Case 3:06-cv-00288-HTW-LRA Document 23 Filed 09/06/2006 Page 1 of 10

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION

NICHOLAS COUGHLIN PLAINTIFF

VS. CIVIL ACTION NO. 3:06CV288-HTW-JCS

FRANKLINSQUIRES COMPANIES, LLC;

HILL ERICKSON, LLC AND C. RICK KOERBER DEFENDANTS

RESPONSE TO MOTION FOR LEAVE TO FILE AMENDED COMPLAINT

COME NOW Defendants FranklinSquires Companies, LLC (“FSC”), Hill Erickson,

LLC(“HE”) and C. Rick Koerber ( “Koerber”), by counsel, and responds to the Motion for Leave

to File Amended Complaint of Plaintiff Nicholas Coughlin (“Coughlin”) and in support thereof state

the following:

1. While F.R.C.P. 15(a) provides that leave to amend a party’s pleading should be

“freely given when justice so requires”, such leave to amend should not be granted where, among

other things, the proposed amendment is futile. Briggs v. Mississippi, 331 F. 3d 499, 508 (5th Cir.

2003)(where proposed amended complaint could not survive F.R.C.P. 12(b)(6) motion amendment

not allowed on futility grounds); Nicolas v. Deposit Guaranty National Bank, 182 F.R.D. 226, 235

(S.D. Miss. 1998); Northbrook Nat’l Ins. Co. v. J&R Vending Corp., 167 F.R.D. 643, 647 (E.D. N.Y.

1996). As will be demonstrated herein, Coughlin’s Motion for Leave to File Amended Complaint

(“Coughlin’s Motion”) should be denied on futility grounds.

2. This case arises out of Coughlin’s allegations that he was an agent of FSC

and that, in connection therewith, Coughlin approached Mr. Jeff Brantley (“Brantley”) about

purchasing his Clinton, MS home (“Brantley Property”). Coughlin’s Complaint at paras. 14 and 15.

Coughlin further alleges that he “negotiated a deal with Jeff Brantley for the sale of his home” and
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that FSC subsequently purchased the Brantley Property through HE, an entity Coughlin alleges is

under the control of FSC. Coughlin’s Complaint at paras. 16 and 18. Coughlin also alleges that FSC

has breached a contractual obligation to pay him a twenty-five percent commission arising out of

FSC’s purchase of the Brantley Property through HE. Coughlin’s Complaint at paras.21-24. At the

time Coughlin filed his complaint in this matter, Coughlin also filed a Lis Pendens Notice with the

Hinds County Chancery Clerk in relation to the Brantley Property owned by HE. See Coughlin’s Lis

Pendens Notice – Exhibit A– to HE’s Motion to Cancel and/or Expunge Lis Pendens Notice and

Request for Expedited Consideration (“HE’s Lis Pendens Motion”) and Exhibit C to HE’s Counter-

Claim, a true and correct copy of HE’s Warranty Deed to the Brantley Property, both of which are

incorporated herein by reference pursuant to F.R.C.P. 10.

3. Based upon the deficiencies in the claims pled by Coughlin in his original complaint,

coupled with the absolutely wrongful Lis Pendens Notice filed by Coughlin in relation to the

Brantley Property, Koerber, FSC and HE filed motions to dismiss and HE filed a filed a Motion to

Cancel and/or Expunge Lis Pendens Notice and Request for Expedited Consideration. All three of

such motions are incorporated herein by reference pursuant to F.R.C.P. 10.

4. Koerber’s dismissal motion seeks the dismissal of the breach of contract claim

asserted against him on the basis of the well settled law that only the principal under a contract –

and not its agent – is liable for contractual obligations. Therefore, even if, as Coughlin alleges, FSC

had a contractual obligation to pay Coughlin a commission in relation to the Brantley Property,

Koerber could not have any such contractual obligation as a matter of law. See Koerber’s Motion

to Dismiss at para. 4, incorporated herein by reference pursuant to F.R.C.P. 10.

5. The dismissal motion of FSC and HE seek the dismissal of Coughlin’s claims on

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the basis that Coughlin’s asserted entitlement to a commission in relation to the Brantley Property

specifically violates the real estate brokerage provisions of the Mississippi Code as Coughlin has

neither alleged nor is he, in fact, a licensed real estate broker. See the Motion to Dismiss of FSC and

HE at para. 3, incorporated herein by reference pursuant to F.R.C.P. 10. HE likewise sought the

dismissal of Coughlin’s claim on the basis that Coughlin alleged a contract with FSC, not HE, and

that HE could therefore have no contractual obligation under a contract to which it is not a party. See

the Motion to Dismiss of FSC and HE at para. 4, incorporated herein by reference pursuant to

F.R.C.P. 10.

