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This case was last updated from Los Angeles County Superior Courts on 07/10/2019 at 00:18:26 (UTC).

TOWER HOTELS FUND 2014 LLC VS KAUAI LAGOONS AVENUE PARTNERS

Case Summary

On 12/22/2015 TOWER HOTELS FUND 2014 LLC filed a Contract - Business lawsuit against KAUAI LAGOONS AVENUE PARTNERS. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judge overseeing this case is RICHARD E. RICO. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****4859

  • Filing Date:

    12/22/2015

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Business

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judge

RICHARD E. RICO

 

Party Details

Plaintiffs, Petitioners and Cross Defendants

TOWER HOTELS FUND 2014 LLC

BUSHOR EDWARD

TOWER HOTEL KAUAI LLC

TOWER DEVELOPMENT INC

Defendants, Respondents and Cross Plaintiffs

KAUAI LAGOONS GRAND AVENUE PARTNERS LLC

TOWER KAUAI LAGOONS LLC

TIMBERS RESORT MANAGEMENT LLC

DOES 1 THROUGH 50

Attorney/Law Firm Details

Plaintiff and Petitioner Attorneys

OWENS & GACH RAY

BUKAC ALEXANDER J.

Defendant Attorney

BAUTE CROCHETIERE HARTLEY & VELKEI LLP

Cross Plaintiff Attorneys

STREET SCOTT JAMES

KEESAL SAMUEL AARON JR

Cross Defendant Attorneys

KEESAL SAMUEL A.

STECHER CHRISTOPHER

 

Court Documents

JOINT STIPULATION RE: REQUEST FOR CONTINUANCE OF MARCH 28 STATUS CONFERENCE, ETC

3/20/2018: JOINT STIPULATION RE: REQUEST FOR CONTINUANCE OF MARCH 28 STATUS CONFERENCE, ETC

DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S NOTICE OF MOTION AND MOTION FOR LEAVE TO FILE CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF

8/8/2018: DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S NOTICE OF MOTION AND MOTION FOR LEAVE TO FILE CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF

PLAINTIFF'S STATEMENT OF POSITION/OPPOSITION RE KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S MOTION FOR LEAVE TO FILE CROSS-COMPLAINT

8/17/2018: PLAINTIFF'S STATEMENT OF POSITION/OPPOSITION RE KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S MOTION FOR LEAVE TO FILE CROSS-COMPLAINT

DECLARATION OF CHRISTOPHER A. STECHER IN SUPPORT OF MOTION FOR LEAVE TO FILE AMENDMENT TO FIRST AMENDED COMPLAINT

8/17/2018: DECLARATION OF CHRISTOPHER A. STECHER IN SUPPORT OF MOTION FOR LEAVE TO FILE AMENDMENT TO FIRST AMENDED COMPLAINT

REPLY BRIEF IN SUPPORT OF DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S MOTION FOR LEAVE TO FILE CROSS-COMPLAINT

8/23/2018: REPLY BRIEF IN SUPPORT OF DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S MOTION FOR LEAVE TO FILE CROSS-COMPLAINT

Case Management Statement

7/3/2019: Case Management Statement

PROOF OF SERVICE SUMMONS & COMPLAINT

2/8/2016: PROOF OF SERVICE SUMMONS & COMPLAINT

CIVIL DEPOSIT

4/5/2016: CIVIL DEPOSIT

SEPARATE STATEMENT IN SUPPORT OF DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S MOTION TO COMPEL FURTHER RESPONSES TO REQUESTS FOR PRODUCTION OF DOCUMENTS FROM PLAINTIFF TOWER HOTELS FUND 2014,

6/28/2016: SEPARATE STATEMENT IN SUPPORT OF DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC'S MOTION TO COMPEL FURTHER RESPONSES TO REQUESTS FOR PRODUCTION OF DOCUMENTS FROM PLAINTIFF TOWER HOTELS FUND 2014,

DECLARATION OF LAURA E. ROBBINS IN SUPPORT OF DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC?S MOTION TO COMPEL FURTHER RESPONSES TO REQUESTS FOR PRODUCTION OF DOCUMENTS FROM PLAINTIFF TOWER HOTEL

