Eichenblatt v. Piedmont/Maple, LLC

• Decision Date: 14 June 2017
• Docket Number: A17A1205
• Parties: EICHENBLATT v. PIEDMONT/MAPLE, LLC et al.
• Court: Georgia Court of Appeals

341 Ga.App. 761

801 S.E.2d 616

EICHENBLATT

v.PIEDMONT/MAPLE, LLC et al.

A17A1205

Court of Appeals of Georgia.

June 14, 2017

Keith Samuel Hasson, Atlanta, for Appellant.

Peter Frank Busscher, Eric Jon Taylor, Atlanta, Daniel Byrum Millman, for Appellee.

Andrews, Judge.

In 1995, David L. Eichenblatt and Kaufman Development Partners, L.P. ("KDP") formed Piedmont/Maple, LLC, a real estate investment company that owned and operated commercial real estate located between Piedmont Road and Maple Drive in Atlanta. Following the sale of its final asset in November 2013, Piedmont/Maple sought to distribute its proceeds and dissolve. A dispute arose regarding the amount of money owed Eichenblatt, and, on October 27, 2014, KDP, Craig S. Kaufman (KDP's general partner), and Piedmont/Maple (collectively, "plaintiffs") sued Eichenblatt for a declaratory judgment regarding proper asset distribution. Eichenblatt counterclaimed for breach of contract, breach of fiduciary duty, and attorney fees. The trial court subsequently granted the plaintiffs partial summary judgment on the counterclaims. Eichenblatt appeals, and for reasons that follow, we reverse the grant of partial summary judgment.

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." OCGA § 9-11-56 (c). We review the grant of summary judgment de novo, construing the evidence and all reasonable inferences drawn from it in the light most favorable to the nonmovant. See Humphrey v. JP Morgan Chase Bank , 337 Ga. App. 331 (1), 787 S.E.2d 303 (2016).

So viewed, the record shows that this is the second time the parties' business dispute has been before us. See Kaufman Dev. Partners v. Eichenblatt , 324 Ga. App. 71, 749 S.E.2d 374 (2013). As described in our previous opinion, Eichenblatt and KDP entered into an operating agreement in 1995 that governed Piedmont/Maple's operation and management. The agreement identified Eichenblatt and KDP as members, set forth management guidelines, and provided that Eichenblatt would receive up to 40 percent of Piedmont/Maple's quarterly cash flow distributions. Id. at 72, 749 S.E.2d 374.

At some point, the parties' business relationship changed, and Eichenblatt was removed as a Piedmont/Maple member via a January 1, 2000 amendment to the operating agreement. Id. Pursuant to that amendment, Eichenblatt retained "the right to receive such share of allocations and distributions to which he would otherwise [have been] entitled, but [had] no other powers, rights or privileges of a Member of the Company." Management of Piedmont/Maple fell to KDP, the only remaining member.

In 2005, KDP refinanced the debt on the Piedmont/Maple holdings, taking out separate loans on the parcels of property fronting Piedmont Road and Maple Drive. In the process, it placed ownership of the property into two single-asset subsidiaries: Piedmont Road, LLC, which owned the Piedmont Road property, and Maple Drive, LLC, which owned the Maple Drive property.

The real estate venture ultimately experienced financial difficulties, and Eichenblatt suspected mismanagement by KDP. He sued Kaufman, KDP, and several related entities, alleging, among other things, that KDP and Kaufman had mismanaged Piedmont/Maple, breached the amended operating agreement, and ignored their fiduciary responsibilities. The case proceeded to trial in September 2011. The jury awarded Eichenblatt $625,000 against KDP for breach of contract, and we affirmed the resulting judgment. See id. We also rejected KDP's claim that the $625,000 award extinguished Eichenblatt's interest in Piedmont/Maple. Id. at 76 (3), 749 S.E.2d 374. As we explained, nothing in the verdict indicated that "the jury intended either for this amount to represent the full value of Eichenblatt's ownership interest in Piedmont/Maple or for Eichenblatt to have no interest in Piedmont/Maple going forward." Id. at 76 (3), 749 S.E.2d 374.