6. HE’s Lis Pendens Motion seeks the cancellation of the Lis Pendens Notice filed by

Coughlin in relation to the Brantley Property based upon the well settled law that a lis pendens

CANNOT be predicated on an action or suit merely to recover a personal or money judgment. W.H.

Hopper and Assoc. v. Dunaway, 396 So. 2d 43, 44-45 (Miss. 1981)(“lis pendens may not be

predicated on an action or suit merely to recover a personal or money judgment unless and until a

valid judgment has been secured and made a lien against the property”; “[i]t (a lis pendens) does not

apply to an action of trespass, or a suit for an accounting, or to any other action or suit which does

not directly affect property”); See HE’s Lis Pendens Motion at para. 3, incorporated herein by

reference pursuant to F.R.C.P. 10. It is crystal clear that Coughlin is merely seeking to recover a

personal or money judgment against the defendants and does not seek to enforce a lien upon, right

to, or interest in the Brantley Property. See para. 1 of Coughlin’s Motion for Leave to File Amended

Complaint (“Plaintiff filed his original Complaint ... for monies earned in the sales (sic) of the Jeff

Brantley property ...”)(emphasis added). Under such circumstances, Coughlin’s Lis Pendens Notice

has no basis in law and has resulted in substantial damage to HE, as will be addressed herein in

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relation to Coughlin’s attempt to bring HE’s insurer into this case through Coughlin’s proposed

amended complaint1.

7. As acknowledged by Coughlin, the Brantley Property was destroyed by fire on July

22, 2006. See Coughlin’s Motion at para. 3. Moreover, Coughlin’s assertion to an entitlement of a

25% and/or 10% commission in the “equity” of the Brantley Property presupposes HE’s sale of the

property at a profit. See para. 22 of Coughlin’s proposed amended complaint (the defendants

“wanted to keep all of the profit for themselves”); See also paras. 24 and 25 of Coughlin’s proposed

amended complaint. However, because of Coughlin’s Lis Pendens Notice, HE never realized any

of the “equity” in the Brantley Property through a sale or otherwise and will never be able to do so

now that the property has been destroyed. As a result, even if Coughlin was entitled to a commission

in relation to the Brantley Property, which is denied, there will never be any profit realized on the

Brantley Property from which to pay any commission2.

1
It should also be noted that Coughlin has submitted a sworn affidavit in opposition to HE’s
Lis Pendens Motion that he “reached a deal with Jeff Brantley for the purchase of his home”. See
Exhibit A – para. 7– to Coughlin’s response to HE’s Lis Pendens Motion. Coughlin’s sworn
assertion is simply untrue and Coughlin should not be allowed to create the impression of a fact
question in the face of the written documents exchanged between Coughlin and Brantley, coupled
with the sworn statements of Brantley’s real estate broker. While Coughlin and one of his relatives,
Mr. Brian Cronin, attempted to negotiate with Brantley for the purchase of the Brantley Property,
NO AGREEMENT was ever reached. See affidavits of Brian Cronin (“Cronin’) and Judy Wooten
Evans (“Evans”), Brantley’s real estate broker, attached as Exhibits B and C, respectively to HE’s
Lis Pendens Motion. While the issue of whether Coughlin’s proposed amendments are futile are
resolved on the basis of the allegations in Coughlin’s proposed amended complaint, it is crucial to
the defendants’ arguments that the Court have the background provided herein when considering
the propriety of Coughlin’s Motion.
2
HE is a company that purchases real estate purchase contracts from qualified sellers for
qualified properties. Among the criteria used to determine a seller’s qualification is if such seller can
demonstrate mastery of the model taught by Franklin Squires Investments, LLC. Moreover, before
HE will consider the purchase of a real estate purchase contract, the qualified seller of the contract
must himself or herself have actually entered into a binding contract with the real property seller. See

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8. While Coughlin’s Motion and the defendants’ opposition thereto on futility grounds

is decided on the basis of the allegations contained in Coughlin’s proposed amended complaint, the

defendants would point out that HE was unable to obtain insurance for the full $3,750,000.00

purchase price HE paid for the Brantley Property. Coughlin acknowledges the amount that HE paid

for the Brantley Property. See para. 21 of Coughlin’s proposed amended complaint. Moreover, HE

financed the purchase of the Brantley Property with short term bridge financing that carries a lot

higher interest rate than would be paid by an ultimate purchaser of the property. See HE’s

counterclaim at para. 18, incorporated herein by reference pursuant to F.R.C.P. 10. It would be a

miscarriage of justice to allow Coughlin to add HE’s insurer as an additional defendant in this action

because, if Coughlin is allowed to do so, any eventual payment of the insurance proceeds of HE’s

policy on the Brantley Property would be further delayed and preclude HE from using such proceeds

to pay towards the extinguishment of HE’s short term bridge financing. This is particularly so since

Coughlin’s Lis Pendens Notice has no basis in law, Coughlin’s proposed constructive trust claim

fails as a matter of law and, on information and belief, Coughlin has insufficient assets from which

HE could collect on any judgment HE may eventually obtain against Coughlin for the damages it has

sustained and would sustain as a result of any delay associated with adding HE’s insurer as a

defendant in this action.