7/15/2016: DECLARATION OF LAURA E. ROBBINS IN SUPPORT OF DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC?S MOTION TO COMPEL FURTHER RESPONSES TO REQUESTS FOR PRODUCTION OF DOCUMENTS FROM PLAINTIFF TOWER HOTEL

REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF MOTION TO COMPEL PRODUCTION OF DOCUMENTS BY DEFENDANT TIMBERS RESORT MANAGEMENT, LLC IN RESPONSE TO PLAINTIFF'S SECOND DOCUMENT DEMAND

11/8/2016: REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF MOTION TO COMPEL PRODUCTION OF DOCUMENTS BY DEFENDANT TIMBERS RESORT MANAGEMENT, LLC IN RESPONSE TO PLAINTIFF'S SECOND DOCUMENT DEMAND

Proof of Service by 1st Class Mail

11/8/2016: Proof of Service by 1st Class Mail

DECLARATION OF ROBERT B. OWENS IN SUPPORT MOTION TO COMPEL FURTHER RESPONSES BY DEFENDANT TOWER KAUAI LAGOONS, LLC TO PLAINTIFF'S SPECIALLY PREPARED INTERROGATORIES

11/8/2016: DECLARATION OF ROBERT B. OWENS IN SUPPORT MOTION TO COMPEL FURTHER RESPONSES BY DEFENDANT TOWER KAUAI LAGOONS, LLC TO PLAINTIFF'S SPECIALLY PREPARED INTERROGATORIES

NOTICE OF MOTION AND MOTION TO COMPEL ATTENDANCE AT DEPOSITION OF PERSON(S) MOST QUALIFIED FROM DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC AND REQUEST FOR MONETARY SANCTIONS BY WAY OF COSTS; E

11/23/2016: NOTICE OF MOTION AND MOTION TO COMPEL ATTENDANCE AT DEPOSITION OF PERSON(S) MOST QUALIFIED FROM DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC AND REQUEST FOR MONETARY SANCTIONS BY WAY OF COSTS; E

NOTICE TAKING MOTION (1) TO COMPEL ATTENDANCE AT DEPOSITION OF PERSON(S) MOST QUALIFIED FROM DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC, ETC

12/2/2016: NOTICE TAKING MOTION (1) TO COMPEL ATTENDANCE AT DEPOSITION OF PERSON(S) MOST QUALIFIED FROM DEFENDANT KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC, ETC

RESPONSE OF DEFENDANT TIMBERS RESORT MANAGEMENT, LLC TO PLAINTIFF'S SEPARATE STATEMENT IN SUPPORT OF ITS MOTION TO COMPEL FURTHER RESPONSES TO PLAINTIFF'S THIRD DOCUMENT DEMAND

5/9/2017: RESPONSE OF DEFENDANT TIMBERS RESORT MANAGEMENT, LLC TO PLAINTIFF'S SEPARATE STATEMENT IN SUPPORT OF ITS MOTION TO COMPEL FURTHER RESPONSES TO PLAINTIFF'S THIRD DOCUMENT DEMAND

Minute Order

5/22/2017: Minute Order

PLAINTIFF TOWER HOTELS FUND 2014, LLC'S OPPOSITION TO DEFENDANT KAIJAI LAGOONS GRAND AVENUE PARTNERS LLC'S MOTION TO COMPEL PRODUCTION OF PRIVILEGED DOCUMENTS; MEMORANDUM OF POINTS AND AUTHORITIES

12/7/2017: PLAINTIFF TOWER HOTELS FUND 2014, LLC'S OPPOSITION TO DEFENDANT KAIJAI LAGOONS GRAND AVENUE PARTNERS LLC'S MOTION TO COMPEL PRODUCTION OF PRIVILEGED DOCUMENTS; MEMORANDUM OF POINTS AND AUTHORITIES

220 More Documents Available

 

Docket Entries

  • 07/03/2019
  • Case Management Statement; Filed by Tower Hotels Fund 2014, LLC (Plaintiff)

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  • 04/11/2019
  • Answer; Filed by Tower Hotel Kauai, LLC (Cross-Defendant)

