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Kanawha Institute for Social Research & Action, Inc. v. Green Spirit Farms, LLC

United States District Court, S.D. West Virginia, Charleston

January 7, 2019



          John T. Copenhaver, Jr. Senior United States District Judge

         Pending is the plaintiff's motion for summary judgment, filed October 8, 2018.

         I. Background

         In December 2014, the plaintiff, Kanawha Institute for Social Research and Action (“KISRA”) and defendant, Green Spirit Farms, LLC (“GSF”), entered into a contract to develop a Vertical Farm using a Vertical Growing System at a KISRA facility in Charleston, West Virginia. Compl. ¶ 14. Plaintiff now brings an action for damages resulting from an alleged breach of this contract and conversion of KISRA's funds.

         KISRA is a faith-based organization which works to strengthen families through a community health center, health support services, and a variety of programs in connection with employment, financial counseling, and child education. Pl.'s Mot. Summ. J. at Ex. 1 ¶ 3. In 2014, KISRA's Chief Executive Officer was Michelle Foster (“Foster”). Id. ¶ 2. GSF is a for-profit limited liability company organized under the laws of Illinois. Compl. ¶ 2; Def.'s Ans. and Aff. Defenses. ¶ 2. GSF is a “manager-managed” company under the Illinois Limited Liability Act, and from January 1, 2014 until July 15, 2017, Milan Kluko (“Kluko”) was the Manager of GSF. Ans. to Pl.'s 1st Interrog. 3, 5.

         In 2014, Foster became aware of GSF's Vertical Growing System (“VGS”). Pl.'s Mot. Summ. J. at Ex. 1 ¶ 6. The VGS is an indoor, hydroponic system where produce is grown in vertical racks under lights. Id. ¶ 6. In early October 2014, Foster toured a GSF facility in Michigan. Id. ¶ 7. After discussions between Foster, Kluko, and other representatives of KISRA and GSF, KISRA and GSF orally agreed to develop a vertical farm using GSF's VGS in a building owned by KISRA in Charleston, West Virginia. Id. ¶ 7.

         On or around December 19, 2014, KISRA received a Purchase Order from GSF (“P.O. No. 5504 Kisra”) requesting that KISRA pay 50% of the total cost of lighting for the VGS - $130, 680. Id. ¶ 9; Id. at Ex. A. On December 19, 2014, KISRA paid GSF the $130, 680.00. Id. ¶ 10; Id. at Ex. A.

         On December 22, 2014, Kluko emailed a “revised scope of work agreement” to Foster regarding the development of the VGS. Id. ¶¶ 11-12; Id. at Ex. B. Foster acknowledged receipt of the “revised scope of work agreement” by email and stated that she would sign the agreement by the next day. Id. ¶¶ 11-12; Id. at Ex. B. The “revised scope of work agreement” was in the form of a Memorandum from Kluko and another GSF representative to Foster, dated December 22, 2014, titled: “Scope, Schedule and Budget for 1039 Central Avenue Charleston, WV - the ‘Central Avenue Vertical Farm' Project” (“VGS Memorandum Agreement”). Id. ¶¶ 11-12; Id. at Ex. B. Foster executed the VGS Memorandum Agreement and returned the signed form to Kluko. Id. ¶ 13.

         The VGS Memorandum Agreement provided that “[b]ased on our most recent discussions last week including our visit to KISRA as well as inspection of the Central Avenue structure in Charleston, WV, Green Spirit Farms (GSF) and KISRA have agreed to develop an initial Vertical Farm using our Vertical Growing Systems.” The VGS Memorandum Agreement noted that “KISRA has provided an initial payment of $130, 680.00 representing 50% of the cost of the lighting for the []VGS units.” Finally, the VGS Memorandum Agreement stated “[i]f you agree with this Scope of Services and budget please sign where indicated and this will serve as our agreement between KISA [sic] and GSF.” Id. ¶ 12; Id. at Ex. C.

         Throughout 2015, KISRA made efforts to prepare the Charleston building for the installation of the VGS. Id. ¶ 14. As of January 2016, no lighting for the VGS units had been delivered to KISRA despite the payment by KISRA for lighting in December 2014. Id. ¶ 14. On January 5, 2016, Foster emailed Kluko and stated: “We would like to get a check out to you for the balance of the lights. Since our system is smaller than originally planned, I figure the balance will be less than the original invoice. Please provide an invoice for the balance.” Id. ¶¶ 15-16; Id. at Ex. D. Foster's January 5th email to Kluko was followed by a series of emails between Foster and Kluko regarding the cost of the remaining lighting. Id. ¶¶ 15, 17; Id. at Ex. D. Finally, on January 13, 2016, Kluko informed Foster that the remaining cost of lighting was $92, 150.00. Id. ¶ 17; Id. at Ex. D.

         On January 14, 2016, GSF issued a Purchase Order to KISRA in the amount of $92, 150.00 for the remaining VGS lighting. Id. ¶ 18; Id. at Ex. E. On January 21, 2016, KISRA furnished $92, 150.00 to GSF. Id. ¶ 19; Id. at Ex. E. Despite having paid GSF a total of $222, 830.00, KISRA has never received any VGS lighting from GSF. Id. ¶ 19; Pl.'s Mot. Summ. J. at Ex. 5 ¶ 4.

         Foster resigned as the Chief Executive Officer of KISRA effective February 5, 2016. Pl.'s Mot. Summ. J at Ex. 1 ¶ 20. After the final payment of $92, 150.00 for the lighting on January 14, 2016, KISRA asked GSF several times when KISRA would receive the lighting, but KISRA never received an explanation for GSF's failure to deliver it. See Pl.'s Mot. Summ. J. at Ex. 6 ¶ 4.

         On February 19, 2016, KISRA's Chief Operating Officer, Carl Chadband (“Chadband”), emailed Kluko informing him that KISRA was cancelling the VGS project and that it requested a return of the $222, 830.00. Pl.'s Mot. Summ. J. at Ex. 6 ¶¶ 4-6; Pl.'s Mot. Summ. J., Ex. 1 at Ex. A. On February 22, 2016, Kluko responded to Chadband's February 19th email by stating, inter alia, that GSF “cancelled work orders for your lighting and will refund the cost of the lighting, ” and that it “[s]hould have this accomplished in approximately 2 weeks from today.” Id. at Ex. 6 ¶ 7; Id. at Ex. A. However, GSF did not return the refund as promised.

         Consequently, on March 11, 2016, Chadband emailed Kluko and stated: “Can you provide me with a status update for our refund. It has been two weeks. Thanks!” Id. at Ex. 6 ¶ 8; Id. at Ex. A. Kluko responded to Chadband the same day and stated: “We hope to have this wrapped next week the process has taken a little longer than we had hoped and my apologies . . . we have all the items together and RMA to get the funds[.] I will get back with you COB Tuesday.” Id. at Ex. 6 ¶ 9; Id. at Ex. A. ...

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