Clark v. Burnette

• Decision Date: 18 April 2022
• Docket Number: 19 CVS 8565
• Citation: 2022 NCBC 17
• Parties: ANDREW CLARK, Plaintiff, v. JARED BURNETTE and JBAC PROPERTIES, LLC, Defendants.
• Court: Superior Court of North Carolina

2022 NCBC 17

ANDREW CLARK, Plaintiff, v. JARED BURNETTE and JBAC PROPERTIES, LLC, Defendants.

No. 19 CVS 8565

Superior Court of North Carolina, Wake

April 18, 2022

THIS MATTER comes before the Court on Jared Burnette and JBAC Properties, LLC's Motion for Entry of Final Judgment (ECF No. 92).

The Court, having considered the motion, the briefs, the arguments of counsel, and all applicable matters of record CONCLUDES that the motion should be GRANTED for the reasons set forth below.

Vann Attorneys, PLLC, by Ian S. Richardson and Barker Richardson PLLC, by Daniel T. Barker for Plaintiff Andrew Clark.

Williams Mullen, by Camden R. Webb, Alexander M. Gormley, and Caitlin M. Poe for Defendants Jared Burnette and JBAC Properties, LLC.

ORDER AND OPINION ON MOTION FOR ENTRY OF FINAL JUDGMENT

Mark A. Davis, Special Superior Court Judge

FACTUAL AND PROCEDURAL BACKGROUND

1. This dispute arises out of a lawsuit filed by Andrew Clark against Jared Burnette and JBAC Properties, LLC ("JBAC"). (ECF No. 3, at p. 1.) Clark and Burnette are the member-managers and equal co-owners of JBAC. (ECF No. 40.2 at p. 2, 19.) On 25 June 2019, Clark initiated this action by filing a Complaint in Wake County Superior Court in which he asserted the following claims: breach of contract against Burnette; declaratory judgment against Burnette and JBAC; quantum meruit against Burnette; and judicial dissolution of JBAC pursuant to N.C. G.S. § 57D-6-02. (ECF No. 3, at pp. 5-10.)

2. On 26 July 2019, this action was designated a mandatory complex business case and was assigned to the Honorable Gregory P. McGuire. (ECF Nos. 1, 2.)

3. After suit was filed, Burnette initially sought-pursuant to JBAC's Operating Agreement and the North Carolina Limited Liability Company Act ("LLC Act")-reimbursement for fees he had paid in connection with JBAC's defense of this lawsuit and advancement of funds for his own defense. (ECF No. 65, at p. 6.) However, Clark refused to consent to the use of JBAC funds for the provision of a defense to either JBAC or Burnette in this lawsuit. (ECF No. 65, at p. 6.)

4. On 11 March 2020, Burnette and JBAC filed an Amended Answer and Counterclaim. In the counterclaim, Burnette sought to establish his right to "reimbursement and indemnification from JBAC for any payment made and any judgment, settlement, penalty, fine, or other cost, including attorneys' fees, incurred in the course of this litigation." (ECF No. 29, at pp. 11-12.)

5. Burnette and JBAC filed a Motion for Summary Judgment on 10 June 2020 with regard to his counterclaim. (ECF No. 38.) On 2 December 2020, Judge McGuire entered an order and opinion (the "Summary Judgment Order") granting the motion, concluding that "[u]nder the Operating Agreement, Burnette [was] entitled to indemnification to the extent required under and permitted by N.C. G.S. § 57D-3-31(a)." (ECF No. 65, at p. 20.)

6. Specifically, Judge McGuire concluded as follows:

There is no dispute that Burnette, as a manager of JBAC, would be entitled to indemnification under the Operating Agreement to the extent required under and permitted by N.C. G.S. § 57D-3-31 if he is wholly successful on the merits or otherwise in his defense of the claims against him in this lawsuit. Therefore, the Court concludes that to the extent it seeks a declaration that the Operating Agreement entitles Burnette to indemnification to the extent required under and permitted by N.C. G.S. § 57D-3-31(a), the Motion for Summary Judgment should be GRANTED.

Finally, the Motion for Summary Judgment does not raise, and the Court makes no determination in this Order and Opinion regarding the proper procedure for, submitting requests for payment of advancements or reimbursement, the type of legal expenses or the particular work performed by counsel for which Burnette should be advanced or reimbursed, or the specific amounts to be paid for advances or reimbursements.

(ECF No. 65, at p. 19.)

7. Judge McGuire further directed the parties to

confer and in good faith attempt to agree on: (a) the amount of advanceable expenses incurred by Burnette to date and on a procedure for payment of future advancement requests, and (b) the amount of reimbursable expenses incurred to date by Burnette on behalf of JBAC and on a procedure for payment of future reimbursement requests. On or before December 30, 2020, the parties shall report to the Court, via email to the clerk assigned to this matter, regarding their attempts to reach agreement and any outstanding disputes.

(ECF No. 65, at pp. 20-21.)

