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SUPREME COURT OF ARKANSAS
No. CV-15-636
Opinion Delivered: April 21, 2016
TOM MUCCIO, MIKE MUCCIO, AND
NEXT CHAPTER RESOURCES, LLC
APPELLANTS
APPEAL FROM THE PULASKI
V. COUNTY CIRCUIT COURT,
SIXTH DIVISION
JOHNELLE HUNT; PHIL PHILLIPS; [60CV-2012-428]
DAVID SCHUMACHER; TREY
TRUMBO; JOHNELLE HUNT, LLC; HONORABLE TIMOTHY DAVIS
PHIL AND JUDY PHILLIPS FAMILY FOX, JUDGE
LIMITED PARTNERSHIP, LLLP; AND
BIG HORN LODGE FINANCING, LLC AFFIRMED.
APPELLEES
ROBIN F. WYNNE, Associate Justice
Tom Muccio, Mike Muccio, and Next Chapter Resources, LLC, appeal from an
order of the Pulaski County Circuit Court granting summary judgment in favor of appellees
Johnelle Hunt, Phil Phillips, David Schumacher, Trey Trumbo, Johnelle Hunt, LLC, Phil
and Judy Phillips Family Limited Partnership, LLLP, and Big Horn Lodge Financing, LLC.
We affirm.
In 2012, appellants sued appellees in the Pulaski County Circuit Court, alleging
causes of action for civil conspiracy, intentional interference with a contractual relationship
or business expectancy, fraud and fraudulent inducement, and violation of the Arkansas
Deceptive Trade Practices Act (ADTPA). The operative facts, as relayed in the complaint,
are as follows. The parties were all members of a company called BioBased, LLC.
Appellants controlled 41.81 percent of the company, with Tom Muccio individually
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controlling 4.85 percent of the company, Mike Muccio individually controlling 10.08
percent of the company, and Next Chapter Resources controlling 26.88 percent of the
company. Appellees controlled 56.19 percent of the company.
Appellants allege that appellees, along with other nonparty co-conspirators, conspired
to gain control of appellants’ interests in BioBased. In September 2008, Tom Muccio, who
served as the company’s CEO from 2004 to 2008, agreed, at the urging of a majority of the
membership, to bring in Walter Smiley to serve as a business consultant. Appellants allege
that Smiley was represented by the conspirators as being neutral and objective but was
actually brought in to further the conspiracy. In December 2008, a majority of the company
membership voted to remove Tom as CEO and replace him with Smiley.
Appellants allege that, at an August 14, 2009 membership meeting, Smiley informed
the members that Signature Bank, an institution that was providing BioBased with an
operating line of credit that was set to expire in the near future, would bounce BioBased’s
checks if the company did not declare bankruptcy. Appellants allege that this statement was
false, as Amy Sorrell, the company’s acting CFO, had made several bank deposits in order
to avoid having checks bounce on the Signature account. Smiley also told the membership
that Signature would not renew the line of credit and demanded that it be moved to another
institution, which claims appellants allege were false. According to appellants, the alleged
conspirators were aware that Smiley’s statements were false when they were made at the
meeting. BioBased’s membership voted unanimously in favor of placing the company into
Chapter 11 bankruptcy. Appellants contend in the complaint that the alleged conspirators,
including appellees, worked together to fraudulently induce them into voting in favor of
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the bankruptcy. They also contend that they were stripped of their membership interests
in the resulting bankruptcy.
Appellants originally sued appellees, along with several other defendants who are not
parties to this action, in the Washington County Circuit Court. On August 5, 2011,
appellants took a voluntary nonsuit of their claims against appellees. That same day, the
Washington County court entered summary judgment in favor of the remaining defendants.
In the order granting summary judgment, the Washington County Circuit Court found
that the bankruptcy plan that had been approved by management and the bankruptcy court
was “proper and approved by seventy-five percent of the membership.”
On March 5, 2015, appellees moved for summary judgment in the Pulaski County
action. At a pretrial conference, appellants voluntarily dismissed their claims for intentional
interference with a contractual relationship or business expectancy and violation of the
ADTPA. The trial court subsequently entered an order granting summary judgment in
favor of appellees on the remaining claims. The trial court found that the Washington
County court’s finding regarding the bankruptcy plan was law of the case. The trial court
also found that appellants acknowledged that the only vote taken that required a three-
fourths majority was the vote to authorize filing of Chapter 11 bankruptcy and that
appellants knew before that vote that the bankruptcy plan would not include them. The
trial court granted summary judgment based on law of the case and its determination that
appellees were “factually entitled to summary judgment.” This appeal followed.