9. With all of the foregoing as a backdrop, Coughlin’s proposed amended complaint

seeks to plead around the defendants’ pending motions to dismiss by adding claims for detrimental

HE’s counterclaim filed in this action at paras. 6-9, incorporated herein by reference pursuant to
F.R.C.P. 10. While the defendants deny Coughlin ever became a qualified seller and, as evidenced
by the contents of footnote 1, it is undisputed that Coughlin never entered into a contract for the
purchase of the Brantley Property, any compensation paid by HE to a qualified seller is contingent
on HE subsequently selling a purchased property at a profit.

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reliance, unjust enrichment and constructive trust (in relation to any insurance proceeds paid by HE’s

insurer), as well as adding HE’s insurer as a defendant in this action. See pp. 5-7 of Exhibit A –

proposed amended complaint, to Coughlin’s Motion, incorporated herein by reference pursuant to

F.R.C.P. 10. Coughlin also adds the bald conclusory assertion that Koerber owns and/or controls

FSC and HE such that the corporate veil should be pierced and Koerber held liable for the actions

of FSC and HE. See para. 6 of Exhibit A – proposed amended complaint, to Coughlin’s Motion,

incorporated herein by reference pursuant to F.R.C.P. 10. In addition, Coughlin now alleges, for the

first time and in direct contradiction to the sworn allegations in Coughlin’s original complaint, that

Koerber has a contractual obligation to pay him a commission that Koerber has breached. See para.

27 of Exhibit A – proposed amended complaint, to Coughlin’s Motion, incorporated herein by

reference pursuant to F.R.C.P. 10; Compare Coughlin’s allegations in the original Complaint at

paras. 15, 16, 18-24.

10. Breach of Contract – To the extent Coughlin is now alleging he had a contract with

Koerber, Coughlin should be estopped and/or otherwise precluded from casting aside his previous

sworn assertion to the Court that his contract was with FSC in an effort to avoid Koerber’s dismissal

motion.

11. Detrimental Reliance – The Courts do not recognize an independent cause of action

for detrimental reliance and the undersigned counsel has found no Mississippi law that supports any

such action. See, Aero Taxi-Rockford v. General Motors Corporation, 2006 WL 1479915 *9 (Mich.

Ct. App. May 30, 2006); Adams v. Washington Group, LLC, 2006 WL 1042358 *1 (N.Y. Sup. Ct.

April 19, 2006); and Interstate Gas Supply, Inc. v. Calex Corp., 2006 WL 328679 * 21 (Ohio Ct.

App. Feb. 14, 2006)(“detrimental reliance arises as an element of various causes of action (e.g.

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promissory estoppel, misrepresentation) but is not a cause of action unto itself.”)(emphasis added

by the court). As a result, Coughlin’s detrimental reliance claim fails as a matter of law.

12. Unjust Enrichment – As the Mississippi Supreme Court has observed,

The doctrine of unjust enrichment or recovery in quasi contract applies to situations where
there is no legal contract and the person sought to be charged is in possession of money or property
which in good conscience and justice he should not retain but should deliver to another.

Kersey v. Fernald, 911 So. 2d 994, 997 (Miss. Ct. App. 2005).

Coughlin has admitted the Brantley Property was destroyed by fire. See para. 26 of Exhibit

A – proposed amended complaint, to Coughlin’s Motion, incorporated herein by reference pursuant

to F.R.C.P. 10. Despite such admission, Coughlin alleges that the defendants have been unjustly

enriched by keeping the monies Coughlin has earned in bringing the Brantley deal to the defendants.

See para. 35 of Exhibit A – proposed amended complaint, to Coughlin’s Motion, incorporated

herein by reference pursuant to F.R.C.P. 10. Such allegations simply do not state a claim for unjust

enrichment. Not only is HE paying interest on short term bridge financing that it used to purchase

the property from Brantley, with no way to extinguish any part of such debt unless and until its

insurer pays the fire claim, HE has no way to ever realize the benefit of any equity that existed in the

Brantley Property due to the destruction thereof. Simply put, none of the defendants have been

unjustly enriched by retaining any money or property that rightfully belongs to Coughlin. Coughlin

can not legitimately argue to the contrary without throwing common sense and logic out the window.