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  • 03/21/2019
  • Notice (of Withdrawal of Memorandum of Costs Without Prejudice); Filed by Edward Bushor (Cross-Defendant); Tower Development, Inc (Cross-Defendant); Tower Hotel Kauai, LLC (Cross-Defendant)

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  • 03/08/2019
  • Cross-Complaint (First Amended); Filed by Kauai Lagoons Grand Avenue Partners, LLC (Cross-Complainant)

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  • 03/04/2019
  • Notice (of Errata Regarding Exhibit A to First Amended Cross-Complaint); Filed by Kauai Lagoons Grand Avenue Partners, LLC (Defendant)

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  • 02/22/2019
  • Memorandum of Costs (Summary); Filed by Tower Development, Inc (Cross-Defendant); Tower Hotel Kauai, LLC (Cross-Defendant); Tower Hotels Fund 2014, LLC (Cross-Defendant) et al.

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  • 02/15/2019
  • Notice (of Ruling on Cross-Defendants' Demurrer to Cross-Complaint); Filed by Tower Development, Inc (Cross-Defendant); Tower Hotel Kauai, LLC (Cross-Defendant); Edward Bushor (Cross-Defendant)

    Read MoreRead Less
  • 02/15/2019
  • Notice (of Further Case Management Conference on July 19, 2019); Filed by Tower Hotels Fund 2014, LLC (Plaintiff); Tower Kauai Lagoons, LLC (Defendant); Edward Bushor (Cross-Defendant) et al.

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  • 02/04/2019
  • at 08:30 AM in Department 17, Richard E. Rico, Presiding; Status Conference - Held - Continued

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  • 02/04/2019
  • at 08:30 AM in Department 17, Richard E. Rico, Presiding; Hearing on Demurrer - without Motion to Strike - Held

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422 More Docket Entries
  • 02/29/2016
  • Minute order entered: 2016-02-29 00:00:00; Filed by Clerk

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  • 02/26/2016
  • DECLARATION OF MARK D. BAUTE REGARDING ATTEMPT TO MEET AND CONFER PURSUANT TO CALIF. CIV. PROC. CODE SECTION 430.41

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  • 02/26/2016
  • Declaration; Filed by Kauai Lagoons Grand Avenue Partners, LLC (Defendant)

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  • 02/08/2016
  • PROOF OF SERVICE SUMMONS & COMPLAINT

    Read MoreRead Less
  • 02/08/2016
  • PROOF OF SERVICE SUMMONS & COMPLAINT

    Read MoreRead Less
  • 02/08/2016
  • PROOF OF SERVICE SUMMONS & COMPLAINT

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  • 02/08/2016
  • Proof-Service/Summons; Filed by Tower Hotels Fund 2014, LLC (Plaintiff)

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  • 12/22/2015
  • SUMMONS

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  • 12/22/2015
  • Complaint; Filed by Tower Hotels Fund 2014, LLC (Plaintiff)

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  • 12/22/2015
  • COMPLAINT FOR: (1) BREACH OF CONTRACT; ETC

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Tentative Rulings

Case Number: BC604859    Hearing Date: November 04, 2020    Dept: 17

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

TOWER HOTELS FUND, et al.

vs.

KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC, et al.

Case No.: BC604859

Hearing Date: November 4, 2020

Defendants’ motion for summary judgment is DENIED. Summary adjudication is GRANTED as to the second and sixth causes of action.

On 12/22/15, Plaintiff Tower Hotels Fund 2014, LLC, on behalf of Tower Kauai Lagoons, LLC brought suit against Defendants Kauai Lagoons Grand Ave Partners, LLC; Timbers Resort Management, LLC; and Tower Kauai Lagoons, LLC. On 8/19/16, Plaintiff filed an FAC, alleging: (1) breach of contract; (2) breach of fiduciary duty; (3) intentional misrepresentation; (4) negligent misrepresentation; (5) accounting; and (6) declaratory relief.

On 5/22/17, Defendants’ demurrer to the FAC was sustained, without leave to amend, as to the third and fourth causes of action.

Defendants now move for summary judgment, or alternatively, summary adjudication.