The law is well settled regarding the standard of review used by this court in
reviewing a grant of summary judgment. Brock v. Townsell, 2009 Ark. 224, 309 S.W.3d
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179. A trial court will grant summary judgment only when it is apparent that no genuine
issues of material fact exist requiring litigation and that the moving party is entitled to
judgment as a matter of law. Id. The burden of proof shifts to the opposing party once the
moving party establishes a prima facie entitlement to summary judgment; the opposing party
must demonstrate the existence of a material issue of fact. Id. After reviewing the evidence,
the trial court should deny summary judgment if, under the evidence, reasonable minds
could reach different conclusions from the same undisputed facts. Id.
Appellants argue that there remain genuine issues of material fact that preclude
summary judgment in this case. Appellants contend that there is a question of fact regarding
representations to them of Smiley’s neutrality. Any potential misrepresentation regarding
this issue has no relevance to the causes of action ruled on by the trial court. Appellants’
support was not necessary for Smiley to be brought on board, and certainly was not necessary
for him to be installed as CEO, as appellants presumably did not support that move. In the
brief, appellants allege that, had they been told the truth about Smiley, they would not have
remained members of BioBased. This bare allegation is not supported by any evidence;
neither Tom nor Mike Muccio testified that they were induced to keep their interests in
the company due to the representations made about Smiley.
Appellants also argue that there remain unresolved issues of fact with regard to
whether alleged misrepresentations by Smiley at the August 14, 2009 membership meeting
induced them to vote in favor of bankruptcy. In order to prove fraud, a plaintiff must prove
five elements under Arkansas law: (1) that the defendant made a false representation of
material fact; (2) that the defendant knew that the representation was false or that there was
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insufficient evidence upon which to make the representation; (3) that the defendant
intended to induce action or inaction by the plaintiff in reliance upon the representation;
(4) that the plaintiff justifiably relied on the representation; and (5) that the plaintiff suffered
damage as a result of the false representation. Jewell v. Fletcher, 2010 Ark. 195, 377 S.W.3d
176.
Appellants failed to provide any proof that Tom Muccio, who represented Next
Chapter Resources at the August 14, 2009 meeting, relied on any false representation in
voting in favor of placing BioBased in Chapter 11 bankruptcy. As a result, there is no proof
that Mike Muccio was damaged as a result of any false representation. While Mike Muccio
testified that the alleged misrepresentations about the threat by Signature to bounce checks
caused him to vote in favor of bankruptcy, Tom Muccio did not. Instead, Tom Muccio’s
testimony was that he voted in favor of bankruptcy in order to enhance his position in the
company and to potentially purchase it out of bankruptcy by partnering with an overseas
investor. This is key because Mike Muccio did not control enough interest to defeat the
bankruptcy resolution by voting against it. The minutes from the August 14, 2009
membership meeting state that Tom Muccio represented Next Chapter’s interest; Mike
represented only his personal interest. Because there is no evidence that the percentage
approval necessary to pass the bankruptcy resolution was obtained as a result of any
misrepresentation, appellants cannot prove that they were harmed by any alleged false
representations.
Appellants’ proof also fails with regard to their claim of a civil conspiracy. To prove
a civil conspiracy, a plaintiff must show that two or more persons have combined to
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accomplish a purpose that is unlawful or oppressive or to accomplish some purpose, not in
itself unlawful, oppressive or immoral, but by unlawful, oppressive or immoral means, to
the injury of another. Faulkner v. Ark. Children’s Hosp., 347 Ark. 941, 961, 69 S.W.3d 393,
406 (2002). Appellants allege in the complaint that appellees operated in concert with
certain nonparty co-conspirators to deprive them of their interests in BioBased. However,
they offer no actual proof of a conspiracy. They allege that appellees knew the alleged
misrepresentations were false but offer no proof of this. Tom Muccio also testified before
the vote on the bankruptcy resolution that he knew that Ms. Hunt was not planning on
including appellants in any plan of reorganization. There is simply nothing, apart from
appellants’ allegations, to show that appellees were part of a conspiracy to deprive them of
their interests in the company through fraud. The proof, at most, shows a business
relationship that deteriorated because of personal friction between certain members of the
corporation. Because appellants failed to provide proof on essential elements of their claims
sufficient to create a question of fact to be determined at trial, the grant of summary
judgment in favor of appellees was proper.
Because appellees failed to present proof sufficient to raise a question of fact with
regard to the claims before the trial court on summary judgment, it is not necessary for us
to consider the issue of whether the trial court erred by applying the doctrine of law of the
case in the summary-judgment order. The order is affirmed.
Affirmed.
Knight Law, P.A., by: K. Vaughn Knight, for appellants.
Shemin Law Firm, PLLC, by: Kenneth R. Shemin, for appellees.
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