The opinion of the court was delivered by: Jeffrey L. VIKEN United States District Judge
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
Plaintiffs' complaint asserts breach of guaranty. (Docket 1). Plaintiffs claim that by a guaranty agreement, defendants are obligated to indemnify plaintiffs for an Internal Revenue Service tax liability, together with costs and attorneys' fees related to the payment of the tax and defense against the IRS claim, as well as the costs and attorneys' fees incurred in this litigation. Id. Defendants' answer admits the guaranty, but denies liability under that agreement. (Docket 30). Defendants' counterclaim asserts an indemnity claim for costs and attorneys' fees incurred to defend this action. Id. Plaintiffs filed a motion for summary judgment. (Docket 41). The motion is ripe for resolution by the court.
Under Fed. R. Civ. P. 56(c), a movant is entitled to summary judgment if the movant can "show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2). Once the moving party has met its burden, the nonmoving party may not rest on the allegations or denials in the pleadings, but rather must produce affirmative evidence setting forth specific facts showing that a genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Only disputes over facts that might affect the outcome of the case under the governing substantive law will properly preclude summary judgment. Id. at 248. Accordingly, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact."
Id. (emphasis in original).
If a dispute about a material fact is genuine, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party, then summary judgment is not appropriate. Id. However, the moving party is entitled to judgment as a matter of law if the nonmoving party has failed to "make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In such a case, "there can be 'no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 323.
In determining whether summary judgment should issue, the facts and inferences from those facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). The key inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52.
The undisputed material facts originate from plaintiffs' complaint
(Docket 1), defendants' answer to the complaint (Docket 30),*fn1
plaintiffs' statement of disputed and undisputed material
facts (Docket 43), and defendants' statement of undisputed material
facts (Docket 47).*fn2 Citations to the record will be
made where appropriate.
Lucile and Mark Bradley, their daughter, Kerrie Applegate (through the Kerrie E. Applegate Irrevocable Trust) and their son, Rodney Bradley, (collectively referred to as the "Bradleys") were the sole shareholders in a family-owned business, MB Enterprises, Inc., f/k/a PortaStorage Inc., which was a portable storage and waste removal business ("MBE" or "Company"). (Docket 43, ¶ 1). In 2003, the Bradleys began the process of selling the business. Id. at ¶ 2. In September 2003, they sold the portable storage component of the business to another company. Id. at ¶ 3.
In late 2003, Tony McDonald from Midcoast Investments, Inc. ("Midcoast") contacted Rodney Bradley to solicit the sale of the remainder of the Company to Midcoast. Id. at ¶ 4. Mr. McDonald explained that Midcoast was purchasing companies with cash assets and tax liability and converting them to debt collection businesses, using bad debt losses to offset the tax liability.
Id. at ¶ 5. By offsetting the tax liability, Midcoast could pay more for the company than the difference between the cash and tax liability. Id. at ¶ 6.
The purchaser of the Company stock would be a newly formed entity, PST Investment, LLC ("PST"). Id. at ¶ 7. Defendant Premium Acquisitions, Inc., formerly Midcoast Acquisition Corporation ("Midcoast Acquisitions"), was the sole member of PST. Id. at ¶ 8. Defendant MDC Credit Corporation, formerly Midcoast Credit Corporation ("Midcoast Credit"), is associated with both PST and Midcoast Acquisitions. Id. at ¶ 9. At Midcoast's direction, the Bradleys transferred all non-cash assets out of the Company (including a transfer that resulted in the complete redemption of the Kerrie E. Applegate Irrevocable Trust's share of the Company) and changed the Company name to PST Investments, Inc. Id. at ¶ 10. At the time of sale, the Company had about $3,451,280 in cash and $1,360,220 in tax liability. (Docket 43 ¶ 11).
