United Scis. v. Kellett

• Docket Number: A21A1060,A21A1061
• Decision Date: 23 June 2023
• Parties: UNITED SCIENCES, LLC et al. v. KELLETT et al. SHARPE v. KELLETT et al.
• Court: Georgia Court of Appeals

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UNITED SCIENCES, LLC et al. v. KELLETT et al.

SHARPE v. KELLETT et al.

Nos. A21A1060, A21A1061

Court of Appeals of Georgia, First Division

June 23, 2023

BARNES, P. J., GOBEIL and MARKLE, JJ.

GOBEIL, JUDGE.

This multiparty litigation concerns the control of a limited liability company, United Sciences, LLC. As relevant here, in the first appearance of this case before this Court United Sciences, LLC v. Kellett, 361 Ga.App. XXIX (Case Nos. A21A1060, A21A1061) (October 7, 2021) (unpublished) ("United Sciences I"), we affirmed the trial court's ruling that OCGA § 9-11-41's two-dismissal provision barred certain claims brought by Wess Eric Sharpe, United Sciences' former Manager, against Robert R. Joseph and his law firm, Hill Kertscher &Wharton, LLP ("HKW"), and Michael R Smith and his law firm, King &Spalding, LLP ("KS"). Slip Op. at 20-26. On September 20, 2022, the Supreme Court of Georgia vacated Division 5 of United Sciences I (pertaining to the two-dismissal rule), and remanded the case to this Court for reconsideration of that division in light of the Supreme Court's decision in Joyner v. Leaphart, 314 Ga. 1 (875 S.E.2d 729) (2022).^[1] For the reasons explained more fully below, we affirm.

The underlying facts in this dispute are set forth in United Sciences I as follows:

[I]n 2011, Samuel Kellett, Jr. hired Sharpe to provide consulting services to Kellett, Jr.'s company, ShapeStart Measurement Systems, Inc., which would eventually become United Sciences. United Sciences' primary product was an ear-scanning technology called "Otoscan" used in the development of hearing aids and related products. In March 2012, Kellett, Jr. and Sharpe executed an employment agreement naming Sharpe as CEO of United Sciences.

Sharpe briefly resigned from United Sciences in 2012, but agreed to return, contingent upon the execution of a new operating agreement which he believed offered him certain protections from removal. As a result, Kellett, Jr. and Sharpe entered into an Operating Agreement (the "Operating Agreement") for United Sciences that stipulated that the company would be "manager-managed" and would have a Board of Directors consisting of five members, with Kellett, Jr. acting as Chairman. Sharpe would serve as a Director on the Board, the CEO and Manager of United Sciences, and he would retain a seat on the Board as long as he owned three percent of the company. United Sciences'[ ] counsel, Robert Joseph, drafted this new Operating Agreement.

Per the Operating Agreement, Sharpe could be removed as a Director only for "cause," defined as including a conviction for a crime of moral turpitude. Sharpe could be removed as Manager with or without cause, but such removal would require notice to Sharpe and his presence at the Board meeting where such a removal would take place, and all Directors would need to be present at the meeting.

[According to Sharpe], throughout 2012 and 2013, Kellett, Jr. began to undermine Sharpe's leadership of United Sciences and took actions to enrich himself and the Kellett family. For example, . . . Kellett, Jr. hired an executive assistant without Sharpe's approval and accessed United Sciences' funds for his personal use. Kellett, Jr. also entered into a debt financing agreement with his father, [Samuel] Kellett, Sr., to provide additional funding to United Sciences. Sharpe was unaware of additional terms added to the financial deal that would allow Kellett, Sr. to acquire United Sciences if the company were ever to go into default. By the end of 2013, Sharpe was convinced that Kellett, Jr. was attempting to raid United Sciences for his and Kellett, Sr.'s benefit. Sharpe believed that Kellett, Jr. would resort to any means necessary to oust him as Manager.

On January 31, 2014, Kellett, Jr. called a Board meeting and announced plans to schedule another Board meeting for February 3, 2014. The agenda for the February 3 meeting included the possibility of removing Sharpe as Manager of United Sciences. Sharpe voiced his opposition to this plan and accused Kellett, Jr. of self-dealing and violating the Operating Agreement. Suspecting [United Sciences' counsel] Joseph had divided loyalties between United Sciences and Kellett, Jr., Sharpe terminated Joseph as the company's counsel, and appointed a new attorney to represent the company at the February 3 meeting. Sharpe refused to attend the February 3 meeting, noting that the Operating Agreement prevented his removal unless he was present.

