Eames v. Bedor

• Decision Date: 13 July 2012
• Docket Number: No. 2010-CV-166,2010-CV-166
• Parties: Jeremiah Eames, et al. v. Joel Bedor, et al.
• Court: New Hampshire Superior Court

Jeremiah Eames, et al.

v.Joel Bedor, et al.

No. 2010-CV-166

State Court of New Hampshire MERRIMACK, SUPERIOR COURT

Date: July 13, 2012

ORDER

This equitable action is brought by several limited partners of the former Mount Washington Hotel Limited Partnership ("MWHLP" or "the Partnership"). The Petitioners claim that the Respondents, Joel J. Bedor, Wayne W. Presby, Mountain Properties Preservation Corporation ("MPPC"), and The Mount Washington Railway Company ("the Cog"), breached their fiduciary duties as partners by self-dealing; converting and diverting partnership assets; and otherwise mismanaging and wasting partnership funds. Additionally, the individual Respondents, Mr. Bedor and Mr. Presby, have counterclaimed, asserting defamation against Petitioners, Jeremiah and Jack Eames. For the reasons stated in this Order, the Court finds for the Respondents on the Petitioners' equitable claims and finds for the Petitioners on the Respondents' counterclaim.

I

The partnership that forms the basis of this lawsuit was formed in 1991 when the Mount Washington Hotel was acquired after an FDIC auction. Prior to the auction date, Jeremiah Eames and his brother, John, agreed to purchase ten limited partnership shares and were awarded 20 percent of the stock in the corporate general partner MPPC. Jeremiah Eames was a sophisticated businessman who had worked for Merrill Lynch for four years and had beeninvolved in numerous businesses. His brother John was a practicing attorney who had been the Grafton County Attorney for many years. The offering memorandum disclosed conflicts of interest, noting:

The partnership is subject to various conflicts of interest arising out of its relationships with the General Partner and its affiliates. Because the Partnership was organized by and will be operated by the General Partner, these conflicts will not be resolved through arm's length negotiations but through the exercise of the General Partner's judgment consistent with its fiduciary responsibility to the Limited Partners. . . . The General Partner, the principals of the General Partner, and other entities within which the principals of the general partner are active, are engaged in certain activities which may be deemed to be in competition with the partnership, including the operation of other tourist attractions and hotel/motel lodging establishments. In addition the General Partner and its affiliates expect to form and to manage other entities which may be involved in similar activities.

Def.'s Ex. B at 9. This memorandum provided that the principals, Mr. Bedor and Mr. Presby, held ownership interests in both the Cog and the Bretton Woods Ski Area. It further stated, "[c]ross marketing approaches between the entities will be explored and enhanced. In addition, extensive packaging and other joint promotional activities will be conducted to aid the sale of rooms in the facilities as well as to enhance ticket sales at the attractions associated with the complex." Id. at 23.

In the early years of operation, the Cog provided substantial benefits to the Mt. Washington Hotel ("the Resort"). Over the years, the Partnership grew, acquiring the Bretton Woods Ski Area, its adjacent golf course, and other assets. Theses assets were collectively referred to by the parties as "the Resort," during the trial. The Cog distributed brochures for the Resort and enabled it to become a member of White Mountain Attractions. Members of this organization may place brochures in State rest stops. Hotels are generally prohibited from placing such brochures, but because the Cog was a member, and the Resort's promotional materials were included on the Cog brochures, its advertisement appeared in this area.Moreover, the Cog actually paid the salaries of certain Resort employees in the early years of operation.

In 2007, the Petitioners brought an action in the Grafton County Superior Court, alleging damages as a result of the Respondents diverting MWHLP assets to the Cog. The Court granted judgment on the pleadings in favor of the Respondents. See Eames v. Bedor, Grafton Cnty. Super. Ct., No. 07-E-299 (Nov. 5, 2008) (Order, Mohl, J.) ("Nov. 2008 Mohl Order").

In the prior pleadings, the Respondents set forth three grounds for dismissal. The Court only addressed the Respondents' argument that the Petitioners' claims were derivative and must fail because they did not comply with the statutory requirements. In doing so, the Court recognized that derivative actions are not the only form of relief available in cases involving limited partnerships and the Court "has the flexibility in this case to allow the petitioners to pursue their claims directly, and not as a derivative action, but only if doing so will not undermine the policy reasons for requiring derivative proceedings." Nov. 2008 Mohl Order, at 8 (discussing Kessler v. Gleich, 156 N.H. 488 (2007)). Applying Durham v. Durham, 151 N.H. 757, 760-61 (2005), the Court declined to exercise its discretion to permit the claims to proceed as direct actions.

