GoRhinoGo, LLC v. Lewis, 092911 NCSUP, 10 CVS 11767

Docket Nº:10 CVS 11767
Party Name:GORHINOGO, LLC, Plaintiff v. PAUL ALEXANDER LEWIS, TENNTEX, a Tennessee General Partnership and PETER GILLIS, Defendants and PAUL ALEXANDER LEWIS, Third-Party Plaintiff v. BENJAMIN H. YANNESSA, ZACHARY MEDFORD and BRADLEY BOWLES, Third-Party Defendants
Case Date:September 29, 2011
Court:Superior Courts of Law and Equity of North Carolina
 
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2011 NCBC 38

GORHINOGO, LLC, Plaintiff

v.

PAUL ALEXANDER LEWIS, TENNTEX, a Tennessee General Partnership and PETER GILLIS, Defendants

and

PAUL ALEXANDER LEWIS, Third-Party Plaintiff

v.

BENJAMIN H. YANNESSA, ZACHARY MEDFORD and BRADLEY BOWLES, Third-Party Defendants

No. 10 CVS 11767

Superior Court of North Carolina, Wake

September 29, 2011

ORDER GRANTING PRELIMINARY INJUNCTION

THIS CAUSE, designated a 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 Chief Superior Court Judge for Complex Business Cases, is before the court for determination of Plaintiff GoRhinoGo, LLC's Motion for a Preliminary Injunction (the "Motion"), pursuant to Rule 65, North Carolina Rules of Civil Procedure ("Rule(s)"); and

THE COURT, having considered the Motion, briefs in support of and in opposition to the Motion, submissions and arguments of counsel and appropriate matters of record, makes the following FINDINGS of FACT, only for the limited purpose of determining the Motion:

[1] GoRhinoGo, LLC ("GoRhino"), is a North Carolina manager-managed limited liability company formed on or about August 27, 2009. The sole members and managers of GoRhino at all times prior to June 30, 2010, were Defendant Paul Alexander Lewis ("Lewis") and Third-Party Defendants Benjamin H. Yannessa ("Yannessa"), Zachary T. Medford ("Medford") and Brad Bowles.1

[2] Defendant Tenntex is a Tennessee General Partnership and Defendant Peter Gillis ("Gillis") is a partner in Tenntex. Gillis is a resident of Wake County, North Carolina, and was the Tenntex partner responsible for handling matters relating to the real property at issue in this action.2

[3] GoRhino has moved for leave to file a Supplemental and Amended Complaint that adds 112 Fayetteville, Inc. ("112 Fayetteville"), Raleigh Nightlife 123, LLC ("Raleigh Nightlife") and Daniel Lovenheim ("Lovenheim") as parties to this action. 112 Fayetteville is a corporation organized and existing under the laws of North Carolina, with its principal place of business in Wake County. It was formed on or about July 11, 2011. Lovenheim formed and controls 112 Fayetteville. Lovenheim is a citizen and resident of Wake County, North Carolina. Raleigh Nightlife is a manager-managed limited liability company organized under North Carolina law, with its principal place of business in Wake County. It was formed on or about April 1, 2010.

[4] GoRhino's Motion for Leave to File a Supplemental and Amended Complaint is not yet ripe for decision. Therefore, at this time 112 Fayetteville, Raleigh Nightlife and Lovenheim are only proposed additional parties to this action.3

[5] GoRhino's sole business is the operation of Isaac Hunter's Oak City Tavern (the "Tavern"), a bar or private club, located in leased premises identified as Condominium R on the first floor of the building at 112 Fayetteville Street, Raleigh, North Carolina (the "Fayetteville Street Premises").4

[6] Tenntex is the owner of the Fayetteville Street Premises.5

[7] On or about September 15, 2009, GoRhino entered into a written agreement with Tenntex to lease the Fayetteville Street Premises (the "GoRhino Lease").6 GoRhino renovated the premises for use as the Tavern.7

[8] The GoRhino Lease anticipated that GoRhino would occupy the Fayetteville Street Premises for five (5) years. The lease provided for an initial term of two (2) years at a rent of $5, 000 per month and a three-year renewal term at a rent of $7, 500 per month.8 The renewal term was subject to the following provisions:

Provided that the tenant shall not be in default at any time during the initial term of this lease, this lease shall automatically renew for an additional term of three (3) years, commencing on October 1, 2011 and ending on September 30, 2014, unless either the landlord or tenant gives the other at least thirty (30) days' written notice prior to the end of the initial term that either landlord or tenant does not wish to renew the lease.

