Agarwal v. Estate of Agarwal
| Decision Date | 09 February 2022 |
| Docket Number | 21 CVS 5263 |
| Citation | 2022 NCBC 7 |
| Parties | ASHISH AGARWAL, Plaintiff, v. ESTATE OF ANIL AGARWAL, Deceased; WENDOVER DONUTS, LLC; KUSH DONUTS, LLC; and SARASH PROPERTIES, LLC, Defendants. |
| Court | Superior Court of North Carolina |
West Law Firm, by William E. West, Jr., for Plaintiff Ashish Agarwal.
Carruthers & Roth, P.A., by Kevin A. Rust, for Defendant-Estate of Anil Agarwal.
Defendants Wendover Donuts, LLC; Kush Donuts, LLC; and Sarash Properties, LLC are currently unrepresented.
1. THIS MATTER is before the Court on Defendant Estate of Anil Agarwal's Motion for Judgment on the Pleadings (the "Motion") pursuant to Rule 12(c) of the North Carolina Rules of Civil Procedure (the "Rule(s)"). (ECF No. 35.) The Motion, which requests partial relief, focuses on the language of identical provisions in the operating agreements of three closely-held North Carolina limited liability companies. At issue is whether the language of the operating agreements requires the dissolution of the LLCs following the death of one of their members.
2. Having considered the Motion, the related briefing, appropriate matters of record, and the arguments of counsel at a hearing on the Motion, the matter is ripe for determination.
3. For the reasons set forth below, the Motion is GRANTED in part and DENIED in part.
4. The Court does not find facts on motions for judgment on the pleadings under Rule 12(c) but rather recites the facts alleged in the pleadings that are relevant to the Court's determination of the Motion. Willard v. Barger, 2019 NCBC LEXIS 43, at *1-2 (N.C. Super. Ct. July 12, 2019) (citing Erickson v. Starling, 235 N.C. 635, 657 (1952)).
5. The events giving rise to this litigation began when Dr. Anil Agarwal ("Dr. Agarwal") acquired three Dunkin' Donuts franchises in North Carolina. (Am. Compl. ¶ 6, ECF No. 18.) Between April 2014 and April 2015, Dr. Agarwal formed both Wendover Donuts, LLC and Kush Donuts, LLC to own and operate the franchises. (Am. Compl. ¶ 7.) Dr. Agarwal also formed Sarash Properties, LLC (together, with Wendover Donuts, LLC and Kush Donuts, LLC, the "LLCs") to own and manage the real property for at least one of the franchises. (Am. Compl. ¶ 7.)
6. At the time the LLCs were organized, Dr. Agarwal was the sole member. (Am. Compl. ¶ 9.) However, Dr. Agarwal did not have experience managing Dunkin' Donuts franchises, so he contacted Plaintiff Ashish Agarwal ("Plaintiff"), who was formerly related to him by marriage, for assistance. (Am. Compl. ¶ 9; Answer, Cross- cl., & Derivative Countercl. ¶ 5, ECF No. 31.) Plaintiff was a successful owner and operator of Dunkin' Donuts franchises in New York. (Am. Compl. ¶ 9.) At Dr. Agarwal's invitation, Plaintiff agreed to relocate to North Carolina and manage the LLCs, "provided that he would have membership interests in the [LLCs] equal to that of [Dr. Agarwal]." (Am. Compl. ¶ 9.) In return, Dr. Agarwal agreed that Plaintiff "would receive a fifty percent membership interest in each of the companies, as well as a fifty percent interest in Decedent's capital accounts in each of the [c]ompanies and in any other assets of the companies." (Am. Compl. ¶ 9.)
7. On 28 July 2015, Dr. Agarwal and Plaintiff entered into an operating agreement for Sarash Properties, LLC, specifying that Dr. Agarwal and Plaintiff each had a 50% interest in this LLC. (Am. Compl. ¶ 10; Ex. D, ECF No. 43.)
8. Thereafter, on 3 November 2015, Dr. Agarwal and Plaintiff entered into two more operating agreements: one for Wendover Donuts, LLC, and a second one for Kush Donuts, LLC. (Am. Compl. ¶¶ 11, 12.) The operating agreement for Wendover Donuts, LLC provided that Dr. Agarwal owned 50%, Plaintiff owned 45%, and a third person, who later withdrew as a member, owned the remaining 5%. (Am. Compl. ¶ 11; Ex. E, ECF No. 24.) Dr. Agarwal and Plaintiff were equal members of Kush Donuts, LLC. (Am. Compl. ¶ 12; Ex. F, ECF No. 25.)
9. On 29 December 2015, Dr. Agarwal and Plaintiff entered into a written agreement ("29 December Agreement") providing that "fifty percent of the membership interests in Kush Donuts, LLC, and fifty percent of the membership interests in Wendover Donuts, LLC were transferred to Plaintiff." (Am. Compl. ¶ 13; Ex. G, ECF No. 26.)
