A&M Hospitalities, LLC v. Alimchandani

• Decision Date: 16 March 2021
• Docket Number: A20A1688, A21A0525
• Citation: 359 Ga.App. 271,856 S.E.2d 704
• Parties: A&M HOSPITALITIES, LLC et al. v. ALIMCHANDANI. Alimchandani v. A&M Hospitalities, LLC.
• Court: Georgia Court of Appeals

359 Ga.App. 271

856 S.E.2d 704

A&M HOSPITALITIES, LLC et al.

v.ALIMCHANDANI.

Alimchandani

v.A&M Hospitalities, LLC.

A20A1688, A21A0525

Court of Appeals of Georgia.

March 16, 2021

Certiorari Denied January 11, 2022

Justin Stuart Scott, Valdosta, Timothy Marzine Tanner, Valdosta, John E. Floyd, Atlanta, James Adams Garland, Jennifer Lauren Peterson, Kamal Ghali, Atlanta, John Flanders Kennedy, for Appellant in A20A1688.

Henry Pearce Scott, Valdosta, Vineet Roney, Daniel R. Lombard, David Lakin, Jonathan Bunge, Daniel Scwartz, for Appellee in A20A1688.

Justin Stuart Scott, Valdosta, Timothy Marzine Tanner, Valdosta, John E. Floyd, Atlanta, James Adams Garland, Jennifer Lauren Peterson, Kamal Ghali, Atlanta, for Appellee A21A0525.

Vineet Roney, for Appellant in A21A0525.

Doyle, Presiding Judge.

A decade after Prenita Alimchandani and Jane Motley created A&M Hospitalities, LLC, Alimchandani filed this action against A&M, Jane, and David Motley (Jane's husband), seeking to judicially dissolve A&M and asserting claims for breach of contract and breach of fiduciary duty.¹ The trial court appointed Christopher A. Cohilas as a limited receiver, which appointment was affirmed by this Court,² and later appointed him as an auditor/special master. Alimchandani filed an arbitration demand, and the arbitrator entered an award in favor of A&M and JDS&J Enterprises, LP,³ on Alimchandani's claims and in favor of JDS&J on its counterclaim, and the trial court eventually confirmed the arbitration award. In Case No. A20A1688, the defendants appeal the trial court's order appointing Cohilas as special master/auditor, and in Case No. A21A0525, Alimchandani appeals the trial court's confirmation of the arbitration award. For the reasons that follow, we affirm in Case No. A21A0525, and in Case No. A20A1688, we reverse and vacate the trial court's order appointing Cohilas as special master/auditor.⁴

The record shows that Jane and Alimchandani created A&M, which develops and operates hotels throughout Georgia, Florida, and Alabama.⁵ According to Alimchandani, the Motleys misappropriated and wasted company assets and failed to make required distributions, so she filed suit to judicially dissolve A&M and asserted breach of fiduciary duty and RICO claims.⁶ In January 2018, Alimchandani filed an arbitration demand, and she also filed a motion for immediate appointment of a receiver. In July 2018, the trial court appointed attorney Christopher Cohilas as a limited receiver for the purposes of audit and discovery. With regard to payment, the limited receiver order provided that Cohilas was to receive "reasonable compensation" for his services, paid by A&M.⁷ The defendants appealed the limited receiver order.

Following an August 2018 arbitration hearing, the arbitrator issued her final award on September 28, 2018, finding in favor of the defendants on Alimchandani's claims and in favor of JDS&J on its counterclaims, awarding damages in the amount of $95,093.52, which included $70,800 for attorney fees. On October 1, 2018, the defendants moved for confirmation of the award, and on December 28, 2018, Alimchandani filed a motion to vacate the arbitration award.

On May 15, 2019, this Court affirmed the limited receiver order in a published opinion, concluding that based on the language of the order, the trial court had actually appointed Cohilas as an auditor, not a receiver, and that the appointment was not an abuse of discretion.⁸ While the appeal was pending, the defendants moved for clarification of the appointment order, challenging Cohilas's work. In July 2019, the defendants filed an objection to Cohilas's billing statements through May 31, 2019, and the trial court overruled their objections and ordered all of the fees and expenses paid. On October 7, 2019, based both on this Court's opinion and the defendants’ motion, the trial court issued a separate order ("the special master/auditor order") clarifying Cohilas's appointment. In the order, which was written by Cohilas, the trial court explained that Cohilas was appointed as an auditor and special master "as those terms are contemplated and authorized by OCGA §§ 9-7-1, 9-7-2, 9-7-3, and Uniform Superior Court Rule [("USCR")] 46." Specifically, the court vested Cohilas with authority to, among other things: conduct an accounting of A&M "hear motions, allow amendments[,] and pass upon all questions of law and fact"; "address all pretrial and discovery matters"; "monitor implementation of and compliance with all orders of the court[,] and [h]e is permitted to impose upon a party any non-contempt sanction provided by OCGA §§ 9-11-37 and 9-11-45"; "conduct all trial proceedings and make and recommend findings of fact on all issues to be decided by the court without a jury"; and engage in ex parte communications with the parties, counsel, and the trial court for certain purposes. The special master/auditor order also restated the payment provision in the initial order, with minor changes.⁹ The defendants appealed the special master/auditor award on October 11, 2019.

