Judge Rules Dickinson Lawsuit Against Keeneland Can Proceed

A federal judge on Tuesday denied a motion by Keeneland Association to dismiss a lawsuit filed by Michael W. Dickinson Inc., stemming from Dickinson's attempt to collect $395,874.18 (plus interest) from Keeneland in a breach of contract judgment against Martin Collins Surfaces & Footings, a limited liability company co-owned by a subsidiary of Keeneland.

Martin Collins Surfaces & Footings (MCSF) , the company that made and installed the synthetic surface Polytrack at Keeneland and several other North American racetracks, in 2008 agreed to pay Dickinson $1.25 million in 10 equal installments of $125,000 per year. The agreement was designed to end a trademark dispute between Martin Collins International, which developed Polytrack for use in Great Britain in the 1980s, and Dickinson, a native of England and champion trainer there who subsequently came to the United States and acquired a patent on a synthetic surface that is marketed under the trade name Tapeta Footings. Martin Collins International was a co-owner with the Keeneland subsidiary Keeneland Ventures of the U.S.-based MCSF.

When MCSF stopped making payments on the contract after one year, Dickinson sued in federal court and won the aforementioned judgment in November 2011. However, shortly after the lawsuit was filed, MCSF was dissolved as a limited liability company.

The second lawsuit, filed against Keeneland Association, sought to collect on the judgment by “piercing the corporate veil” of MCSF to prove Keeneland was the “alter ego” of MCSF and should be held responsible for paying the judgment.

Last March, Keeneland filed a motion to dismiss, arguing that Dickinson failed to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6) and that Dickinson failed to join required Parties under Rule 12(b)(7).

Karen Caldwell, chief judge of the U.S. District Court for the Eastern District of Kentucky, assessed Keeneland's motion to dismiss based on those arguments and ultimately denied them. Dickinson did state a claim, Caldwell wrote, by providing testimony from a former Martin Collins International employee demonstrating that Keeneland controlled MCSF, using its own employees to handle all aspects of the business; that MCSF failed to observe corporation formalities (regular meetings of directors or members); and that Keeneland acted solely to guarantee a loan providing critical financing to MCSF and paid off other debts when MCSF was dissolved.

Caldwell also ruled the other parties (MCSF, Keeneland Ventures and Martin Collins International) are not required to be joined (or named) as defendants because “Martin Collins is not alleged to have caused harm in this case – Keeneland is.”

In conclusion, Caldwell wrote: “Dickinson has pled sufficient facts to state a plausible claim on both elements of its veil piercing theory. Similarly, Dickinson did not fail to join required parties to this litigation under Rule 19. Thus Keeneland's motion to dismiss for failure to state a claim under Rule 12(b)(6) and for failure to join parties under Rule 12(b)(7) will be denied.”

A statement from Jonathan Blank, an attorney for Dickinson, read: “Michael W. Dickinson Inc. favorably received an opinion from the United States District Court for the District of Kentucky in Lexington allowing it to continue to prosecute its case against Keeneland to collect in a judgment that is now approximately half a million dollars. MWD Inc. has alleged that Keeneland used a sham corporation to commit a fraud against MWD Inc. so that Keeneland would not have to pay its debts. MWD Inc. appreciates the careful deliberation of the court and looks forward to discovering more information and having its day in court.”

Attorneys for Keeneland did not immediately respond to an email seeking comment.

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