Fiske v. Kiefer, 030916 NCSUP, 15 CVS 11575

Docket Nº:15 CVS 11575
Opinion Judge:Gregory P. McGuire Special Superior Court Judge
Party Name:JOHN FISKE, JEFFREY SMALL, NABIL BOUTROS AND STEPHEN SMALL, Plaintiffs, v. MARC KIEFFER, Defendant.
Attorney:Raynor Law Firm, PLLC, by Kenneth R. Raynor, Esq. for Plaintiffs. James, McElroy & Diehl, P.A., by Fred B Monroe, Esq. for Defendant.
Case Date:March 09, 2016
Court:Superior Courts of Law and Equity of North Carolina
 
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2016 NCBC 22

JOHN FISKE, JEFFREY SMALL, NABIL BOUTROS AND STEPHEN SMALL, Plaintiffs,

v.

MARC KIEFFER, Defendant.

No. 15 CVS 11575

Superior Court of North Carolina

March 9, 2016

Raynor Law Firm, PLLC, by Kenneth R. Raynor, Esq. for Plaintiffs.

James, McElroy & Diehl, P.A., by Fred B Monroe, Esq. for Defendant.

OPINION AND ORDER

THIS CAUSE was designated a mandatory complex business case by Order of the Chief Justice of the North Carolina Supreme Court, pursuant to N.C. Gen. Stat. §7A-45.4(b) (hereinafter, references to the North Carolina General Statutes will be to "G.S."), and assigned to the undersigned Special Superior Court Judge for Complex Business Cases.

THIS MATTER comes before the Court upon Plaintiff's Motion to Dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)").

THE COURT, after considering the Motions, the briefs in support and in opposition to the Motion for Judgment, and other appropriate matters of record, FINDS and CONCLUDES as stated herein.

Gregory P. McGuire Special Superior Court Judge

A. FACTUAL AND PROCEDURAL BACKGROUND.1

1. Plaintiffs and Defendant constitute all of the Members of three North Carolina limited liability companies, including Makhn Gelt, LLC. The parties' respective ownership interests are structured as follows: Marc Kieffer: 40%, Stephen Small: 20%, Nabil Boutros: 20%, Jeffrey Small: 10%, and John Fiske: 10%.2 The parties entered into a written Operating Agreement for Makhn Gelt.3

2. Initially, the Managers of the LLCs were Plaintiff Stephen Small and Defendant. On or about January 6, 2015, Plaintiffs terminated Defendant as a Manager of the LLCs.4 At the time, Defendant was owed approximately $18, 000 in back pay for his work as a Manager. In addition, Plaintiffs indicated that the LLCs, specifically Makhn Gelt, would make a severance payment to Defendant, but the payment was not made.5

3. Plaintiffs and Defendant engaged in numerous negotiations over the sale of their respective interests in the LLCs to one another, but could not come to an agreement.6The Plaintiffs and Defendant remain in business together.7

4. On or about April 6, 2015, RJG Restaurant Group, LLC, a third-party, delivered a non-binding letter of intent concerning the potential purchase of the assets of the LLCs.8 Defendant investigated the proposal and was concerned that "its purpose was [ ] to force a sale of the business on terms that were not favorable to Defendant."9 Defendant also "desired to maintain his investment in the LLCs."10 Defendant objected to the sale and it was not completed.11

5. Section 2.3(b) of the Makhn Gelt Operating Agreements provides in pertinent part as follows:

Operating Deficit Loans. If the majority of Interest Holders determine from time to time that an Operating Deficit has occurred or is about to occur, they may give written notice (the "Capital Call") to each Interest Holder, . . .

"Operating Deficit" shall mean the excess of (x) all expenditures and obligations incurred by, or expected to occur or be incurred by, the LLC in the normal course of its business, including without limitation debt service on LLC obligations! over (y) the gross receipts to the LLC from all sources, including without limitation Capital Contributions and reserves from prior periods.

Any Interest Holder may, but shall not be required to, contribute to the capital of the LLC the total amount of capital needed as set forth in the Capital Call, multiplied by the Interest Holder's Residual Interest. ...

If the principal and interest outstanding under an outstanding Operating Deficit Loan is not repaid in full within one (l) calendar year after the Operating Deficit Loan is made, then any Funding Interest Holder may, at any time after the expiration of the one (l) year period, elect to convert the Operating Deficit Operating Loan into an additional Interest in the LLC . . . 12

6. On or about April 27, 2015, Plaintiffs issued a Notice of an Operating Deficit for Makhn Gelt, LLC (the "Notice") to all of Makhn Celt's members requesting a $100, 000 capital call be made by May 30, 2015.13 Plaintiffs did not invite Defendant to participate in any meeting concerning the need to issue the Notice.14 Defendant has not alleged whether any of the Plaintiffs elected to make a capital contribution in response to the Notice. The Notice itself states that the LLC made an "informal" capital call and that "some of the interest holders have responded".15 In his brief, however, Defendant claimed that he elected not to contribute to the capital call.16

7. Defendant alleges that "[u]pon information and belief, " at the time of the capital call, there existed sufficient cash on hand, or financing available, to meet the operational needs of Mahkn Gelt, LLC, and there was not an operating deficit that would support a notice for a capital call at that time.17 Defendant further alleges that "upon information and belief, Plaintiffs issued the capital call for the improper purpose of (a) "eventually" diluting Defendant's ownership interest in Mahkn Gelt, (b) retaliating against Defendant for his objection to the sale to RJG, and/or (c) gaining an advantage over Defendant in negotiating a sale of the LLCs' assets.18

8. On June 17, 2015, Plaintiffs filed this lawsuit against Defendant. On June 23, 2015, Plaintiffs filed their Amended Complaint. The Amended Complaint sought a declaratory judgment, asking the Court "to determine whether the Manager of each LLC is "allowed to sell all of the assets of the LLC "with approval of only a majority of the members of the company."

9. On August 27, 2015, Defendant filed his Answer, Defenses and Counterclaims. Defendant raised counterclaims for declaratory relief (First Cause of Action), breach of fiduciary duty/constructive fraud (Second Cause of Action), and breach of contract (Third Cause of Action).

10. On October 26, 2015, Plaintiffs filed their Motion to Dismiss and Reply to Counterclaim. Plaintiffs Motion to Dismiss sought dismissal of Defendant's second counterclaim for breach of fiduciary duty and constructive fraud and third counterclaim for breach of contract.

11. On November 12, 2015, Defendant filed a Voluntary Dismissal with Prejudice of their second counterclaim for breach of fiduciary duty and constructive fraud against Stephen Small "for actions, or omissions, solely in his capacity as Manager of Makhn Gelt, LLC." Defendant did not dismiss his claims for breach of fiduciary duty and constructive fraud against Stephen Small "arising out of actions or omissions conducted in his...

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