On December 6, 2019, the trial court entered an order of confirmation and judgment of the final arbitration award, and Alimchandani appealed.¹⁰

Case No. A20A1688

1. The defendants contend that the trial court abused its discretion by appointing Cohilas as special master/auditor under USCR 46 and OCGA § 9-7-1 et seq.¹¹ We agree.

" ‘We review the appointment of a receiver, a special master, or an auditor for an abuse of discretion.’ "¹²

Georgia law distinguishes between the role played by a receiver and an auditor. A trial court may appoint an auditor in all cases "involving matters of account, if the case shall require it," "to investigate the matters of account and report the result to the court." ^{[13 ]} Thus, "unless modified by the order of appointment," an auditor generally is granted the authority "to hear motions, allow amendments, and pass upon all questions of law and fact," including the "power to subpoena and swear witnesses and compel the production of papers." ^{[14 ]} And under OCGA § 9-7-1, the duties previously performed by a ‘master’ in the superior court are now performed by an ‘auditor,’ although ... [USCR] 46, which was adopted effective June 4, 2009, permits the trial court to appoint a special master to perform certain duties enumerated therein.¹⁵

USCR 46 (A) (1) permits a trial court to:

appoint a [special] master: (a) to perform duties consented to by the parties; (b) to address pretrial and post-trial matters that the court cannot efficiently, effectively or promptly address; (c) to provide guidance, advice and information to the court on complex or specialized subjects, including, but not limited to, technology issues related to the discovery process; (d) to monitor implementation of and compliance with orders of the court or, in appropriate cases, monitoring implementation of settlement agreements; (e) to investigate and report to the court on matters identified by the court; (f) to conduct an accounting as instructed by the court and to report upon the results of the same; (g) upon a showing of good cause, to attend and supervise depositions conducted outside of the jurisdiction; and (h) to hold trial proceedings and make or recommend findings of fact on issues to be decided by the court without a jury if appointment is warranted by (i) some exceptional condition, or (ii) the need to perform an accounting, to resolve a difficult computation of damages or if the matter involves issues for which a special substantive competence would be beneficial.

USCR 46 (A) (2) provides:

A master must not have a relationship to the parties, counsel, action, or court that would require disqualification of a judge under applicable standards, unless the parties consent with the court's approval to appointment of a particular person after disclosure of all potential grounds for disqualification.

OCGA § 24-6-605 prohibits a judge from testifying as a witness in a matter before him. Similarly, the Code of Judicial conduct prohibits a judge from participating in a matter in which he has "personal knowledge of disputed evidentiary facts" or if he has been a witness in the proceedings.¹⁶

Here, Alimchandani's attorney engaged in numerous ex parte communications with Cohilas, including emails addressing litigation strategy.¹⁷ And Alimchandani has listed Cohilas as a witness in the case in her interrogatory responses, and her second amended complaint is based on and incorporates Cohilas's three status reports and relies on his factual observations and testimony. Further, in a motion for contempt against the defendants, Cohilas stated that his "duties are to the [c]ourt and to the Company, i.e.[,] all shareholders." Similarly, in a letter to A&M's accountant, Cohilas stated that pursuant to the order appointing him as the company's limited receiver, he is "deemed to be the [c]ompany's representative with regard to accountant/client confidentiality among other things."

In addition to these facts which disqualify Cohilas as special master in this case, it is clear that he is performing an impermissible combination of roles by acting as investigator, witness, and judge of fact and law, which combination requires him to assess the credibility of his own work. These are fundamentally incompatible duties and are at odds with the role of a special master. Accordingly, the trial court's appointment of Cohilas as special master/auditor is reversed.

2. The defendants also contend that the trial court erred by requiring the defendants to pay 100 percent of Cohilas's fees and to do so prior to final judgment.

In Georgia, an auditor's fees "shall be determined and fixed by the trial judge," and they "may be apportioned between and among the parties at the discretion of the judge."¹⁸ "The fees of the auditor shall be assessed as court costs and shall be paid prior to the filing of any appeal from the judgment of the court[.]"¹⁹ With regard to special master...