8. After both parties subsequently moved for summary judgment on Clark's claims, the Court issued an order and opinion on 29 April 2021. (ECF No. 75.) Judge McGuire denied Clark's motion for summary judgment on his judicial dissolution claim and granted summary judgment in Burnette's favor on Clark's claims for breaches of the Operating Agreement and unjust enrichment. (ECF No. 75, at pp. 36-37.) The Court also entered summary judgment in Burnette's favor on numerous aspects of Clark's declaratory judgment claims. (ECF No. 75, at pp. 34- 36.)

9. This case was re-assigned to the undersigned on 1 July 2021. (ECF No. 80.)

10. On 14 July 2021, Clark filed a voluntary dismissal without prejudice pursuant to N.C. R. Civ. P. 41(a)(1) on all of his remaining claims. (ECF No. 82.)

11. Burnette filed the present motion on 10 January 2022 seeking a final judgment from the Court setting out the precise sums to which Burnette is entitled to indemnification. (ECF No. 92.)

12. The motion came before the Court for a hearing on 8 March 2022 and is now ripe for decision.

ANALYSIS

13. The LLC Act provides in pertinent part as follows:

(a) An LLC shall indemnify a person who is wholly successful on the merits or otherwise in the defense of any proceeding to which the person was a party because the person is or was a member, a manager, or other company official if the person also is or was an interest owner at the time to which the claim relates, acting within the person's scope of authority as a manager, member, or other company official against expenses incurred by the person in connection with the proceeding.

(b) An LLC shall reimburse a person who is or was a member for any payment made and indemnify the person for any obligation, including any judgment, settlement, penalty, fine, or other cost, incurred or borne in the authorized conduct of the LLC's business or preservation of the LLC's business or property, whether acting in the capacity of a manager, member, or other company official if, in making the payment or incurring the obligation, the person complied with the duties and standards of conduct (i) under G.S. 57D-3-21, as modified or eliminated by the operating agreement or (ii) otherwise imposed by this Chapter or other applicable law.

N.C. G.S. § 57D-3-31 (2021).

14. JBAC's Operating Agreement, in turn, states in relevant part as follows:

To the fullest extent required under and permitted by the [LLC] Act, the Company shall indemnify its Managers and make advances for expenses to Managers with respect to the matters capable of indemnification under the [LLC] Act.

(ECF No. 29.1, at p. 7.)

15. "[I]ndemnification is the right to be reimbursed for all out of pocket expenses and losses caused by an underlying claim." Wheeler v. Wheeler, 2018 NCBC LEXIS 156, at **26-27 (N.C. Super Ct. Nov. 15, 2018) (quoting Majkowski v. Am. Imaging Mgmt. Servs., LLC, 913 A.2d 572, 586 (Del. Ch. 2006)). The availability of indemnification allows an entity to "allocate the risk of personal liability of directors, officers, employees, and agents." Id. at **20 (cleaned up).

16. In his motion, Burnette argues that he is entitled to a final judgment in the total amount of $320, 866.64 for expenses and fees that he incurred defending himself and JBAC from Clark's claims in this action. (ECF No. 92, at p. 2.) Burnette seeks recovery of $314, 967.08 from JBAC on a theory of indemnification for fees incurred in the defense of this lawsuit and an award of $5, 899.56 from Clark individually for costs pursuant to N.C. G.S. § 7A-305(d). (ECF No. 92, at p. 2.)

17. With regard to the fees and expenses incurred by Burnette for which he seeks indemnification, the amount of $6, 025.53 was paid to the Pendergrass Law Firm for work completed before the filing of this lawsuit. (ECF No. 93, at p. 6.) The Pendergrass Law Firm billed Burnette for an additional $4, 041.50 in fees after the filing of this action. (ECF No. 93, at p. 6.) The Williams Mullen law firm then began representing Burnette and billed him for $287, 459.00 in attorneys' fees and $8, 052.31 in costs in the defense of this suit.^[1] (ECF No. 93, at p. 6.) Burnette further seeks indemnification in the amount of $12, 653.80 for fees incurred by an individual named Kristen Creech "for litigation support for this lawsuit." (ECF No. 93, at p. 6.) Burnette also argues that he is entitled to $30, 155.51 in pre-judgment interest due to JBAC's initial failure to advance amounts Burnette was forced to pay himself.^[2]Finally, Burnette contends that he is entitled to an award of post-judgment interest.^[3] 18. Clark does not dispute that Burnette was successful in defending the claims against him in this action. He does, however, make several specific arguments in response to Burnette's motion, each of which is discussed below.

A. Authority of Court to Enter Final Judgment

19. As an initial matter, Clark argues that the entry of a final judgment at this time would be improper due to the "uncertain" resolution of all the claims in this action. As a basis for this argument, Clark contends that because the voluntary dismissal of his remaining claims was taken without prejudice pursuant to Rule 41, he has the right to refile those...