Article courtesy of Michael Robson (Greenberg Traurig)
The Alliance Group, Inc. v. NGC Group, Inc., 970 N.W.2d 505 (Neb. Ct. App. 2021)
In a dispute between The Alliance Group, Inc. (“Alliance”) and NGC Group, Inc. (“NGC”) and its owner, Justin Hernandez on appeal from the Douglas County District Court, the Nebraska Court of Appeals affirmed the district court’s ruling that Mr. Hernandez’s oral promise to reimburse Alliance was not barred by Nebraska’s statute of frauds and that NGC breached that promise.
The dispute stems from an obligation owed to Alliance pursuant to a contract between Alliance and Acass Systems, LLC (“Acass”). Alliance provides payroll and employer support services. Alliance and Acass entered into an agreement in which Alliance would distribute payroll to Acass and Acass would reimburse Alliance. In 2017 and 2018, Acass experienced financial shortfalls and relied on DIV Investments (“DIV”) as its main lender. Mr. Hernandez owned NGC and DIV, two distinct entities. Between March 30 and June 8, 2018, NGC made four direct payments to Alliance to satisfy Acass’ payroll obligations to Alliance.
On June 19, 2018, Acass informed Alliance that payroll would be coming from NGC. By June 21, 2018, Alliance had yet to receive the required funding for payroll from NGC, and in an email to Alliance, Mr. Hernandez asked, “Is there any way you can send the [paychecks] and I’ll make sure you get paid by [June 22, 2018]?” Alliance understood Mr. Hernandez to have made an “express, clear promise . . . that he would cause Alliance to be paid back” if Alliance made the payroll deposits on June 21, and Alliance proceeded to advance the payroll funding that same day. Alliance requested Mr. Hernandez pay the $185,000 invoice on June 25, 2018, and Mr. Hernandez did not respond. In July 2019, Alliance filed a complaint in district court against NGC and Mr. Hernandez.
The district court found in favor of Alliance. The court found that Mr. Hernandez made a promise on behalf of NGC to repay Alliance for the payroll, not to offer Acass another loan. The court found that the promise given by Mr. Hernandez did not comply with the requirements of Neb. Rev. Stat. § 36-202 that a promise to answer for the debt of another be in writing or sufficiently evidenced by some note or memorandum, as the invoice and emails offered by Alliance did not sufficiently detail the essential terms of Mr. Hernandez’s promise. The court found that Mr. Hernandez’s promise was made to advantage NGC through its lending relationship with DIV and DIV corresponding lending relationship with Acass. As such, the court concluded that the leading object rule applies as an exception to the statute of frauds and that Mr. Hernandez’s promise, given on behalf of NGC, was an enforceable contract. The court awarded Alliance $180,381.82 in damages.
On appeal, NGC argued that the district court erred in (1) determining that Alliance’s claim was not barred by the statute of frauds, (2) applying the leading object rule to except the oral promise from the requirements of the statute of frauds, (3) not limiting Alliance’s damages to $104,721 pursuant to Alliance’s proof of claim filed in Acass’ bankruptcy action, and (4) failing to apply the doctrines of claim preclusion and issue preclusion to limit Alliance’s damages to $104,721.
The court of appeals held the following on their claims: First, they found that the district court was not clearly wrong in concluding that Mr. Hernandez orally promised, on behalf of NGC, to repay Alliance. Second, they found that the district court correctly applied the leading object rule and Alliance’s claim was not barred by the statute of frauds. Third, the court concluded that NGC did not sufficiently present claim preclusion or issue preclusion at the district court level because NGC failed to plead either defense as affirmative defenses and failed to expressly argue at trial that either doctrine barred Alliance’s claim or otherwise limited Alliance’s recovery to $104,721. Fourth, the court found that the district court’s award of $180,381.82 was sufficiently supported by the evidence offered at trial.
