Ledford v. Smith
| Decision Date | 28 July 2005 |
| Docket Number | No. A05A0307.,No. A05A0306.,A05A0306.,A05A0307. |
| Citation | 618 S.E.2d 627,274 Ga. App. 714 |
| Parties | LEDFORD et al. v. SMITH et al. Smith et al. v. Ledford et al. |
| Court | Georgia Court of Appeals |
Bondurant, Mixson & Elmore, H. Lamar Mixson, David G.H. Brackett, Atlanta, Horace D. Joiner, JR., Dalton, for appellants.
Krevolin & Horst, Jeffrey D. Horst, Joann Brown-Williams, Atlanta, for appellees.
In Case No. A05A0306, Jimmy Ledford, Larry O'Dell, Bryan Walker, Signature Leasing Corporation, LLC, and Dyna-Vision Group, LLC (plaintiffs below) appeal from an order of the Murray County Superior Court granting partial summary judgment in favor of Brenda Smith, Bryan Ownbey, Bob Thomas, and Signature Hospitality Carpets, LLC (defendants below). In Case No. A05A0307, Smith, Ownbey, Thomas, and Signature Hospitality Carpets, LLC, cross-appeal, contending the trial court erred in denying them complete relief by finding that material issues of fact remained on the plaintiffs'/appellants' surviving claims.
Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56(c). A de novo standard of review applies to an appeal from an order either granting or denying summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant. Desai v. Silver Dollar City, Inc., 229 Ga.App. 160, 163(1), 493 S.E.2d 540 (1997). So viewed, the record reveals the following.
In 1998, Dyna-Vision Group, LLC (a company owned by Ledford, O'Dell, Walker and two others) joined with individuals Smith, Ownbey, and Thomas to form Signature Hospitality Carpets, a limited liability company ("SHC"). SHC sold carpet to the hospitality industry. SHC's ownership was divided between the "Active Members" (Smith, Ownbey and Thomas) and Dyna-Vision. The Active Members were full-time, terminable-at-will employees and corporate officers of SHC. SHC's Operating Agreement provided that "[t]he business and affairs of the Company shall be managed by the Members through a Board of Directors." Both Dyna-Vision and the Active Members could elect three directors each to SHC's board. The board was comprised of Smith, Ownbey, Thomas, Ledford, O'Dell, and Dyna-Vision's accountant, Ed Staten. Dyna-Vision's express function within SHC was to provide "credit" and "general management assistance."
SHC's Operating Agreement provided that either Dyna-Vision or the Active Members could, at any time, trigger a buy-out or "Mandatory Put and Call" that would force a sale of Dyna-Vision's or the Active Members' interest in SHC to the other. Paragraph 9.5 of the agreement provided:
Mandatory Put and Call. At any time Dyna-Vision or the Active Members by majority vote within that group, may set a price per percentage Interest and give written notice of that price to the other group, (the "Notice of Offer to Sell or Purchase)." The Members receiving the Notice of Offer to Sell or Purchase shall have thirty (30) calendar days to decide whether to sell all their Interest at that price or to purchase all the Interest of the group giving Notice of Offer to Sell or Purchase at the Price set forth in the Notice of Offer to Sell or Purchase. If the Members receiving the Notice of Offer to Sell or Purchase fails to make an election, ... the Members receiving the Notice of Offer to Sell or Purchase shall have to sell their Interest at the price set forth in the Notice of Offer to Sell or Purchase.
The agreement also contained a right of first refusal provision that required both Dyna-Vision and the Active Members to give notice to the other of an intended sale to a third party of their interest in SHC. Paragraph 9.2.1 of the agreement provided:
Notice of Intended Disposition. No Member in the Company may sell less than all their Interest, and in the event a Member receives a bona fide offer from any person in an arms-length transaction to purchase all of the Interest which they own in the Company and if the person receiving the offer of purchase desires to sell all the Interest that is the subject of the offer, notice of the desire to sell the Interest shall be given in writing to the other Members and the terms of the offer, which notice shall include the price offered, the name of the offeror, and the payment terms (the "Notice of Intended Disposition").