The venture continued after the trial, and in September 2012, KDP loaned Piedmont/Maple $3,550,000, which allowed Piedmont /Maple to pay off outstanding debt on the Maple Road property that had gone into default. This member loan and the associated promissory note carried a greater principal balance than the original indebtedness and a 15 percent interest rate, rather than the 5.61 percent rate associated with the original loan. The note also obligated Piedmont/Maple to pay fees to KDP and a Kaufman-related real estate entity.

Approximately two months before the member loan and promissory note were issued, Maple Drive, LLC, entered into a contract to sell the Maple Drive property for $5,500,000. The sale closed in April 2013, and the proceeds were used to extinguish the promissory note, interest, and fees owed to KDP on the Maple Drive property. In November 2013, Piedmont Road, LLC, sold the Piedmont Road property for $5,525,000. Following that sale, the plaintiffs sought to wind down and terminate Piedmont/Maple. As part of the dissolution, Piedmont/Maple distributed to Eichenblatt $969,609.23, which it had determined to be 40 percent of its total remaining assets, less certain fees and expenses. Eichenblatt, however, disputed the accuracy of Piedmont/Maple's calculation and refused to cash the distribution checks.

The plaintiffs subsequently filed this declaratory judgment action to establish the proper dissolution payment. Eichenblatt counterclaimed for breach of contract and breach of fiduciary duty, asserting that KDP and Kaufman had manipulated the Maple Drive member loan to KDP's advantage and had reduced the value of the Piedmont/Maple property by selling the Piedmont Road and Maple Drive parcels separately.¹ The trial court granted summary judgment to the plaintiffs on these counterclaims, and this appeal followed.

1. Counterclaims Relating to Sale of the Property. Eichenblatt argues that the trial court erred in granting summary judgment on his breach of contract and fiduciary duty counterclaims involving the sale of the Piedmont/Maple property. We agree.

(a) Citing the judgment in the prior lawsuit, the trial court found that res judicata barred the sale-related counterclaims, entitling the plaintiffs to summary judgment. According to the trial court, Eichenblatt sought damages in both suits based on the value of the Piedmont/Maple property as an assemblage, rather than as separate parcels. It concluded that because Eichenblatt had already litigated this damage claim in the first suit, he could not raise it again as a counterclaim to the declaratory judgment action.

Res judicata, however, only applies where the cause of action in each suit is "identical." Haley v. Regions Bank , 277 Ga. 85, 91 (2), 586 S.E.2d 633 (2003). The term "cause of action" means "the entire set of facts which give rise to an enforceable claim." Id. (punctuation and emphasis omitted). Thus,

[w]here some of the operative facts necessary to the causes of action are different in the two cases, the later suit is not upon the same cause as the former, although the subject matter may be the same, and even though the causes arose out of the same transaction.

Id. (citations and punctuation omitted). See also Morrison v. Morrison , 284 Ga. 112, 115 (3), 663 S.E.2d 714 (2008) ("The fact that the subject matter of different lawsuits may be linked factually does not mean that they are the same ‘cause.’ ").

In the prior lawsuit, Eichenblatt alleged that KDP's mismanagement of Piedmont/Maple—including its failure to sell the property as an assemblage before the real estate market declined in 2008—negatively impacted his share of the venture. Although that litigation ended with a judgment in favor of Eichenblatt for $625,000, his interest in Piedmont/Maple continued. In the present litigation, Eichenblatt claims that following the first trial, KDP and Kaufman once again mismanaged the venture, breached the amended operating agreement, violated their fiduciary duties, and diminished the value of his remaining interest by failing to sell the property for its highest value (which, in his view, was as a combined assemblage). Although the two suits involve the same real estate and both raise issues about property management and valuation, they are not identical for purposes of res judicata. On the contrary, the claims at issue here relate to mismanagement and devaluation of Eichenblatt's interest after the first trial.

"These claims could not have been raised in the prior lawsuit[ ] because the underlying circumstances had not yet occurred." Humphrey , 337 Ga. App. at...