10. The operating agreements contain a mandatory dissolution provision that is triggered upon the death of a member, unless within ninety days following the death, the members "mutually agree" in writing otherwise. (Ex. D, ECF No. 43; Ex. E, ECF No. 24; Ex. F, ECF No. 25; collectively the "Operating Agreements", § 10.1.)
11. Dr. Agarwal died on 15 December 2020. (Am. Compl. ¶ 14.)
12. Three months after his death, Plaintiff, acting alone, executed three corporate resolutions, one for each LLC, electing not to dissolve the LLCs but to continue their operations. (Am. Compl. ¶ 15.)
13. The effect of these resolutions, however, is in dispute. Plaintiff and Dr. Agarwal's estate ("the Estate") disagree as to whether the relevant language in the Operating Agreements affords Plaintiff the unilateral ability to decide the fate of the three LLCs. (Am. Compl. ¶ 16.)[1]
14. Consequently, Plaintiff filed suit on 12 May 2021, (Compl., ECF No. 3), and amended his complaint on 13 September 2021, (Am. Compl., ECF No. 18), seeking, among other things, a declaratory judgment "with regard to the application, interpretation, and meaning of the operating agreements . . . and whether the death of [Dr. Agarwal] requires that the companies be dissolved, and their affairs wound up." (Am. Compl. ¶ 20.)
15. The Estate responded with a cross-claim against the LLCs requesting a declaration that they be dissolved in accordance with the terms of the Operating Agreements, as well as pursuant to N.C. G.S. § 57D-6-02(2). (Answer, Cross-cl., & Derivative Countercl. ¶ 26.) It also counterclaimed on behalf of Kush Donuts, LLC and Wendover Donuts, LLC against Plaintiff, as manager of the LLCs, for alleged breach of his fiduciary duties. (Answer, Cross-cl., & Derivative Countercl. ¶ 2.)
16. On 11 November 2021, the Estate moved for judgment on the pleadings pursuant to Rule 12(c) requesting that the Court enter a partial judgment in its favor. (Mot. J. Pleadings, ECF No. 35.) Specifically, the Estate seeks a declaration from the Court that, in accordance with the plain language of the Operating Agreements: (1) the death of Dr. Agarwal is a mandatory dissolution event pursuant to Section 10.1, and (2) upon the death of Dr. Agarwal, the Estate became a member of each of the LLCs and was entitled to vote on Plaintiff's resolutions to continue their operations. Plaintiff responds that: (1) Section 10.1 is, at best, ambiguous, and questions of fact prevent a determination at this stage regarding whether the LLCs must dissolve, and (2) the Operating Agreements do not establish that the Estate is a member of the LLCs entitled to vote on whether operations continue.
17. After full briefing, the Court held a hearing on 16 December 2021 (the "Hearing"), at which counsel for Plaintiff and counsel for the Estate were heard.[2] The Motion is now ripe for determination.
Tully v. City of Wilmington, 370 N.C. 527, 532 (2018) (cleaned up).
19. When analyzing a Rule 12(c) motion, the Court "may properly consider documents which are the subject of a plaintiff's complaint and to which the complaint specifically refers even though they are presented by the defendant." Weaver v. Saint Joseph of the Pines, Inc., 187 N.C.App. 198, 204 (2007) (citation and internal quotation marks omitted). Moreover, when a document is attached, "[t]he terms of such exhibit control other allegations of the pleading attempting to paraphrase or construe the exhibit, insofar as these are inconsistent with its terms." Wilson v. Crab Orchard Dev. Co., 276 N.C. 198, 206 (1970).
20. Ultimately, "[t]he party moving for judgment on the pleadings must show that no material issue of fact exists and that he is entitled to judgment as a matter of law." Daniels v. Montgomery Mut. Ins. Co., 320 N.C. 669, 682 (1987) (citation omitted).
21. The parties assert competing claims for declaratory judgment based on their interpretations of the Operating Agreements. The Declaratory Judgment Act, N.C. G.S. § 1-253, et seq., "affords an appropriate procedure for alleviating the uncertainty in the interpretation of written instruments and for clarifying litigation." Woodcock v. Cumberland Cnty. Hosp. Syst., 2022 NCBC LEXIS 3, at *6-7 (N.C. Super. Ct. Jan. 20, 2022) (quoting Hejl v. Hood, Hargett & Assocs., 196 N.C.App. 299, 302 (2009) (internal quotations omitted)).
22. An LLC is "primarily a creature of contract[, ]" Battles v. Bywater, LLC, 2014 NCBC LEXIS 54, at *8 ( N.C. Super. Ct. Oct. 31, 2014) (cleaned up), and operating agreements are contracts, N.C. State Bar v. Merrell 243 N.C.App. 356, 370 (2015). Thus, the Court construes the...
To continue reading
Request your trial