13. Constructive or Equitable Trust – Coughlin’s proposed constructive trust claim is

premised upon the propriety of Coughlin’s Lis Pendens Notice. See paras. 37-38 of Exhibit A –

proposed amended complaint, to Coughlin’s Motion, incorporated herein by reference pursuant to

F.R.C.P. 10. As demonstrated herein, as well as in HE’s Lis Pendens Motion, Coughlin’s Lis

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Pendens has no basis in law and was wrongfully filed. The Court could find the proposed

constructive trust claim futile on this basis alone. However, a confidential relationship is a necessary

element of constructive trust. Braddock Law Firm, PLLC v. Becnel, 2006 WL 997855 *8 (Miss. Ct.

App. August 22, 2006). Coughlin has neither alleged such a relationship nor does one, in fact, exist.

Under such a scenario, Coughlin’s constructive trust claims fails as a matter of law.

14. Veil Piercing – In a conclusory fashion, Coughlin alleges that Koerber owns and/or

controls FSC and HE such that the corporate veil should be pierced and Koerber held liable for the

actions of FSC and HE. See para. 6 of Exhibit A – proposed amended complaint, to Coughlin’s

Motion, incorporated herein by reference pursuant to F.R.C.P. 10.

Under Mississippi law, the operation of a corporate business does not render one personally

liable for corporate acts. Foamex, L.P. v. Superior Products Sales, Inc., 361 F.Supp. 2d 576, 577

(N.D. Miss. 2005). Moreover, a defendant’s sole ownership of a corporation, including the fact that

he uses and controls it to promote his ends, is not even a factor for the court to consider in

determining whether to hold him personally liable for the corporation’s debts. Foamex, L.P., 361

F.Supp. 2d at 577. To pierce the veil of a corporation, a plaintiff must show the following: (1)

frustration of the legitimate expectations of the plaintiff regarding the entity to whom he looked for

contract performance; (2) a flagrant disregard for the corporate formalities by the principals of the

corporation and; (3) fraud or equivalent malfeasance by the corporate principals. Foamex, L.P., 361

F.Supp. 2d at 577. Moreover, in a breach of contract actions, a plaintiff must demonstrate fraud to

disregard a corporate entity. Foamex, L.P., 361 F.Supp. 2d at 578.

Coughlin’s proposed amended complaint clearly fails to state a claim for veil piercing under

Mississippi law. This is particularly true since Coughlin is required to plead fraud in his effort to

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enforce the alleged contractual obligations of FSC and/or HE against Koerber. Under such a

scenario, Coughlin has to meet the particularity requirements of F.R.C.P. 9(b). Jack LaLanne Fitness

Centers, Inc. v. Jimlar, Inc., 884 F.Supp. 162, 165-166 (D. N.J. 1995)(discussing the pleading

requirements for veil piercing under F.R.C.P. 9(b) and 8(a)(2) and noting that even under 8(a)(2),

“we require an actual factual allegation – more substantial than an intangible suspicion – before we

will loose the judicial process, and the expense of discovery and depositions, on the defendant”).

15. Koerber, FSC and HE respectfully request that the separate memorandum brief

required by the local rules be waived as the issues raised herein are straightforward and all of the

authorities relied upon by the defendants are cited herein.

WHEREFORE, PREMISES CONSIDERED, Koerber, FSC and HE respectfully request the

Court to deny Coughlin’s Motion for Leave to File Amended Complaint on futility grounds and to

award the defendants any further or alternate relief the Court deems appropriate.

Respectfully submitted this the 6th day of September, 2006.

Defendants FranklinSquires Companies, LLC,

Hill Erickson, LLC and C. Rick Koerber

BY: s/Eddie J. Abdeen (MSB#9321)

ONE OF THEIR ATTORNEYS

ATTORNEYS FOR DEFENDANT

C. RICK KOERBER:

EDDIE J. ABDEEN, ESQ. (MSB #9321)

Attorney at Law
Post Office Box 2134
Madison, Mississippi 39130
Telephone: 601-607-4750
Facsimile: 601-427-0040

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R. PAUL RANDALL, JR., ESQ. (MSB # 99960)

Willoughby, McCraney & Randall, PLLC
451 Northpark Drive, Suite A
Ridgeland, Mississippi 39157
Telephone: 601-956-2615
Facsimile: 601-956-2642

CERTIFICATE OF SERVICE

I hereby certify that on September 6, 2006, I electronically filed the foregoing with the

Clerk of the Court using the ECF System which sent notification of such filing to the following:

Xavier M. Frascona, Jr.

J. Fredrick Ahrend
Matthew Hetzel
FRASCOGNA COURTNEY, PLLC
P. O. Box 23126
Jackson, MS 39225

s/Eddie J. Abdeen

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