Hawkins v. 1000 Ltd. P'ship

• Decision Date: 14 December 2016
• Docket Number: A155376
• Citation: 282 Or.App. 735,388 P.3d 347
• Parties: Richard L. HAWKINS and Christopher A. Folkestad, as Trustees of the Timothy P. Moyer Trust, and derivatively on behalf of 1000 Broadway Building Limited Partnership, an Oregon limited partnership, and 1000 Limited Partnership, an Oregon limited partnership, Plaintiffs-Appellants Cross-Respondents, v. 1000 LIMITED PARTNERSHIP, an Oregon limited partnership; 1000, Inc., an Oregon corporation; TMT Development Co., Inc., an Oregon corporation; West Park Avenue, LLC, an Oregon limited liability company; Fox Tower, LLC, an Oregon limited liability company; and Vanessa Sturgeon, Defendants-Respondents Cross-Appellants, and 1000 Broadway Building Limited Partnership, an Oregon limited partnership, Cross-Appellant.
• Court: Oregon Court of Appeals

282 Or.App. 735

388 P.3d 347

Richard L. HAWKINS and Christopher A. Folkestad, as Trustees of the Timothy P. Moyer Trust, and derivatively on behalf of 1000 Broadway Building Limited Partnership, an Oregon limited partnership, and 1000 Limited Partnership, an Oregon limited partnership, Plaintiffs-Appellants Cross-Respondents,

v. 1000 LIMITED PARTNERSHIP, an Oregon limited partnership; 1000, Inc., an Oregon corporation; TMT Development Co., Inc., an Oregon corporation; West Park Avenue, LLC, an Oregon limited liability company; Fox Tower, LLC, an Oregon limited liability company; and Vanessa Sturgeon, Defendants-Respondents Cross-Appellants,and1000 Broadway Building Limited Partnership, an Oregon limited partnership, Cross-Appellant.

A155376

Court of Appeals of Oregon.

Argued and submitted March 31, 2015.

December 14, 2016

Eric A. Lindenauer, Portland, argued the cause for appellants-cross-respondents. With him on the briefs was Garvey Schubert Barer.

Jan K. Kitchel argued the cause for cross-appellant 1000 Broadway Building Limited Partnership and respondents-cross-appellants 1000 Limited Partnership and 1000, Inc. With him on the briefs were Casey M. Nokes and Cable Huston LLP.

Robyn Ridler Aoyagi, Portland, argued the cause for respondent-cross-appellant Vanessa Sturgeon. With her on the briefs were Daniel H. Skerritt and Tonkon Torp LLP.

J. Kurt Kraemer, Katie Jo Johnson, and McEwen Gisvold LLP filed the briefs for respondents-cross-appellants West Park Avenue, LLC, and Fox Tower, LLC.

Thomas H. Tongue, Brian R. Talcott, and Dunn Carney Allen Higgins & Tongue LLP filed the briefs for respondent-cross-appellant TMT Development Co., Inc.

Before Duncan, Presiding Judge, and Lagesen, Judge, and DeVore, Judge.^*

DUNCAN, P.J.

This appeal involves an interfamily dispute among the direct and indirect owners of the 1000 Broadway Building, one of several commercial buildings developed by Tom Moyer Sr. The ownership structure for the 1000 Broadway Building involves a labyrinthine arrangement of partnership interests, but, in overly simplified terms, four trusts, one for each of Moyer Sr.'s children, hold interests in the building as limited partners. A company owned by Moyer Sr.'s trust is the general partner that controls the limited partnerships and, consequently, the management and finances of the building itself.

The complaint in this case was filed by the trustee of one of the four trusts, the Timothy P. Moyer Trust, and alleges that the various defendants breached two limited partnership agreements related to the 1000 Broadway Building by, among other things, using the limited partnership's funds for the construction of a different building, Park Avenue West.¹ Defendants moved to dismiss the claims, arguing that plaintiff's claims were barred because a different limited partner—the trust for another of Moyer Sr.'s children—had previously arbitrated and settled claims based on the same set of underlying facts. The trial court treated the motions as motions for summary judgment, agreed with defendants that the claims were barred, and granted summary judgment in defendants' favor. Defendants then sought attorney fees as the prevailing parties, but the trial court denied their requests.

Plaintiff appeals the judgment against him, arguing that (1) the earlier arbitration resolved direct rather than derivative claims, so his current derivative claims are not precluded; (2) similarly, the settlement of those direct arbitration claims was never intended to bar, and could not bar, subsequent derivative claims; and (3) in any event, plaintiff has alleged direct claims that he can assert against the general partner regardless of the previous arbitration and settlement. Defendants cross-appeal, arguing that the trial court applied an incorrect legal standard to deny their requests for attorney fees.

For the reasons that follow, we disagree with the trial court's conclusions that plaintiff's derivative claims, as a matter of law, are barred by the settlement agreement in the arbitration proceeding; we conclude instead that the record presents genuine issues of material fact regarding the nature of the claims in that arbitration, as well as questions of fact regarding the scope and effect of the release provision in the settlement. However, we agree with the trial court's conclusion that plaintiff failed to state a cognizable direct claim against the general partner. Accordingly, we reverse in part and remand on appeal. In light of that resolution of plaintiff's appeal, we dismiss the cross-appeal as moot.