A member's "Interest" in SHC was defined in Paragraph 1.11 of the agreement as "a Member's ownership interest in the Company, including any and all benefits to which such Member is entitled pursuant to this Agreement, together with all obligations of such Member to comply with the terms and conditions of this Agreement." Paragraph 6.4 of the agreement provided that SHC's directors and officers "shall act in a manner they believe in good faith to be in the best interest of the Company and with such care as an ordinarily prudent person in a like position would use under similar circumstances." And finally, Paragraph 7.3 provided:
Activities of Member and Affiliates. Notwithstanding the provisions of OCGA § 14-11-307 of the [Georgia Limited Liability Company] Act, the Members acknowledge and agree that the Members and their respective Affiliates are presently, or may become in the future, general partners of partnerships, managers of other limited liability companies, or associated in some other manner with other businesses. The Members and their respective Affiliates may engage in all such other business ventures, including without limitation ventures involving the purchase, sale and operation of other businesses, but no Active Member shall engage in businesses similar to the business of the Company by competing with the business of the Company while they are employed with the Company, except for business associations of Active Members with Vista Carpet Industries, LLC.
In December 2001, Shelby Peeples, an individual involved in the carpet industry, approached Dyna-Vision's owners and expressed an interest in purchasing all or part of SHC. On January 9, 2002, Dyna-Vision's owners and the Active Members met to discuss the possibility of a sale. They discussed several plans, including selling the entire corporation to Peeples for between $10 and $12 million. Although most of those present wanted to sell, Dyna-Vision's Jim Ledford opposed selling because he believed the company was worth more. After reviewing SHC's financial records and after later, separate meetings with the Active Members and Dyna-Vision's owners, Peeples offered Dyna-Vision $2.5 million for its share of SHC. Dyna-Vision's negotiator called the offer "insulting." No one from Dyna-Vision ever informed the Active Members of this offer in writing as required by the Operating Agreement.
On January 10, Smith left Walker a telephone message stating she believed the negotiations had failed and that Dyna-Vision's owners and the Active Members should meet to discuss the future of SHC. On January 11, 2002, Walker called Ownbey at SHC to arrange the meeting. Ownbey, however, informed Walker that Smith's requested meeting was cancelled because Peeples had made the Active Members an offer they intended to accept. Later that day, Dyna-Vision's owners and the Active Members met to discuss the offer. The Active Members presented a memorandum setting out the details of an offer they had received to purchase their interest in SHC. Although this memorandum did not indicate a purchase price or identify a purchaser, Dyna-Vision's owners believed the offer was from Peeples. About a week after this meeting, Smith and Ownbey told Ledford "we don't have an offer." Ledford deposed that the Active Members represented that Peeples had withdrawn the offer. Peeples deposed that he did not make the offer and stated that the supposed outside offer was in fact an attempt by the Active Members to buy-out Dyna-Vision.
On January 21, 2002, Peeples sent the Active Members a "letter of intent" in which he proposed a plan to acquire SHC. Peeples proposed to lend the Active Members $3.5 million upon "the condition precedent that the Active Members acquire the Dyna-Vision interest." Further, the loan would be secured by an interest in SHC's assets. This included an interest in "the land and building where the business of [SHC] is conducted[,]" which was known as "the Green Road property." Peeples also proposed to purchase all of SHC's assets if and when SHC actually acquired Dyna-Vision's interest. The letter of intent contained proposed employment and confidentiality clauses. It also acknowledged in a "Conflicting Obligations" provision that SHC was bound by its Operating Agreement and that the Active Members should honor those obligations. Although the Active Members did not disclose the letter of intent to anyone with Dyna-Vision, there is some evidence that Dyna-Vision's owners nevertheless knew that Peeples was negotiating separately with the Active Members and "funding the breakup of [SHC]."
On February 8, 2002, the Active Members decided to trigger the mandatory put and call provision of the Operating Agreement and offer Dyna-Vision $3.5 million for its share of SHC. On February 25, 2002, the Active Members presented a "Notice of Offer to Sell or Purchase" to Dyna-Vision.
After receiving the notice, Dyna-Vision's owners contacted several lenders about possibly financing the purchase of the Active Members' share of SHC. Dyna-Vision did not disclose those financing meetings to the Active Members. While deciding whether to buy or sell the Active Members' interest in SHC, Ledford requested financial information from SHC. Whether any...
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