The Arkansas Court of Appeals has affirmed a lower court's ruling in a business dispute involving trampoline parks. The case, Ashley and Jonathan Kirk Cupp v. Amy and Chad Register and Gretchen and Phillip Greer, centers on claims of breach of contract, fiduciary duties, and fraud among business partners. The decision affects the parties involved and highlights the complexities of business partnerships and contract law.
The dispute began when Jonathan "Kirk" Cupp and his ex-wife Ashley Cupp sued their former business partners, Phillip Greer and Chad Register, along with their spouses. The Cupps sought damages for breach of contract and other claims related to their exit from a trampoline park business called Church Bells, LLC. The case was filed in the Greene County Circuit Court and involved a four-day bench trial.
In 2017, the three partners formed Church Bells, LLC, which owned and operated trampoline parks across four states. Each partner had a one-third ownership stake in the business. As part of their agreement, they personally guaranteed commercial leases and a $3 million loan from First National Bank of Paragould. However, the business faced challenges due to the COVID-19 pandemic, leading to its eventual bankruptcy in 2020.
The Cupps decided to leave the business in early 2020 and entered into an "Equity Purchase and Sale Agreement" (EPA) with Greer and Register. Under this agreement, the Cupps would sell their equity stake for a total of $590,000, with payments scheduled over several years. However, payments ceased in August 2020, and the trampoline parks closed permanently.
After the bankruptcy filing, Greer and Register paid off the debts associated with the business, including the personal guarantees. The Cupps, however, did not contribute to these payments. In response, Greer and Register filed a counterclaim seeking contribution for the amounts they paid on behalf of the Cupps.
The circuit court ruled in favor of Greer and Register, denying the Cupps' claims and awarding contribution without setoff. The court found that the Cupps did not exercise their right to reclaim their equity interest in the business and that Greer and Register had made good-faith efforts to resolve the business's debts.
The court ruled, "The Greers and the Registers paid more than their pro rata share of the guaranteed liability and were thus entitled to the full amount of contribution claimed against the Cupps."
Additionally, the circuit court awarded attorney's fees to Greer and Register, stating that the lawsuit was primarily based in contract law. The Cupps appealed the ruling, arguing that the court misapplied equity principles and that they were entitled to a setoff based on the alleged inequitable conduct of Greer and Register.
In its ruling, the Arkansas Court of Appeals upheld the lower court's decision. The court stated that the Cupps had not provided sufficient evidence of bad faith or inequitable conduct by Greer and Register to warrant a setoff. The court also affirmed the award of attorney's fees, noting that the Cupps' claims were intertwined with the contract issues at the heart of the case.
The court affirmed, "The Cupps sued the Greers and the Registers to recover damages. Their leading cause of action...was breach of contract arising from two agreements between the parties."
This ruling reinforces the importance of clear contractual agreements and the responsibilities of business partners. It also highlights the legal complexities that can arise during business disputes, particularly when bankruptcy is involved.
The decision may set a precedent for similar cases involving business partnerships and the enforcement of contractual obligations. It emphasizes that parties must adhere to the terms of their agreements and that courts will uphold these agreements when disputes arise.
Looking ahead, the Cupps may seek to appeal the ruling to the Arkansas Supreme Court, although it remains to be seen whether they will pursue this option. The case serves as a reminder for business partners to clearly define their roles and responsibilities to avoid similar disputes in the future.