Davis v. VCP S., LLC

• Decision Date: 29 June 2015
• Docket Number: Nos. S15A0142,S15X0143.,s. S15A0142
• Citation: 774 S.E.2d 606,297 Ga. 616
• Parties: DAVIS v. VCP SOUTH, LLC et al. VCP South, LLC et al. v. Davis et al.
• Court: Georgia Supreme Court

297 Ga. 616

774 S.E.2d 606

DAVIS

v.VCP SOUTH, LLC et al.

VCP South, LLC et al.

v.Davis et al.

Nos. S15A0142

S15X0143.

Supreme Court of Georgia.

June 29, 2015.

Reconsideration Denied July 27, 2015.

John C. Bell Jr., Bell & Brigham, Augusta, Thomas F. Allgood Jr., Allgood & Mehrhof, P.C., Augusta, for appellant.

James W. Ellison, James B. Wall, Wall Ellison LLP, Augusta, for appellees.

Opinion

THOMPSON, Chief Justice.

Appellant Lori Davis, individually and as personal representative of the Estate of Keith L. Davis, M.D., appeals three orders entered by the Columbia County Superior Court on March 7, 2014, April 1, 2014, and April 21, 2014, granting mandatory interlocutory injunctions against her and holding her in civil and criminal contempt in an action brought against her husband's estate by Steven M. Roth, M.D. (“Roth”) and two Georgia limited liability companies Roth co-owned with Keith Davis (“Davis”). The plaintiffs filed suit against appellant and the Davis Estate seeking to enforce certain provisions of the companies' operating agreements giving Roth, as the surviving member of the LLCs, an option to purchase Davis' interests, and to otherwise establish the rights of the parties, including the ownership of certain trademarks. Appellant also appeals from an order entered April 21, 2014 in which the trial court adopted the Third Report of the Special Master and limited discovery in the pending case. Appellees, VCP South, LLC, VCP Raleigh, LLC and Mary Anne Roth, individually and as Executrix of the Estate of Steven M. Roth, M.D. cross-appeal alleging the trial court erred in allowing the Davis Estate to maintain an ownership interest in the LLCs past the time provided for in the operating agreements, and in allowing the distribution of LLC profits accruing after Davis' death to the Davis Estate. For the reasons set forth below, we affirm the decisions of the trial court.

The facts of this case are as follows: In 2004, plastic surgeons Davis and Roth formed VCP South, LLC, a joint vein care practice located outside Augusta, Georgia, with each doctor owning fifty percent of the membership units of the LLC pursuant to the terms of an operating agreement signed by the parties. Drs. Davis and Roth thereafter formed other related limited liability companies and opened additional vein care practices in neighboring states. The doctors heavily advertised their services and developed a lucrative business, becoming known as “The Vein Guys.” VCP South contracted with a marketing company to apply for federal trademark protection for a number of trademarks utilized by the medical practices, including “Vein Care Pavilion,” “Vein Care Pavilion of the South,” “The Vein Guys,” “We're So Vein,” “Real Talk,” and “Total Vein Care.” Unbeknownst to Roth, and despite the fact that the marketing company was paid by VCP South, these trademarks were placed solely in the name of Davis.

Davis died suddenly on January 2, 2010. Under the terms of VCP South's operating agreement, Roth, as the surviving member of the LLC, had a first option to purchase all or part of the membership units owned by Davis. Absent an agreement as to value, the operating agreement provided that the value of the membership units would be determined in a commercially reasonable manner by the certified public accountant regularly representing the practice. The option existed for a period of ninety days following the date of qualification of the personal representative of the estate of the deceased doctor and, following the appointment of Davis' wife as personal representative of his estate on October 1, 2010, Roth sought to exercise his options to purchase Davis' membership units in VCP South, as well as in the other LLCs,¹ on or about November 11, 2010. When negotiations between appellant and Roth broke down, Roth, VCP South and VCP Raleigh, LLC filed suit against the Davis Estate on December 3, 2010, seeking, inter alia, to enforce the provisions of the operating agreements and to obtain a ruling that various trademarks obtained and utilized by the medical practice since 2004 belonged to VCP South. Appellant answered the complaint, responding in part that the LLCs' accountant, Steven Staley, should not be allowed to do the valuation because he continued to provide services to the LLCs and to Roth and thus had a conflict of interest. The trial court disagreed, granting partial summary judgment to the plaintiffs on this issue and authorizing Staley to decide the fair market value of Davis' interest.

