Urban Hotel Development v. President Dev. Group

• Decision Date: 29 July 2008
• Docket Number: No. 07-2228.,No. 07-2320.,07-2228.,07-2320.
• Citation: 535 F.3d 874
• Parties: URBAN HOTEL DEVELOPMENT COMPANY, INC., Appellant/Cross-Appellee, v. PRESIDENT DEVELOPMENT GROUP, L.C., President Hotel Investors, L.C., President Hotel, L.C., Ronald D. Jury, Trustee of the Ronald D. Jury Trust, and Plaza 45, L.C., Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

535 F.3d 874 URBAN HOTEL DEVELOPMENT COMPANY, INC., Appellant/Cross-Appellee,
v.
PRESIDENT DEVELOPMENT GROUP, L.C., President Hotel Investors, L.C., President Hotel, L.C., Ronald D. Jury, Trustee of the Ronald D. Jury Trust, and Plaza 45, L.C., Appellee/Cross-Appellant. No. 07-2228. No. 07-2320. United States Court of Appeals, Eighth Circuit. Submitted: March 14, 2008. Filed: July 29, 2008.

[535 F.3d 876]

James Walter Erwin, argued, St. Louis, MO, Anthony L. Gosserand, on the brief, Kansas City, MO, for appellant/cross-appellee.

Michael D. Pospisil, argued, John M. Edgar and Daniel R. Young, on the brief, Kansas City, MO, for appellee/cross-Appellant.

Before MURPHY, BRIGHT, and BENTON, Circuit Judges.

BENTON, Circuit Judge.

Urban Hotel Development Company, Inc. ("UHDC") sued President Development Group, L.C., President Hotel Investors, L.C., President Hotel, L.C. (collectively "Development Companies"), Ronald D. Jury as Trustee of Ronald D. Jury Trust ("Jury Trust"), and Plaza 45, L.C. ("Plaza 45") for declaratory judgment, breach of contract, and breach of fiduciary duty. UHDC, Jury Trust, and Plaza 45 were all members of the Development Companies, which were limited liability companies organized to redevelop the President Hotel in Kansas City, Missouri. Before redevelopment of the hotel, UHDC was removed as a member.

The district court¹ granted summary judgment for Jury Trust, Plaza 45, and the Development Companies, finding UHDC's removal was valid under the operating agreements, and there was no evidence of

535 F.3d 877

breach of fiduciary duty or a quantum meruit claim. However, the district court granted summary judgment for UHDC on the breach of contract claim. After a bench trial, the court entered a $10,000 judgment for UHDC. On appeal, UHDC insists the removal was invalid and, therefore, it still is a member of the Development Companies. Alternatively, UHDC seeks $167,667 in damages. The Development Companies cross-appeal, claiming no evidence supports even $10,000 in damages. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

I.

In this diversity suit, this court applies the substantive law of the state in which the district court sits. Roemmich v. Eagle Eye Dev., LLC, 526 F.3d 343, 348 (8th Cir.2008). Here, this court applies Missouri law, reviewing de novo the district court's interpretation of it. See id.

This court reviews de novo the grant of summary judgment. Id. Summary judgment is appropriate if the evidence, viewed most favorably to the non-moving party, establishes that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id.; see also Fed.R.Civ.P. 56(c).

UHDC asserts its removal was ineffective because the operating agreements authorized only a redemption, not a removal, of a member; it did not receive written notice of the redemption, nor was the redemption made with a Major Decision Approval; and it did not receive the Redemption Price.

UHDC was removed as member of the Development Companies by letter dated May 2, 2003:

This letter is to serve as official notice that pursuant to the Operating Agreements of President Hotel, LC, President Hotel Investors, LC, and President Development Group, LC, that Urban Hotel Development Company, Inc. is being removed from these companies.

...

The letter was signed by Ronald D. Jury, as Managing Member of the Development Companies.

Article X, Section 10.1(a) of the operating agreements authorized the redemption of a member's interest: "Each member hereby grants to the Company the right to redeem ... all or any portion of such Member's Interest in the Company. The Company shall exercise any Member Redemption Option by delivering notice to such Redeeming Member (the `Redemption Notice')." To redeem a member's interest, section 10.1(b) required a "Major Decision Approval," a "written approval by the holders of more than sixty-five percent ... of the Distribution Percentages owned by all the Members." Under section 10.2, payment of the Redemption Price was to be made "not more than ten (10) business days following the receipt of the Redemption Notice."

The distribution percentages of the Development Companies were:

1. President Development Group, L. C.: Jury Trust and Plaza 45 each had a 50% distribution percentage and UHDC a 0% distribution percentage until $1,500,000 in net profits was distributable to the members. At that point, Jury Trust would have a 45% distribution percentage, Plaza 45 a 30% distribution percentage, and UHDC a 25% distribution percentage.

2. President Hotel Investors, L.C.: Jury Trust had a 53% distribution percentage, Plaza 45 a 27% distribution percentage, and UHDC a 20% distribution percentage.

3. President Hotel, L.C.: Jury Trust had a 53% distribution percentage,

535 F.3d 878

Plaza 45 had a 27% distribution percentage, and UHDC a 20% distribution percentage.

Under Missouri law, a limited liability company is governed by statute and the operating agreement. See In re Tri-River Trading, LLC, 329 B.R. 252, 267 (8th Cir. BAP 2005), citing Mo. Ann. Stat. § 347.010; see also Mo. Ann. Stat. § 347.079. Operating agreements are interpreted by ascertaining the intent of the parties and giving effect to it. Am. Anglian Envtl. Techs., L.P. v. Envtl. Mgmt. Corp., 412 F.3d 956, 958 (8th Cir.2005). This court enforces a clear and unambiguous operating agreement, giving maximum effect to Missouri's policy of freedom of contract and the enforceability of operating agreements. Id. at 958, 962.

As relevant here, the statute states: "A person ceases to be a member of a limited liability company ... [when]...