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Spears v. Com Link, Inc.

Court of Appeal of Iowa

July 10, 2013

CLAUDE SPEARS, Plaintiff-Appellant,
v.
COM LINK, INC.; NORM WILKERSON; MARK CHAFFEE; HERMAN SLABACH; LANCE SLABACH; THEESE PRICE-VITENSE; KENNETH PAXON; DEAN PRICE; SANDY WILKERSON; RSM MCGLADREY, INC.; MIDWEST DATACOM, INC.; MIDWEST DATAPATH, L.L.C.; MIDWEST DATACOM, L.L.C.; IOWA DATACOM, L.L.C.; COMLINK WIRELESS, L.L.C.; PRAIRIE INVESTMENTS, L.L.C.; PRAIRIE INTERNET INVESTMENTS, L.L.C.; COM-WAVES, COM-WAVES, L.L.C.; MINT COMMUNICATIONS, L.L.C.; UNIWAVE COMMUNICATIONS, INC.; and VITENSE INVESTMENTS, INC., Defendants-Appellees.

Appeal from the Iowa District Court for Linn County, Ian K. Thornhill, Judge.

Claude Spears appeals from the district court's grant of summary judgment on claims of breach of contract, misrepresentation, fraud, minority shareholder oppression, conversion, conspiracy, and breach of fiduciary duty.

Richard A. Pundt of Pundt Law Office, and Larry J. Thorson of Ackley, Kopecky & Kingery, L.L.P., Cedar Rapids, for appellant.

Mark Weinhardt of Weinhardt & Logan, Des Moines, for appellee RSM McGladrey, Inc.

Steven E. Ballard, Thomas E. Maxwell, and Michael J. Harris of Leff Law Firm, L.L.P., Iowa City, for appellees, Herman Slabach, Lance Slabach, Theresa Price-Vitense, Dean Price, Prairie Investments, Mint Communications, and Vitense Investments.

Norm Wilkerson and Sandy Wilkerson, Cedar Rapids, appellees pro se.

Heard by Doyle, P.J., and Danilson and Mullins, JJ.

MULLINS, J.

Claude Spears appeals from the district court's order granting summary judgment on claims of breach of contract, misrepresentation, fraud, minority shareholder oppression, conversion, conspiracy, and breach of fiduciary duty. We affirm and remand for further proceedings against any remaining defendants.

I. Background Facts and Proceedings

This case arises out of the purchase, operation, and eventual failure of Com-Link, Inc. After Com-Link's failure, Spears sued twenty-five individuals and business entities directly and indirectly related to Com-Link's operation. We are called upon to review the propriety of the district court's grant of summary in favor of Norm Wilkerson; Sandy Wilkerson; Herman Slabach; Lance Slabach; Dean Price; Theresa "Teesa" Price-Vitense;[1] Prairie Internet Investments, LLC; Mint Communications, LLC; Vitense Investments, Inc.; and RSM McGladrey, Inc. We set forth the facts in the light most favorable to Spears.

Claude Spears, Stephen Rusboldt, and Gary Schultz founded Com-Link as an internet service provider in the mid-1990s. In early 2004, Norm Wilkerson, Mark Chaffee, and Kenneth Paxton expressed an interest in purchasing Com-Link on behalf of Midwest DataCom, Inc. During the negotiations, Paxton and Wilkerson made certain representations to Spears about Midwest DataCom's plans to expand Com-Link's customer base. Ultimately, Midwest DataCom did not purchase Com-Link and Paxton dropped out of the negotiations.

After Midwest DataCom decided not to purchase Com-Link, Wilkerson contacted several investors to help acquire Com-Link. The investors included Dean Price, an accountant and managing partner of RSM McGladrey; Herman Slabach, president of a construction company that builds underground telecommunications infrastructure; and Lance Slabach. The investors decided to pursue the acquisition of Com-Link.

In April 2004, Spears, Rusboldt, and Schultz entered an agreement with Com-Link entitled the "Share Purchase Agreement." Under the terms of the agreement, Rusboldt and Schultz agreed to sell all of their shares to Com-Link; Spears agreed to sell a portion of his shares. The agreement further provided that Com-Link agreed to sell shares to several investors at a price to be agreed upon at a later date. The prospective investors listed in the agreement were Norm Wilkerson, Mark Chaffee, Herman Slabach, Lance Slabach, Mitchell Price, and Theresa "Teesa" Price. Each party signed the agreement—with Dean Price apparently acting on behalf of his adult children Mitchell and Teesa when signing.

After the parties signed the share purchase agreement, Spears, Rusboldt, and Schultz held a board meeting and authorized Com-Link to issue stock to the individual investors in the number of shares set forth in the share purchase agreement. The founding members elected the following board of directors: Norm Wilkerson, Claude Spears, Mark Chaffee, Herman Slabach, and Lance Slabach. The board then elected Wilkerson as president, Chaffee as vice president, Spears as secretary, and Sandy Wilkerson (Norm Wilkerson's wife) as treasurer.

Over the next several years, Com-Link failed to remain competitive as an internet service provider and accumulated more and more debt. In 2005, Com-Link obtained a loan for $107, 000, which Spears does not remember signing. In 2006, Com-Link incurred a loan in the amount of $264, 643.23, which Spears again does not remember signing.

In August 2006, Com-Link sold certain assets to Mint Communications, LLC. Mint Communications is a subsidiary of Vitense Investments, Inc. Vitense Investments's shareholders include Dean Price, Teesa Price, and Kurt Vitense with Dean acting as its registered agent.

In October 2006, a collections agency demanded payment from Spears for a Com-Link American Express bill in the amount of $29, 870.16. Spears paid the bill. Spears then met with Dean Price to demand Com-Link's financial statements that he claims Price never provided.

In January 2007, Prairie Internet Investments was formed with Teesa Price as the registered agent. Prairie Internet Investments' shareholders included Herman Slabach (27%), Norm Wilkerson (27%), Vitense Investments (27%), Mark Chaffee (14%), and Spears (5%). Spears believed he was owed a 20% share.

Com-Link's digital subscriber line users were allegedly transferred to ABC Solutions (not a party to this case) in 2007. Com-Link ceased doing business later that year. Com-Link was then administratively dissolved for failure to file a biennial report in 2008. By 2011, Mint Communications, assumed all of Com-Link's debt ...


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