Subsequently, the Petitioners filed a Motion to Reconsider, which the Court granted "only insofar as it requests the opportunity to file a motion to amend and an amended writ prior to final judgment." Eames v. Bedor, Grafton Cnty Super. Ct., No. 07-E-299, at 2 (Mar. 5, 2009) (Order, Mohl, J.). A new Petition and a Motion to Amend was filed on April 6, 2009, and granted over objection on June 22, 2009 (Mohl, J.). The Court directed the Clerk to schedule a structuring conference, thereby finding that the amended pleadings addressed the Court's prior concerns. See Eames v. Bedor, Grafton Cnty Super. Ct., No. 07-E-299, at 2 (June 22, 2009) (Order, Mohl, J.). On August 31, 2009, the Respondents filed a Motion to BringForward Motion for Judgment on the Pleadings. The Respondents asserted that the Court did not address their remaining arguments as to why the action should be dismissed: "(i) Partners cannot sue other partners until and unless there has been an accounting; and (ii) There is no basis to support Petitioners [sic] claim for attorneys' fees . . . ." Mot. to Bring Forward ¶ 10. Before the Motion was decided, this case was transferred to the Business and Commercial Dispute Docket and the Court held oral argument on the Respondents' Motion. The Court then ruled that an accounting was not required before the Petitioners could bring this suit and allowed the Petitioners to maintain fiduciary claims alongside their accounting claims. Eames v. Bedor, Merrimack Cnty. Super. Ct., No. 10-CV-166, at 3-8 (July 19, 2010) (Order, McNamara, J.). The case was then docketed for trial.

A

Prior to trial, the parties brought a number of motions in limine and Respondents requested a jury trial. The Court denied the Respondents' request for a jury trial because the gravamen of this case involves the equitable claims between the parties. Eames v. Bedor, Merrimack Cnty. Super. Ct., No. 10-CV-166, at 3 (Mar. 28, 2012) (Order, McNamara, J.).

Two of the motions in limine petitioned the Court to appoint a commissioner to take videotaped trial depositions. The Court granted these motions. The remainder of the Respondents' motions sought to exclude evidence from trial. The Petitioners objected to all of the Respondents' motions. The Court excluded expert opinion testimony from Attorney Richard Uchida. The Court denied the Respondents' request to exclude any mention of a bonus paid to Presby or a partnership interest awarded to Charles Kenison, and it denied the Petitioners' request to exclude documents held at the OMNI Hotel and the Petitioners' request to exclude expert testimony from Frank Zito. The Respondents also renewed their prior motion,asserting that an accounting must be held before any actions could be maintained between the parties. The Court rejected this argument as well.

The Court also deferred ruling on some of the motions involving expert testimony, as the judge need not serve as gatekeeper for himself. Traxys N. Am., LLC v. Concept Mining, Inc., 808 F. Supp. 2d 851, 853 (W.D. Va. 2011). Specifically, the Court deferred ruling on whether to exclude testimony from: Dr. Thomas Barocci; Drew Landry; Frank Zito, regarding salaries; and former MWHLP employees, regarding the amount of time they spent working for the Cog and the Resort. See Eames v. Bedor, Merrimack Cnty. Super. Ct., No. 10-CV-166 (Mar. 28, 2012) (Order, McNamara, J.). These motions in limine are now granted, denied, or moot, consistent with this narrative Order.

The Petitioners also moved to exclude certain testimony by Frank Zito following trial, including exhibit GGGGGG. Pet'rs' Post-Trial Mot. to Exclude Portion of Test. of Frank Zito 1-3. This motion asserts that Mr. Zito testified that, in addition to the expert testimony offered, he was also asked to calculate the Earnings Before Interest Taxation Depreciation and Amortization ("EBITDA") of assets not purchased by CNL. The Petitioners claim this testimony was not disclosed as part of the scope of Mr. Zito's testimony prior to trial, and ask that the Court strike this testimony. Mr. Zito's expert report states that he was retained by the Respondents "in order to present rebuttal to Plaintiffs' Expert Report and analysis concerning the treatment of past business practices and the resulting amount of benefits conferred to the Plaintiffs from the Defendants." Defs.' Ex. QQQQQQ, at 1. The report further states, "I also understand that I may be asked to testify regarding my opinions and matters that arise in trial by examination of witnesses concerning the damages or matters set forth in this report. I expect to expand upon the concepts expressed in this report . . . ." Id. at 2. Part of Mr. Zito's report considers that the Petitioners' expert, Drew Landry, applied incorrect accounting andauditing standards. As part of Mr. Zito's testimony, based on this expert conclusion, it would be reasonable to expect that Mr. Zito would perform the correct accounting tests...