Pinnacle Benning, LLC v. Clark Realty Capital, LLC

• Decision Date: 06 March 2012
• Docket Number: No. A11A2408.,A11A2408.
• Citation: 314 Ga.App. 609,724 S.E.2d 894,12 FCDR 847
• Parties: PINNACLE BENNING, LLC et al. v. CLARK REALTY CAPITAL, LLC et al.
• Court: Georgia Court of Appeals

12 FCDR 847

314 Ga.App. 609

724 S.E.2d 894

PINNACLE BENNING, LLC et al.

v.CLARK REALTY CAPITAL, LLC et al.

No. A11A2408.

Court of Appeals of Georgia.

March 6, 2012.

Page, Scrantom, Sprouse, Tucker & Ford, Marcus B. Calhoun, Jr., William L. Tucker, Thomas Frederick Gristina, April Halstead Hocutt, Columbus, Greenberg Traurig, Joe D. Whitley, Stephanie L. Oginsky, Michael James King, Atlanta, for appellants.

Buchanan & Land, Jerry Alan Buchanan, Columbus, Lori Marie Leonardo, for appellees.

DILLARD, Judge.

Pinnacle Benning, LLC (“Pinnacle”) and Clark Pinnacle Benning LLC (“CPB”), by and through Pinnacle, appeal the trial court's dismissal of a complaint against Clark Realty Capital, LLC (“Clark Realty”), and Clark Benning, LLC (“Clark Benning”) (referred to collectively as “Clark”). Pinnacle contends that the trial court erred by (1) dismissing a count for declaratory judgment, (2) dismissing a count for a derivative action for failure to make a formal demand to file suit, and (3) dismissing the complaint without allowing Pinnacle to amend same. For the reasons set forth infra, we affirm the trial court's dismissal of Pinnacle's complaint but remand for the entry of an order specifying that these counts be dismissed without prejudice.

The undisputed record shows that CPB is a limited-liability company that is the managing member of Fort Benning Family Communities, LLC (FBFC).¹ In this regard, Pinnacle is a 30% member of CPB and Clark Benning is a 70% member. Additionally, Pinnacle serves as the “Pinnacle Manager” of CPB and Clark Realty serves as the “Clark Manager.”

Pinnacle filed a complaint against Clark in September 2010, alleging that Pinnacle and CPB are entities that were set up to operate a military housing project at Fort Benning, Georgia, as part of a joint venture entered into by Clark Realty and American Management Services, a nonparty affiliate of Pinnacle. Pinnacle further alleged that, due to the corporate structure, Clark Realty controlled both CPB and FBFC and, therefore, Clark Realty “must exercise its good faith business judgment on behalf of both entities as a whole, creating inherent conflicts, especially when acting as FBFC in a fashion adverse to Pinnacle's interests as the property manager at Fort Benning.”

After describing various and sundry allegations of impropriety with regard to related entities and joint ventures, the complaint contended that “Clark is using its control over [CPB] and FBFC to execute a private vendetta against Pinnacle that is solely to [Clark's] financial benefit, and in derogation of the rights and interests of Pinnacle, the Joint Venture, [CPB], FBFC, the Army and the residents of Fort Benning.” Specifically, Pinnacle alleged that Clark sought to terminate Pinnacle's property-management agreement and engaged an independent consulting firm to conduct audits of Pinnacle's management operations at Fort Benning. Additionally, Pinnacle alleged that Clark employed “one of the most elite and expensive litigation firms in the country” shortly thereafter to assist “in executing [Clark's] unlawful plan to usurp Pinnacle's rights under the parties' Joint Venture.” Thus, Pinnacle argued that Clark abandoned and betrayed its duties as manager of FBFC because FBFC “is funding [Clark's] scorched earth audit and litigation campaign against Pinnacle.”

In response to these alleged wrongdoings, Pinnacle sought to audit Clark's books and records, pursuant to Section 3.11 of CPB's operating agreement, which provides that

[t]he Pinnacle Manager shall have the right at the Pinnacle Manager's expense upon reasonable advance written notice to the Clark Manager to review and inspect the books and records of the Company or to cause the books and records of the Company to be audited by an independent third party auditor selected by the Pinnacle manager and reasonably satisfactory to the Clark Manager.²

And Pinnacle claims that after sending the necessary written notice to Clark that it intended to exercise this right, Clark responded “by emailing a limited set of documents consisting of the Operating Agreements, the LLC formation agreements and the LLC tax returns for [CPB].” But according to Pinnacle, this response was insufficient to satisfy its rights under the operating agreement. Pinnacle further alleged that Clark ignored a subsequent letter indicating that Pinnacle had selected an independent third party to audit the books and records.

