Avgiris Bros. v. Bouikidis
| Decision Date | 30 September 2022 |
| Docket Number | 2021-0741-LWW |
| Parties | AVGIRIS BROTHERS, LLC, Plaintiff, v. THEODOROS BOUIKIDIS and SAVVAS BOUIKIDIS, Defendants, and A-B BROTHERS, LLC, Nominal Defendant. |
| Court | Court of Chancery of Delaware |
Submitted: June 10, 2022
Peter B. Ladig, Sarah T. Andrade, and Gabriel B. Ragsdale, BAYARD P.A., Wilmington, Delaware; Counsel for Plaintiff Avgiris Brothers, LLC
Barry M. Klayman and Kaan Ekiner, COZEN O'CONNOR, Wilmington Delaware; Robert W. Hayes, COZEN O'CONNOR, Philadelphia Pennsylvania; Counsel for Defendants Theodoros Bouikidis and Savvas Bouikidis
WILL, Vice Chancellor This case involves two sets of brothers who joined forces to open a fast casual Greek restaurant in Philadelphia. The Avgiris brothers took on the bulk of the capital contributions needed to open the business and were allocated 65% of the membership interests of A-B Brothers, LLC. The Bouikidis brothers contributed their restaurant industry experience but significantly less of the start-up funds and were allocated the remaining 35%. A-B Brothers' limited liability company agreement memorialized these interests and named the four brothers as the entity's managers.
Over time, the brothers' relationships became divided along family lines. Eventually, the Avgiris brothers-acting as A-B Brothers' majority interest holder-acted to remove the Bouikidis brothers as managers, in accordance with the terms of the LLC agreement. The Bouikidis brothers rejected the contractual reality that they were no longer managers. Litigation pursuant to 6 Del. C. § 18-110 was brought by the Avgiris brothers as a result.
In this post-trial decision, I conclude that the Bouikidis brothers were properly removed as managers of A-B Brothers. What should have been a straightforward decision in a summary proceeding was, however, muddled by a series of grievances advanced by the Bouikidis brothers in the form of affirmative defenses. None of those defenses affect the outcome of this case. Judgment will be entered for the plaintiff.
Unless otherwise noted, the facts described in this section were either stipulated to by the parties or proven by a preponderance of the evidence. Trial was conducted by Zoom over two days during which five fact witnesses testified.[2] The parties introduced 67 exhibits including four deposition transcripts.[3]
To the extent that any conflicting evidence was presented, I have weighed it and made findings of fact accordingly.
Plaintiff Avgiris Brothers, LLC is a Delaware limited liability company formed by brothers Constantine (Dean) and Christopher (Chris) Avgiris, the two members of Avgiris Brothers.[4] Avgiris Brothers along with defendants (and brothers) Theodoros and Savvas Bouikidis are the members of nominal defendant A-B Brothers, LLC, a Delaware limited liability company.[5] The relationship between the Avgiris and Bouikidis families began when Chris Avgiris was hired to work at Zesto Pizza, a restaurant operated by the defendants in Philadelphia, Pennsylvania.[6] Chris became friends with Theodoros and Savvas Bouikidis, and the three discussed the prospect of opening and operating a fast casual restaurant serving Greek cuisine.[7] In early 2016, as these conversations progressed, Chris involved Dean in business development plans given Dean's business knowledge and background.[8]
Avgiris Brothers engaged Pryor Cashman LLP as legal counsel to help formalize the parties' relationship, negotiate a lease for retail space, form an entity to operate the business, and prepare the new company's governing documents.[9] In June 2016, Pryor Cashman prepared an initial draft of a limited liability company agreement for A-B Brothers, which Dean shared with the defendants.[10]
Pryor Cashman also negotiated a lease for the planned restaurant.[11] The defendants had an existing relationship with the prospective landlord because one of their Zesto Pizza locations was located in the same shopping center as the open retail space.[12] The parties formed an entity called GRK Boys, LLC, which signed a storefront lease agreement dated July 11, 2016.[13]
The parties began building out the restaurant space shortly after leasing it.[14]Both Avgiris Brothers and the defendants were spending money towards this goal, though they had yet to execute a written agreement memorializing their relationship. Catherine (Cathy) Avgiris, the mother of Chris and Dean, maintained a spreadsheet to track expenditures during the buildout phase given her finance background (including as a public company CFO).[15]
