlement Agreement. See Savage, 464 S.W.3d at 334 (reversing a

grant of summary judgment because there were insufficient facts to establish that an attorney had

apparent authority to settle a case when their client never expressly confirmed to the other party

that the attorney had that authority).

Comparing Uri Silver’s Affidavit and the emails attached to HYC’s Motion to Strike with

the second set of Barnathan Affidavits, the Court finds that there are questions of material fact

over whether the Barnathan’s ever understood themselves to be signing a final version of the

Settlement Agreement. And questions remain about whether both Solomon Barnathan and

Albert Barnathan were less aware of the specifics than Joseph, given Joseph’s larger role in

negotiating the Agreement. Because Defendants made payments to HYC after the drafting of the

Settle Agreement and the amounts of those payments differ from the payment plan as listed in

the Agreement, there remains a question of material fact whether Defendants’ conduct shows

assent to the contract or not. See R.J. Betterton Management Serv., Inc., 769 S.W.2d at 216

(finding a meeting of the minds “[w]here the parties performed under the agreement for an

extended period of time and [the defendant] made payments to [plaintiff] conforming to the

terms of the agreement”) (emphasis added).

Given the disputed questions of material fact here, the Court DENIES HYC’s Motion for

Summary Judgment for its claims that LP and the Barnathans breached the Settlement

Agreement.

C. Fraudulent Inducement and Intentional Misrepresentation

HYC also moves for summary judgment against the Barnathan Defendants for their

alleged fraudulent inducement and intentional misrepresentation as it relates to their negotiations

over the Settlement Agreement. (ECF No. 49-1 at PageID 237–40.) This claim essentially boils

down to the allegation that Joseph Barnathan and his former attorney agreed to the Settlement

Agreement on behalf of LP and the Barnathans during the conference call on December 26,

2023, and later email chain and then, reneged after securing HYC’s payment of LP’s debts and

its promise to forgo litigation. Defendants explicitly deny this. (ECF Nos. 57-1, 57-2, 57-3.)

Fraudulent inducement8 and intentional misrepresentation9 occur when a defendant

“made a false statement of material fact that is designed to induce the plaintiff to rely on it.”

Thompson v. Bank of America, 773 F.3d 741, 752 (6th Cir. 2014) (“intentional

misrepresentation,” “fraudulent misrepresentation,” “fraud,” and “fraudulent inducement” are

essentially synonymous). A future promise can support a claim for intentional misrepresentation

when it is “made with the intent not to perform.” Fowler v. Happy Goodman Family, 575

S.W.2d 496, 499 (Tenn. 1978). The same is true for fraudulent inducement because a fraudulent

inducement claim “may be based on . . . false promise made without the intention to perform.”

Omorfia Ventures, Inc. v. Posh Bridal Couture, LLC, 2020 WL 5500483 at *6 (M.D. Tenn. Sep.

11, 2020). 10 The questions of the intent of the defendant and of the reliance of the plaintiff on

8 There are five elements of fraudulent inducement in Tennessee.

[T]he defendant (1) made a false statement concerning a fact material to the

transaction (2) with knowledge of the statement's falsity or utter disregard for its

truth (3) with the intent of inducing reliance on the statement, (4) that the plaintiff

reasonably relied on the statement, and (5) that this reliance resulted in an injury.

Thompson, 773 F.3d at 751.

9 Intentional misrepresentation has six elements.

(1) that the defendant made a representation of a present or past fact; (2) that the

representation was false when it was made; (3) that the representation involved a

material fact; (4) that the defendant either knew that the representation was false or

did not believe it to be true or that the defendant made the representation recklessly

without knowing whether it was true or false; (5) that the plaintiff did not know that

the representation was false when made and was justified in relying on the truth of

the representation; and (6) that the plaintiff sustained damages as a result of the

representation.

Thompson, 773 F.3d at 751.

10 As in its Order on the Motion for Judgment on the Pleadings, the Court once again notes that

some federal courts in Tennessee treat promissory fraud, which is referenced by both Parties

here, as a theory of liability under which a plaintiff may bring fraudulent inducement and

intentional misrepresentation claims. But other courts treat promissory fraud as its own claim.