After Staley's valuation² was completed in September 2011, the trial court appointed a Special Master to consider, inter alia, the Davis Estate's objections to the valuation as well as other issues regarding the extent of the estate's interests in the LLCs during the pendency of the litigation. The Special Master issued a report on December 12, 2011, finding that pursuant to the terms of the operating agreement, Davis ceased to be a member of the LLCs on the day he died and his estate thereafter maintained only financial rights, including (1) the right to share in the profits and losses of the company, (2) the right to interim and terminating distributions, and (3) the right to capital interest, “until such time as a closing occurs to purchase his Membership Units.” Noting that the agreement set no time limit within which the closing had to occur, but recognizing that a party could unreasonably protract the purchase of the ceased member's interest, as well as that the company had complete control over when and how quickly a valuation could be done, the Special Master determined that a reasonable cutoff date for the allocation of profits and losses and entitlement to distributions “should be the last day of the month when a commercially reasonable value is determined,” because, pursuant to the operating agreement, once the purchase price was established, the Davis Estate had no choice but to accept the price. The Special Master thus determined that if Staley's valuation was found to have been done in a commercially reasonable manner, then September 30, 2011, the last day of the month when the Davis Estate was presented with this valuation, would be the appropriate cutoff date for the Davis Estate's financial rights.

Thereafter, by order entered May 3, 2012, the trial court adopted the Special Master's report and granted partial summary judgment to the plaintiffs with respect to the valuation of Davis' membership units for purchase by Roth. Appellant appealed, and the trial court's grant of summary judgment to the plaintiffs on this issue was affirmed by the Court of Appeals. See Davis v. VCP South, LLC, 321 Ga.App. 503, 740 S.E.2d 410 (2013).³ Finally, on December 18, 2013, the closing sale of Davis' membership units to Roth was accomplished.⁴

Despite the fact that the issue regarding ownership of the trademarks remained pending in the case, on March 6, 2014, appellant, through a representative, contacted Facebook and, claiming ownership and asserting trademark infringement, had the The Vein Guys Facebook page disabled and taken down. Facebook sent an email notification to VCP South's website manager stating that Facebook would only be able to restore content to The Vein Guys page if it received “explicit notice of consent from the complaining party.” A Motion for Emergency Injunctive Relief was filed by the plaintiffs and heard by the trial court on March 7, 2014. Finding the plaintiffs would suffer irreparable harm and damages, the trial court entered an order that day requiring appellant to immediately notify Facebook to “reinstate and put back up ‘The Vein Guys' page instanter” and to immediately advise the court when such reinstatement was accomplished.

The Facebook page remained disabled, however, and plaintiffs filed a motion for contempt on March 13, 2014.⁵ Following a hearing on March 26, 2014,⁶ the trial court entered an order on April 1, 2014 declining to hold appellant in contempt, but granting an interlocutory injunction requiring her to take affirmative action to “comply explicitly” with Facebook's original instructions for obtaining restoration of the Facebook page.⁷ The trial court's order further provided that the Facebook page was to be reactivated no later than April 4, 2014, or beginning April 5, 2014, the court would assess a penalty of $1,000 per day against appellant until the page was restored.

When the Facebook page was not timely activated, the plaintiffs filed a motion for reconsideration which was heard by the trial court on April 14, 2014. At this hearing, appellant's attorney announced that the Facebook page had been reactivated that day. Thereafter, on April 21, 2014 the trial court entered its Second Order on Interlocutory Injunction and Contempt finding appellant in both civil and criminal contempt of its previous order and enjoining her, personally or through her attorneys or intermediaries, from (1) contacting Facebook without court approval regarding The Vein Guys Facebook page; and (2) permitting any other entity (with one limited exception not relevant to this appeal) to use the disputed trademarks. The order further required appellant to produce all licenses, contracts and other documentation between appellant and others related to use of any of the disputed trademarks, and provided that the trial court would entertain a motion for attorney fees by the plaintiffs in connection with the Facebook page dispute.

Also on April 21, 2014, the trial court issued its Order on Special Master's Third Report and Other Matters in which it adopted, in major part, the Third Report of the Special Master as the judgment of the court. Among other things, the trial court held that VCP South had been purchased as of September 30, 2011 from the Davis Estate based on the company's operating agreement and previous rulings of the court, thus the Davis Estate was not entitled to any distributions from the company accruing after that date. Further, the court concluded...