It was not until July 2017 that the parties began to meaningfully negotiate their respective membership interests. The parties forecasted that startup costs for the restaurant would total $500,000.[16] Avgiris Brothers took the position that ownership percentages should be based on contributions to upfront capital costs, meaning that a contribution of $250,000 would equate to a 50% interest.[17] The Bouikidis brothers desired credit for providing their experience in the restaurant industry.[18] The parties reached a handshake deal on an initial 65%-35% membership allocation in A-B Brothers, with Avgiris Brothers holding the former and the two Bouikidis brothers collectively holding the latter.[19]
On July 28, 2017, Dean emailed the defendants' attorney, Marc Zaid, noting that the Bouikidises had [20] Consistent with the parties' agreement, however, Dean stated "we would like to go in with a day 1 ownership structure of 65% (Avgiris) vs. 35% (Bouikidis)."[21]
The Limited Liability Company Agreement (the "LLC Agreement"), executed by Chris on behalf of Avgiris Brothers, and the defendants in their individual capacities, reflects this agreement.[22] Membership interest and capital contributions as of August 1, 2017 are memorialized in Schedule A to the LLC Agreement:[23]
Membership Interest
Capital Contribution as of 8/1/2017
Avgiris Brothers, LLC
65%
$445,000
Theodoros Bouikidis Savvas Bouikidis
35%
$55,000
TOTAL
100%
The LLC Agreement also provided that the four "Managers" of A-B Brothers were "Constantine Avgiris, Christopher Avgiris, Theodor[os] Bouikidis, and Savvas Bouikidis."[24]
A 35% interest for the defendants would equate to a total contribution of $175,000.[25] To address the deficit, Avgiris Brothers offered to supply a loan to the defendants for the majority of their capital contribution. Dean proposed to the defendants' counsel that the defendants pay $120,000 "over the course of 5 years, amounting to a $2K collective monthly payment."[26] To "secure this payment commitment," Dean indicated that Avgiris Brothers was open to "either (1) collateral, or (2) the reversion of [the defendants'] ownership interest in the business" in the event of default.[27]
Avgiris Brothers' loan to the defendants was memorialized in a promissory note (the "Note") for $120,000 dated September 1, 2017.[28] The Note was secured by a Pledge Agreement, also dated September 1, 2017, that was executed by each of the Bouikidis brothers and by Chris on behalf of Avgiris Brothers.[29] In the Pledge Agreement, the defendants pledged their interests in A-B Brothers to secure their obligations under the Note.[30] Both the Pledge Agreement and Note required that any modifications or amendments to either contract be made in writing and signed by all parties.[31]
Pursuant to the Pledge Agreement, if A-B Brothers distributed money to its members, the defendants' portion of the distribution would be applied to repayment of their obligations under the Note.[32] Section 7 of the Pledge Agreement provides:
Pledgor [Savvas and Theodoros Bouikidis, jointly and severally] hereby assigns to Pledgee [Avgiris Brothers] all cash otherwise distributable, from time to time, by A-B Brothers, LLC in respect to the Collateral, as further security for the Obligations, which, when distributed to Pledgee in respect to the Collateral, shall be accounted for and applied by Pledgee as Pledgor's payments toward the Pledgor's' [sic] monthly payment installments, or portions thereof, then (after distribution of such distributable cash) due or coming due from Pledgor to Pledgee. Notwithstanding any of the above, Pledgor agrees that it will be bound to remit, at a minimum, the monthly payments set forth in the Note, regardless of any cash distributions by A-B Brothers, LLC to Pledgor and even during such times as A-B Brothers, LLC may make no cash distributions to Pledgor. In the event of an uncured default by Pledgor, all rights of the Pledgor to receive cash distributions from A-B Brothers, LLC, to which it would otherwise be entitled with respect to the Collateral, shall cease and all such rights shall thereupon become vested in the Pledgee, except with respect to the rights to such cash distributions that accompany any portion of the Collateral retained by the Pledgor as provided by Section 6 of this agreement, above.[33]
Dean had previously explained to Zaid and the defendants that the language in the second sentence of Section 7 was intended to address the "concept" that "the minimum payment monies are still owed even at times when the business does not distribute cash to any owners."[34]
The planned Greek restaurant, called Yiro Yiro, opened on September 1, 2017 in the Roxborough section of Philadelphia.[35] The restaurant saw early success.[36] Shortly after it opened, Cathy Avgiris met with the defendants to discuss the spreadsheet of startup costs sh...
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