(ECF No. 42 at Page ID 197 (citing Monaco Indus., LLC v. Fomento Econ. Mexicano S.A.B. de

C.V., 685 F. Supp. 3d 654, 672 (E.D. Tenn. 2023); Power & Tel. Supply Co. v. SunTrust Banks,

Inc., 447 F.3d 923, 931 (6th Cir. 2006); Brown v. Woodbury Auto Grp. LLC, 591 F. Supp. 3d

282, 294 (M.D. Tenn. 2022); City of Morristown v. AT&T Corp., 206 F. Supp. 3d 1321, 1332

(E.D. Tenn. 2016); Omorfia Ventures, Inc. v. Posh Bridal Couture, LLC, No. 3:19-CV-00794,

the misrepresentation are questions of fact. Dog House Investments, LLC v. Teal Properties,

Inc., 448 S.W.3d 905, 916 (Tenn Ct. App. 2014); Biancheri v. Johnson, No. M2008-00599-

COA-R3-CV, 2009 WL 723540 at *8 (Tenn. Ct. App. M.S., filed Mar. 18, 2009).

There are genuine disputes of material facts that preclude summary judgment here. The

Parties disagree over whether Defendants made any misrepresentations or false promises,

whether Joseph Barnathan and his counsel intended to deceive or induce HYC’s reliance, and

whether HYC’s reliance on Defendants’ statements was reasonable. For example, HYC insists

that Joseph Barnathan agreed to the Settlement Agreement on the December 26, 2023,

conference call (ECF No. 49-2 at PageID 251,) but Joseph Barnathan explicitly denies this.

(ECF No. 66 at PageID 481–82.) The Court cannot grant summary judgment on either the

fraudulent inducement or intentional misrepresentation claims when the Parties dispute

something so fundamental to these claims. The Court therefore DENIES summary judgment on

HYC’s fraudulent inducement and intentional misrepresentation claims.

D. Unjust Enrichment and Quantum Meruit

HYC also seeks summary judgment on its unjust enrichment and quantum meruit claims.

But it only argues for its unjust enrichment claim. (ECF No. 49-1 at PageID 240–41.) In

essence, HYC argues that whether the Settlement Agreement is a binding contract between the

2020 WL 5500483, at *6 (M.D. Tenn. Sept. 11, 2020)).) And the Tennessee Supreme Court has

not clarified this issue in the interim. Plaintiff appears to view promissory fraud as a theory

through which to assert fraudulent inducement and intentional misrepresentation. (See ECF No.

49-1 at Page ID 239.) Defendants do not specify. Having reviewed the law on this point, the

Court finds that whether promissory fraud is a theory or a standalone claim, a claimant may

assert both intentional misrepresentation and fraudulent inducement based on false future

promises made with the intent not to perform. See Fowler v. Happy Goodman Family, 575

S.W.2d 496, 499 (Tenn. 1978); Loew v. Gulf Coast Dev., Inc., No. 01-A-019010CH00374, 1991

WL 220576 at *7 (Tenn. App. Nov. 1, 1991). The nature of promissory fraud in Tennessee law,

while unclear, is not essential to the decision here. The genuine disputes of material fact

identified above justify the Court’s decision here.

Parties, it has conferred over $1.2 million in benefits to Defendants by paying off their debts and

providing them with services that remain unpaid. (Id.) And to allow Defendants to retain this

benefit would be unjust. (Id.) Defendants choose to argue against the quantum meruit claim.

(ECF No. 57 at PageID 307.) So the parties address different claims here.

“Under an unjust enrichment theory, courts impose a contractual obligation where there

is ‘no contract between the parties or the contract has become unenforceable or invalid,’ and the

defendant will be unjustly enriched unless the court imposes a quasi-contractual obligation.”11

Fam. Tr. Servs. LLC v. Green Wise Homes LLC, 693 S.W.3d 284, 304–05 (Tenn. 2024) (citing

Whitehaven Cmty. Baptist Church, 973 S.W.2d at 596). An unjust enrichment claim has three

elements: (1) “[a] benefit conferred upon the defendant by the plaintiff,” (2) “appreciation by the

defendant of such benefit,” and (3) “acceptance of such benefit under such circumstances that it

would be inequitable for him to retain the benefit without payment of the value thereof.” Id.

(citing Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d 512, 525 (Tenn. 2005)). “The

most significant requirement of an unjust enrichment claim is that the benefit to the defendant be

unjust.” Id. (citing Freeman Indus., LLC, 172 S.W.3d at 525).