A Share Purchase Agreement was executed on January 30, 2004, between PST ("Purchaser") and PST Investments, Inc., f/k/a MB Enterprises, Inc., and Bradleys as the sole shareholders of the Company (collectively the "Sellers"). (Docket 45-3). Contemporaneously, Midcoast Credit and Midcoast Acquisition ("Guarantors") executed a Guaranty whereby "Guarantors . . . unconditionally and irrevocably guarantee to Sellers . . . the prompt and faithful performance of all of Purchaser's obligations pursuant to the provisions of Article 9 of the Share Purchase Agreement (the 'Indemnification Obligations')." (Docket 45-4, p. 1).*fn3
By a Notice of Liability dated June 30, 2009, the IRS advised Rodney Bradley of an income tax liability of PST Investments, Inc., f/k/a MB Enterprises, Inc., for the fiscal year ending March 31, 2004. (Docket 45-5). The Notice of Liability Statement indicated an income tax liability of $1,360,220, together with accrued accuracy related penalties under the Internal Revenue Code, Section 6662(h), of $544,088, for a total due of $1,904,308. Id. at p. 5. The explanation for the assessment was as follows:
It is determined that the purported stock sale by shareholders of PST Investments, Inc., f.k.a. MB Enterprises, Inc., f.k.a. Porta Storage, Inc. to Midcoast Acquisition Corporation and PST Investments, LLC is not respected for tax purposes. . . . Rather, the stock sale and the transactions involving the sale of PST Investments, Inc., . . . assets to CAJ Enterprises, Inc., are determined to be, in substance, a sale of assets of PST Investments, Inc., . . . followed by a distribution by PST Investments, Inc., . . . of its proceeds to its shareholders. . . . In substance, the shareholders received a liquidating distribution from PST Investments, Inc., . . . . It has been determined that PST Investments, Inc., . . . ceased its business activity in 2004 and was insolvent.
In the alternative, the transaction is in substance, a sale of the assets of PST Investments, Inc., . . . to CAJ Enterprises, Inc., followed by a redemption of PST Investments, Inc., . . . stock owned by PST Investments, Inc., . . . shareholders (the shareholders before any alleged sale to Midcoast Acquisitions Corporation and PST Investments, LLC).
Id. at pp. 5-6. Similar IRS statements were sent to Lucile J. Bradley, both individually and as personal representative of the estate of Mark E. Bradley.*fn4
Bradleys served notice and made a demand upon PST, Midcoast Acquisitions and Midcoast Credit for payment of the IRS liability under the Share Purchase Agreement and Guaranty. (Docket 43, ¶ 17). Defendants claim they no longer own PST and refuse to perform under the Guaranty. Id. at ¶ 18.
Plaintiffs contested the Notice of Liability statements in the United States Tax Court. (Docket 47, ¶ 2). The Tax Court scheduled a trial for May of 2010. Id. at ¶ 3. The tax liability was resolved with the IRS by stipulation. (Docket 60-1). Rodney Bradley acknowledged a tax liability and interest through June 30, 2009, of $608,832.*fn5 Id. at pp. 25-26. Lucile Bradley, individually, acknowledged a tax liability and interest of $412,568. Id. at pp. 30-31. Lucile Bradley, as the personal representative of the estate of Mark Bradley, acknowledged a tax liability and interest of $380,986. Id. at pp. 35-36. These stipulations resulted in a decision of the United States Tax Court assessing a corresponding amount against each taxpayer. Id. at pp. 40-41, 43-44, and 46-47. As of September 1, 2010, plaintiffs owed $1,469,309. Id. at p. 2. DISCUSSION Section 10.4 of the Share Purchase Agreement states it, as well as the attached schedules and exhibits, "shall be governed by and construed under the laws of the State of Florida . . . ." (Docket 45-3, p. 26). In an order denying defendants' motion to dismiss, Chief Judge Karen E. Schreier concluded the Guaranty is an exhibit within the attachments to the Share Purchase Agreement. (Docket 29, pp. 12-13). Both documents must be interpreted under Florida law. Id. at p. 13.
"Florida District Courts of Appeal are the law of Florida unless and until overruled by the Florida Supreme Court. . . . Thus, [a] federal court applying state law is bound to adhere to decisions of the state's intermediate appellate courts absent some persuasive indication that the state's highest court would decide the issue otherwise." Liberty Mutual Insurance Company v. Aventura Engineering & Construction Corp., 534 F. Supp. 2d 1290, 1303 (S.D. Fla. 2008) (internal citation and quotation marks omitted). "Florida courts interpreting [contracts] are guided by the plain meaning of the language used in the [contracts]." Fidelity National Property and Casualty Company v. Boardwalk Condominium Association, Inc., No. 3:07cv278/MCR/EMT, 2010 WL 1911159 *4 (N.D. Fla. 2010) (internal quotation marks omitted). "A provision that is clear and unambiguous should be enforced according to its terms . . . ." Id. (internal quotation marks omitted).
In Florida, "the generally accepted rule of law [is] that where an indemnitor has notice of a suit against his indemnitee, and is afforded an opportunity to appear and defend, a judgment therein rendered against the indemnitee, if without fraud or collusion, is conclusive against the indemnitor as to all material questions therein determined." Wright v. Fidelity and Casualty Company of New York, 139 So. 2d 913, 915 (Fla. App. 1962). In Chappell v. Scarborough, 224 So. 2d 791 (Fla. App. ...