At the February 3 meeting, . . . Kellett, Jr. stated to the Board that Sharpe had a 1986 felony conviction for aggravated assault, of which Kellett, Jr. had only recently learned; he also claimed that Sharpe misrepresented his educational background. The Board voted to approve Sharpe's removal as United Sciences' Manager, Director, and CEO.

Following Sharpe's removal, Sharpe alleged that Kellett, Jr. and other Board members made misrepresentations to United Sciences' minority shareholders about the timing of Sharpe's disclosure of his conviction. . . . Kellett, Jr. and other majority shareholders also allegedly failed to pay employees and vendors, undermined deals, and diluted the equity of owners . . . of United Sciences by issuing equity to themselves....

United Sciences I, Slip Op. at 3-7.

Shortly after the above-summarized events, Sharpe, proceeding individually and on behalf of United Sciences, instituted several lawsuits related to his ouster. Specifically, on February 10, 2014, Sharpe filed suit in the Superior Court of Fulton County against Kellett, Jr. and other United Sciences board members, seeking injunctive relief and asking the court to appoint a receiver and award damages. During the pendency of the February 2014 action, Smith began acting as counsel for United Sciences. Sharpe voluntarily dismissed that case on April 25, 2014.

Thereafter, in July 2014, Sharpe filed a five-count complaint against Kellett Jr. in Fulton County State Court, asserting claims for tortious interference with contractual and business relations, fraud, breach of fiduciary duty, punitive damages, and attorney fees and litigation expenses. On December 8, 2015, the parties informed the state court that they had reached a settlement, and they filed a joint motion for administrative closure, which the court granted on December 11, 2015. In August 2018, the state court granted Sharpe's motion to reopen the case, finding that he had demonstrated that he had not been fully compensated as required under the terms of the parties' settlement. Then, in 2018 and 2019, Sharpe filed four separate actions in Fulton County State Court against various individuals and entities associated with United Sciences, including one suit against Joseph and HKW, and another suit against Smith and KS. He voluntarily dismissed those state court actions on January 14, 2020.

On January 31, 2020, Sharpe and other parties^[2] filed a complaint, as amended, in the Superior Court of Fulton County, raising multiple claims against Kellett, Jr. and several other defendants. As relevant here, in Counts 9 to 12, Sharpe alone brought claims against Joseph, HKW, Smith, and KS for aiding and abetting a breach of the Operating Agreement (Count 9), conspiracy to breach the Operating Agreement (Count 10), aiding and abetting a breach of fiduciary duty (Count 11), and conspiracy to breach fiduciary duty (Count 12).^[3] Those counts were premised on the defendants' actions that allegedly resulted in a breach of the Operating Agreement and the fiduciary duty owed to the minority shareholders and Sharpe as Manager. Joseph and HKW and Smith and KS filed motions to dismiss the amended complaint, arguing, in relevant part, that Sharpe's claims against them were barred by the two-dismissal rule. They also argued that Sharpe's claims were precluded as a matter of law under the so-called "stranger doctrine" because neither Joseph nor Smith was a stranger to the Operating Agreement.

After a hearing, the trial court found that, pursuant to OCGA § 9-11-41, Sharpe's numerous voluntary dismissals of suits related to his removal as Manager warranted dismissal of his present claims against the lawyer/law firm defendants. Alternatively, the trial court determined that Counts 9 to 12 of the amended complaint sounded in tortious interference, and were therefore due to be dismissed under the "stranger doctrine," which provides that "only a stranger to both the contract at issue and the business relationship giving rise to and underpinning the contract may be liable for tortious interference with the contract or the relationship." Perry Golf Course Dev., LLC v. Housing Auth. of City of Atlanta, 294 Ga.App. 387, 390 (3) (670 S.E.2d 171) (2008) (citation and punctuation omitted).

This Court affirmed the trial court's dismissal of Sharpe's claims. United Sciences I, Slip Op. at 20-26. As noted above, our Supreme Court remanded the case to us for reconsideration of Division 5 in light of Joyner, in which the Supreme Court clarified that the two-dismissal rule satisfies only one of the prerequisites that must be established before res judicata will operate to bar a subsequent action. 314 Ga. at 6-7 (2) (a) ("after a trial court determines that the two-dismissal rule applies and that the second voluntary dismissal results in an adjudication on the merits, the trial court must then evaluate whether that adjudication bars the third action . . . by applying the law of res judicata").

However as this Court noted in United Sciences I, because we affirmed the trial court's dismissal of Sharpe's claims based on the application of OCGA § 9-1141 (a) (3), we did not address the trial court's alternative ruling that Sharpe's claims against Joseph, HKW, Smith, and KS were due to be dismissed...