11 In Family Trust, the Tennessee Supreme Court clarified that unjust enrichment claims and

quantum meruit claims have different elements. Fam. Tr. Servs. LLC, 693 S.W.3d at 305. It

explicitly endorsed the three-element test from Freeman Industries for unjust enrichment claims.

Id. While the lack of a contract is not an element under the Freeman Industries test, the Supreme

Court of Tennessee took great care to emphasize that unjust enrichment is still a quasi-

contractual remedy that courts impose in the absence of an enforceable contract. Id. at 304. The

Court therefore reads Family Trust to require claimants to bring unjust enrichment claims only

with no underlying enforceable contract over the same subject matter. Other differences between

the two claims are apparent from the different tests. For example, unjust enrichment claims

require the defendant “appreciate” that they received a benefit, while quantum meruit claims do

not. And quantum meruit claims require the party seeking recovery to prove that it provided

valuable goods and services to the defendant, and unjust enrichment claims do not.

A quantum meruit claim under Tennessee law is similar to unjust enrichment. A plaintiff

must plead: (1) there is no existing, enforceable contract between the parties covering the same

subject matter; (2) the party seeking recovery proves that it provided valuable goods or services;

(3) the party to be charged received the goods or services; (4) the circumstances indicate that the

parties to the transaction should have reasonably understood that the person providing the goods

or services expected to be compensated; and (5) the circumstances demonstrate that it would be

unjust for a party to retain the goods or services without payment. Doe v. HCA Health Servs. of

Tennessee, Inc., 46 S.W.3d 191, 198 (Tenn. 2001) (citing Swafford v. Harris, 967 S.W.2d 319,

324 (Tenn.1998)).

Once again, there remain genuine disputes as to material facts on HYC’s unjust

enrichment and quantum meruit claims. Since both claims hinge on the absence of a contract

covering the same transaction, HYC’s Motion for Summary Judgment on these claims against

LP fails. As noted above, LP is contractually obligated to pay for HYC’s services and to

indemnify them for any litigation that results under the Services Contract and Indemnity. HYC’s

Count I turns on this obligation, and the undisputed facts show that LP is liable to pay HYC for

services rendered and litigation costs incurred. (ECF No. 49-2 at PageID 246–47.)

As for the Barnathans, the unjust enrichment claim requires that they were aware they

received the benefit. And the Barnathans deny knowledge of the loan that HYC took out to pay

off LP’s debts. (See ECF Nos. 57-1, 57-2, 57-3.) So the Barnathans dispute material facts about

their knowledge of the benefit of at least the loan. Further, and as Defendants suggest, the

question of how much, if at all, the Barnathan’s benefitted from HYC’s payment of the LP’s

debts and from the services HYC provided without payment is unclear. What is more, HYC’s

position seems to collapse into the veil piercing inquiry below. How much the Barnthans

personally benefitted from HYC’s conduct or received from the services provided by HYC, are

unresolved factual questions that preclude summary judgment against the Barnathans for these

claims. See Jones v. Varsity Brands, LLC, 618 F. Supp. 3d 725, 770 (W.D. Tenn. 2022).

E. Piercing the Corporate Veil

HYC lastly seeks summary judgment for its claim that the Court should pierce LP’s

corporate veil and allow it to assert liability directly against the Barnathan Defendants. (ECF

No. 49-1 at PageID 241–42.) It asserts that the Barnathan Defendants exercise such control over

LP that its debts are effectively their debts. (Id.) Defendants counter by insisting that HYC has

not shows enough undisputed facts related to their control and operation of LP to prevail on

summary judgment for this claim. (ECF No. 57 at PageID 311–15.)

As the Tennessee Supreme Court held, a claim to pierce the corporate veil has three

elements:

(1) Control over the entity, not only of finances, but of policy and business

practice in respect to the transaction under attack, so that the entity, as to

that transaction, had no separate mind, will, or existence of its own;

(2) The control must have been used to commit fraud or wrong, to perpetuate

the violation of a statutory or other positive legal duty, or to commit a

dishonest and unjust act in contravention of a third party’s rights; and

(3) The control and fraud, wrong, violation, or injustice must have proximately

caused the injury or unjust loss complained of.