I. BACKGROUND²

A. Moyer-related Entities and Operations

1. The "1000 Entities"

Moyer Sr., a real estate developer, completed the 1000 Broadway Building in downtown Portland in 1991. The building is owned by One Thousand Broadway Building Limited Partnership (1000 Broadway LP). That limited partnership has 11 limited partners, each of which is a different trust for one of Moyer Sr.'s grandchildren (the "Gallo trusts"); the Gallo trusts, collectively, hold a 50 percent interest in the limited partnership. However, control of the limited partnership—and the remaining 50 percent interest—is held by a general partner, 1000 Limited Partnership (1000 LP).

1000 LP, in turn, has four limited partners, each of which is a trust for one of Moyer Sr.'s children: the Colleen M. Thrift Trust; the Kimberly Moyer Kassab Trust; the Thomas Peter Moyer Trust ("the Tom Moyer Jr. Trust"); and the Timothy P. Moyer Trust. Those trusts each own a 24.75 percent interest in 1000 LP—collectively, 99 percent of the limited partnership. The remaining one percent is held by 1000 LP's general partner, 1000, Inc., a corporation that is owned and controlled by yet another trust, the Thomas P. Moyer Revocable Living Trust ("the Tom Moyer Sr. Trust").

2. Fox Tower

Moyer Sr. had also developed another building, the Fox Tower, in downtown Portland, which was owned by Fox Tower, LLC. Three of the four trusts for Moyer Sr.'s children—the Colleen M. Thrift Trust, the Kimberly Moyer Kassab Trust, and the Tom Moyer Jr. Trust—were members in Fox Tower, LLC. Moyer Sr. initially was a member and the manager of the LLC, but he later transferred his membership interest to the other members and to a new member, 1000 Broadway LP. As a result, the interests between the entities controlling the two buildings intertwined: 1000 Broadway LP owned a 23.55 percent interest in Fox Tower, LLC.

3. TMT Development, Sturgeon, and the role of Moyer Sr.

For many years, Moyer Sr. retained exclusive control over the management of his real estate and related enterprises. He was the president and director of 1000, Inc., as well as the trustee of the Tom Moyer Sr. Trust, and he thereby exercised control over 1000, Inc., 1000 LP, and 1000 Broadway LP (collectively, the "1000 Entities"). He also retained the title of manager of Fox Tower, LLC, after he transferred his interest in that LLC. In addition, the day-to-day operations for both 1000 Broadway Building and Fox Tower were delegated to another entity, TMT Development Co., Inc., (TMT Development), which was wholly owned by Moyer Sr.

Beginning in 2002, Moyer Sr.'s granddaughter, Sturgeon, became involved in the management and operations of his real estate enterprises. In 2003, Sturgeon became the president of TMT Development, but Moyer Sr. remained personally involved in the management and operations of the buildings after that time.

4. Transfers of funds among Moyer-related entities

While in control of his real estate entities, Moyer Sr. freely moved funds among those entities. Between 1999 and 2002, Moyer Sr. directed 26 transfers of funds from 1000 Broadway LP to various recipients for purposes unrelated to the operations of the limited partnership, and there was no agreed-upon rate of interest to be included in the repayment of those transfers.

Between 2006 and 2009, eight additional transfers were made from 1000 Broadway LP for purposes other than operating the limited partnership. This second set of transfers was made to fund the development of another building in downtown Portland, Park Avenue West. A separate entity, West Park Avenue, LLC, had been created in conjunction with that project, but Fox Tower, LLC, wholly owned West Park Avenue, LLC, and separately held title to Park Avenue West. The eight transfers from 1000 Broadway LP for purposes of funding the Park Avenue West project totaled $14,074,822.21. Again, there was no agreed-upon rate of interest for repayment of those transfers by Fox Tower, LLC, or any other beneficiary of the funds.

5. Transfer of control from Moyer Sr.

In the summer of 2010, Moyer Sr. was replaced by First Republic Trust Company (First Republic) as the successor trustee of the Tom Moyer Sr. Trust, thereby putting First Republic in control of the 1000 Entities. In November 2010, First Republic exercised that control to appoint Sturgeon as the sole director and president of 1000, Inc. Sturgeon was also appointed as the manager of Fox Tower, LLC.

B. The Thrift Arbitration and Settlement

In December 2010, shortly after First Republic replaced Moyer Sr. and appointed Sturgeon to run 1000, Inc., Colleen M. Thrift and John H. Thrift, individually and as cotrustees of the Colleen M. Thrift Trust (claimants or "the Thrifts"), initiated arbitration proceedings based on the trust's partnership interest in 1000 LP and membership interest in Fox Tower, LLC.³ The claimants made various allegations of mismanagement and improper financial transfers among Moyer-related entities. Because those arbitration proceedings and their resolution are central to the issues on appeal in this case, we recount them in some detail.

1. The arbitration claims and 1000 Entities' motion to dismiss

The claimants' arbitration claims alleged that the diversion of funds from 1000 Broadway LP, through Fox Tower, LLC, to fund the development and construction of Park Avenue West was in breach of the respective partnership and operating agreements for those entities. The...