[ . . . ]

In the event this lease is renewed, the rent for the period of October 1, 2011 through September 30, 2014 shall the sum of Seventy-Five Hundred Dollars ($7, 500.00) per month.9

[9] The GoRhino Lease also reflects an anticipation that GoRhino would continue to occupy the premises by giving GoRhino a right of first refusal if Tenntex should elect to sell the building.10

[10] In January 2010, Defendant Lewis' employment as General Manager of the Tavern was terminated by unanimous vote of the other managers/members of GoRhino, on the grounds that Lewis had used GoRhino funds to pay personal debts and failed to account to GoRhino upon request.11 Lewis admits that he used company funds for his personal benefit, but contends that this was a "loan" from GoRhino.12

[11 ] After termination of his employment with GoRhino, Lewis continued to be a member and manager of GoRhino within the meaning of G.S. 57C-03-06, and he received and accepted a distribution of GoRhino's profits after the end of its first full quarter of operation on March 31, 2010.13

[12] Gillis, as a partner of Tenntex, was aware of the dispute between Lewis and the other managers of GoRhino because he had communications with Yannessa and Medford about such dispute.14 Yannessa and Medford had told Gillis prior to June 2010 that Lewis did not have authority to act by himself on behalf of GoRhino.15

[13] In March of 2010, Lewis and Lovenheim invited Medford to join a scheme to drive GoRhino out of business and take over operation of the Tavern's business through a new entity from which the other members of GoRhino would be excluded.16Lewis told Medford that Gillis had agreed to terminate or non-renew GoRhino's lease of the Fayetteville Street Premises, and that Lewis would cause cancellation of GoRhino's ABC Permit.17

[14] The scheme outlined to Medford by Lewis and Lovenheim was contrary to the best interest of GoRhino, and contrary to any obligations of Lewis, as a manager and member of GoRhino to act in GoRhino's best interest.18

[15] Although Medford declined to participate in the scheme, Lewis, Gillis and Lovenheim acted to carry out the plan to drive GoRhino out of business and replace it with an entity owned or controlled by Lovenheim and Lewis. Specifically, there is evidence before the court to the effect that Lewis, Gillis (as a partner of Tenntex) and Lovenheim committed the following overt acts pursuant to the plan:

(a) On June 20, 2010, Gillis joined with Lewis in executing a document purporting to cancel the GoRhino Lease (the "Termination Agreement"), effective June 30, 2010, even though GoRhino was, and at that time always had been, current on all rent payments.19 Lewis purported to act as a manager of GoRhino in executing the Termination Agreement, and Gillis acted as a partner of Tenntex in executing the Termination Agreement.20

(b) The Fayetteville Street Premises constituted the sole place of business of GoRhino.21 It was a valuable and critical asset of GoRhino, and Lewis' execution of the Termination Agreement, purportedly as a GoRhino manager, was materially contrary to GoRhino's best interest. Lewis did not inform any of the other GoRhino managers that he was signing the Termination Agreement, and no other manager approved the Termination Agreement, although a per capita majority of the managers was required under GoRhino's Operating Agreement for such action.22

(c) The termination of a paying tenant would have been contrary to the best interest of Tenntex if it did not have a new tenant lined up. This, together with the scheme disclosed to Medford by Lewis and Lovenheim, and subsequent events, created an inference that Gillis and Lewis had agreed by June 20, 2010, that a Lewis/Lovenheim-related entity would replace GoRhino in operating the business at the Fayetteville Street Premises.

(d) Gillis joined with Lewis in executing the Termination Agreement even though (i) Gillis knew that there was an existing dispute between Lewis and the other managers/members of GoRhino, (ii) Gillis had been told that Lewis did not have authority to act by himself on behalf of GoRhino and the (iii) Termination Agreement was, on its face, contrary to the best interest of GoRhino.23 The signature of Gillis on the purported Termination Agreement was notarized by a notary in the building where Lovenheim has his office.24]

(e) On or about June 28, 2010, Lewis, again purporting to act as a GoRhino manager, caused cancellation of GoRhino's ABC Permit.25 The ABC Permit was a materially valuable and critical asset of GoRhino because the Tavern, its sole business, could not be operated without the ABC Permit.26Accordingly, termination of the ABC Permit was contrary to the best interest of GoRhino and contrary to any duty of Lewis to act in GoRhino's best interest.27No other manager of GoRhino approved the termination of the ABC Permit, even though such action required a per capita majority vote of the managers.28

(f) On or about June 28, 2010, Lewis purported to act as a GoRhino manager in drawing virtually all of GoRhino's operating cash from its bank accounts.29 This was materially contrary to the best interest of GoRhino and violated any duty of Lewis to act in the best interest of GoRhino. None of the other GoRhino managers approved the withdrawal of the funds.30

(g) Immediately after Lewis withdrew GoRhino's working capital, the Raleigh Nightlife entity paid off a Wake County property tax lien for the benefit of Tenntex and Gillis.31 Neither Tenntex, Gillis nor Lewis have provided any credible explanation for this payment to counter the inference that it was...

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