The remainder of Pinnacle's complaint contained three counts, only two of which are at issue in this appeal.³ The first count alleged that Clark's response to the written demand was “in breach of Section 3.11 of the Operating Agreement of [CPB]” and sought declaratory judgment that the relevant section “affords Pinnacle Benning the right to inspect and audit all books and records of the Company, including but not limited to all books and records pertaining to the Company's business and purpose of acting as a managing member of FBFC.”

The second count of the complaint alleged that Clark

breached its duties of loyalty and failed to act in good faith with reasonable disinterested business judgment by ... causing FBRC [sic] to expend substantial monies on professional fees to [the law firm and independent consulting firm], to the financial detriment of [CPB]; causing [CPB] to act solely for the private purposes of [Clark], and against the interests of the members of [CPB] collectively; and causing [CPB] to act against the interests of FBFC, and in derogation of its duties of disinterested and good faith business judgment as managing member of FBFC.

Thus, Pinnacle sought (1) “a full accounting of the costs to the Company resulting from Clark Realty's conflicts of interest and breaches of duty” and (2) relevant refunds to CPB and FBFC from Clark Realty. In this count, Pinnacle also explained that it had not made a demand upon CPB to commence the cause of action because doing so would have been futile for a number of reasons, including that it “would in essence be asking Clark Realty, as the Clark Manager of [CPB], to authorize and commence suit against itself....”

Thereafter, Clark moved to dismiss Pinnacle's complaint with prejudice for failure to state a claim upon which relief can be granted,⁴ arguing that Pinnacle sought an impermissible advisory opinion on the merits of a breach-of-contract action for rights that had already accrued, and that Pinnacle's failure to make a demand of CPB required dismissal of the derivative action. The trial court agreed and dismissed Pinnacle's complaint. This appeal by Pinnacle follows.

At the outset, we note that “[w]e review de novo a trial court's ruling on a motion to dismiss.” ⁵ And we recognize that in the case sub judice, Clark's motion to dismiss, the trial court's order granting same, and the parties' arguments on appeal all frame the issues in the context of a failure to state a claim upon which relief can be granted. But as will be explained infra, Pinnacle's claims were in actuality properly dismissed for a lack of subject-matter jurisdiction,⁶ and we affirm the dismissal under the right-for-any-reason doctrine.⁷ With the foregoing in mind, we will now address each of Pinnacle's enumerations of error in turn.

1. Pinnacle first contends that the trial court erred by dismissing its count for declaratory judgment with regard to its right to audit Clark's books and records. We disagree.

As detailed supra, Pinnacle alleged that Clark was in breach of the operating agreement by refusing to allow Pinnacle to inspect and audit all books and records, including those pertaining to Clark's role as managing member of FBFC, when Clark responded “by emailing a limited set of documents consisting of the Operating Agreements, the LLC formation agreements and the LLC tax returns for [CPB].” Accordingly, Pinnacle sought a declaration that the relevant section of the operating agreement entitled Pinnacle to same. But the trial court held, and we agree, that Pinnacle did not seek guidance as to future actions but instead sought a determination as to whether Clark had already breached a contractual obligation by denying Pinnacle the rights afforded by the operating agreement.

It is well established that under the Declaratory Judgment Act, ⁸ a superior court may enter declaratory judgment “in cases of actual controversy, and to determine and settle by declaration any justiciable controversy of a civil nature” when it appears that “the ends of justice require that such should be made for the guidance and protection of the petitioner, and when such a declaration will relieve the petitioner from uncertainty and insecurity with respect to his rights, status, and legal relations.” ⁹ But a declaratory judgment may not be merely advisory in nature.¹⁰ Thus, when a “party seeking declaratory judgment does not show it is in a position of uncertainty as to an alleged right, dismissal of the declaratory judgment action is proper....” ¹¹

In this regard, a party seeking declaratory judgment “must show facts or circumstances whereby it is in a position of uncertainty or insecurity because of a dispute and of having to take some future action which is properly incident to its alleged right, and which future action without direction from the court might reasonably jeopardize its interest.” ¹² This is so because the purpose of declaratory judgment “is to permit one who is walking in the dark to ascertain where he is and where he is going, to turn on the light before he steps rather than after he has stepped in a hole.” ¹³ Moreover, “[i]t has long been held that an action for a declaratory judgment does not lie where a simple action for breach of contract will give full and complete relief.” ¹⁴

And here, because the alleged rights of the parties have already accrued—Pinnacle has attempted to audit all of Clark's books and records and maintains that it has the right to do so, but Clark has refused Pinnacle access to all...