Youree v. Recovery House of E. Tennessee, LLC, 705 S.W.3d 193, 211 (Tenn. 2025) (citing

Continental Bankers Life Insurance Co. of the South v. Bank of Alamo (“Continental Bankers”),

578 S.W.2d 632 (Tenn. 1979)).

When deciding whether the claimant has shown the three elements, courts may look to

the eleven Allen factors. Id.; see Fed. Deposit Ins. Corp. v. Allen, 584 F. Supp. 386, 397 (E.D.

Tenn. 1984). These Allen factors are:

(1) whether there was a failure to collect paid in capital; (2) whether the corporation

was grossly undercapitalized; (3) the nonissuance of stock certificates; (4) the sole

ownership of stock by one individual; (5) the use of the same office or business

location; (6) the employment of the same employees or attorneys; (7) the use of the

corporation as an instrumentality or business conduit for an individual or another

corporation; (8) the diversion of corporate assets by or to a stockholder or other

entity to the detriment of creditors, or the manipulation of assets and liabilities in

another; (9) the use of the corporation as a subterfuge in illegal transactions; (10)

the formation and use of the corporation to transfer to it the existing liability of

another person or entity; and (11) the failure to maintain arms length relationships

among related entities.

See Allen, 584 F. Supp. at 397. The Court is mindful that there is a “presumption of corporate

separateness” and that piercing the corporate veil is “the exception, not the rule.” Youree, 705

S.W.3d at 207–08 (citing Edmunds v. Delta Partners, L.L.C., 403 S.W.3d 812, 829 (Tenn. Ct.

App. 2012)). And it agrees with Defendants that “[t]he burden is on the party seeking to pierce

the corporate veil to prove facts sufficient to warrant such an action.” (ECF No. 57 at PageID

312 (citing Schlater v. Haynie, 833 S.W.2d 919, 925 (Tenn. Ct. App. 1991); PI, Inc. v. Beene,

No. 1:12-cv-350, 2014 WL 11455975, at *8 (E.D. Tenn. Aug. 18, 2014)).)

HYC has not proved enough undisputed facts here to justify summary judgment. The

Court accepts as undisputed that the Barnathans are the majority, if not exclusive, owners of LP

and that they control and operate LP. The Court also accepts that each of the Barnathans serves

as an executive, officer, or director of LP and that Solomon Barnathan owns one hundred percent

of the shares of LP. The Court even accepts that LP and the Barnathans employ the same

attorney. For all that the Court still cannot conclude on this record, that the Barnathans have

used their control of LP “to commit fraud or wrong, to perpetuate the violation of a statutory or

other positive legal duty, or to commit a dishonest and unjust act in contravention of a third

party’s rights.” Youree, 705 S.W.3d at 211.

HYC has shown few undisputed facts or evidence related to many of the Allen factors.

For example, the Court cannot determine whether there was a failure to collect paid in capital,

whether LP was grossly undercapitalized, whether LP issued stock certificates, whether they

used the same office and business location, whether LP was used as an instrumentality of one or

more of the Barnathans, whether the Barnathans diverted corporate assets to the detriment of

creditors or manipulated assets and liabilities, whether the Barnathans used LP as a subterfuge in

illegal transactions, whether the Barnathans formed and used LP to transfer existing liability of

another, and whether the Barnathans failed to maintain arm’s length relationships among related

entities. The Court accepts as undisputed that the Barnthans own and operate LP, they use the

same attorney as LP, and that LP breached two contracts with HYC. Those facts are not enough

to defeat the presumption of corporate separateness at the summary judgment stage. See

Edmunds v. Delta Partners, L.L.C., 403 S.W.3d 812 (Tenn. App. 2012) (reversing a decision to

pierce the corporate veil on a breach of contract claim where the only evidence in support was

that the president and controlling shareholder of a company had made assurances that the

company would honor the contract). The Court therefore DENIES summary judgment as to

HYC’s claim to pierce LP’s corporate veil.

CONCLUSION

For the reasons explained above, the Court DENIES the HYC’s Motions to Strike and

for Sanctions and DENIES IN PART AND GRANTS IN PART HYC’s Motion for Summary

Judgment.

SO ORDERED, this 9th day of March, 2026.

s/Thomas L. Parker

THOMAS L. PARKER

UNITED STATES DISTRICT JUDGE