Legal Standard

Code of Civil Procedure section 437c, subdivision (a) provides that a “party may move for summary judgment in any action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” The motion shall be granted if there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) Subdivision (p)(2) of the same section provides that where a defendant presents evidence showing one or more elements of a cause of action cannot be established, then the burden shifts to plaintiff to show the existence of a triable issue of material fact. (See Blue Shield of California Life & Health Insurance Co. v. Superior Court (2011) 192 Cal.App.4th 727, 732.) A party is also permitted to move for summary adjudication of a particular issue, which can be granted “only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

The moving party’s burden on summary judgment “is more properly one of persuasion rather than proof, since he must persuade the court that there is no material fact for a reasonable trier of fact to find, and not to prove any such fact to the satisfaction of the court itself as though it were sitting as the trier of fact.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 fn.11, original italics.)

Factual Background

Plaintiff’s principal, Ed Bushor (Bushor), approached Oaktree, an investment firm, with an opportunity to develop a hotel in Hawaii (the Project). The parties entered into an operating agreement (Agreement) wherein Defendant Kauai Lagoons Grant Avenue Partners, LLC (GAP) was made a controlling owner and member of Defendant Tower Kauai Lagoons, LLC (TKL).

At the heart of this action is a dispute over the involvement of Timbers Resort Management, LLC (Timbers) as the master developer. Oaktree holds a controlling interest in Timbers, and Plaintiff alleges that Defendants repeatedly served their own interests at the expense of the TKL, and breached provisions of the Agreement by entering in unauthorized agreements with Timbers.

Evidentiary Objections

CCP 437c, subdivision (q) provides:

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.

The Court rules as follows to Plaintiff’s objections:

· Sustained: 1, 2, 3, 7, 17, 19, 20, 21, 24, 25, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, and 51.

· Overruled: 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 22, 23, 26, 27, 28, 29, 30, 31, and 32.

Discussion

The Agreement contains a choice of law provision which dictates that any dispute will be governed by Delaware law. Neither party disputes the applicability of this provision. Accordingly, the Court’s analysis is based on Delaware law.

I. Breach of Contract

Plaintiff’s breach of contract claim is based on allegations that GAP breached Section 7.04 of the Agreement by failing to seek approval before entering into agreements with affiliate Timber.

Section 7.04 of the Agreement provides:

Notwithstanding anything to the contrary in this Agreement, any agreements with an affiliate of any Member must be approved by the Non-Affiliated Members, and no other fees or compensation will be paid by the company to any Member or any of its Affiliates.

Section 7.01(h) of the Agreement provides:

The Tower Members acknowledge and agree that, subject only to (i) the right of Class B Member to select one Committee Member and to have such Committee Member participate in the Executive Committee pursuant to this Section 7.01, and (ii) the right to approve Fundamental Decisions, the Tower Members shall not have any right to participate in the management or administration of the Company or any Property Company, or otherwise approve of or consent to matters related to the ownership or operation of the Initial Company Property or other assets of the Company or any Property Company or other subsidiary.

Defendants argue that Plaintiff cannot show a breach of section 7.04 because, while Timbers is an affiliate of the GAP: (1) GAP’s acceptance of the Agreement was conditioned on the use of Timbers as the developer (SS ¶¶ 20-21); (2) Plaintiff signed the Agreement, and “…by signing the Operating Agreement, which names Timbers the Development Manager, Tower approved of Timbers’ engagement as the developer of the Kauai project.” (Motion, 25: 10-17; SS ¶¶ 20-21); and (3) Plaintiff had previously agreed that Timbers would be paid a monthly development fee of $30,000. (Ibid.) In other words, Defendants argues that the agreements with Timbers were preapproved at the time the Agreement was entered into, and therefore do not fall within the scope of section 7.04.

Moreover, in support, Defendants argue that this is the only interpretation of 7.04 that can coexist with section 7.01.

In support, Defendants’ submitted evidence includes:

· The Operating Agreement defines Timbers as the “Development Manager” of the LLC and [Plaintiff] as the “Local Development Manager” and describes the duties to be performed by each (SS ¶ 26.)

· Bushor praised Oaktree when the deal closed, saying he was happy that Timbers was involved and that he wanted to have a long-term business relationship with Oaktree. (SS ¶ 24.)

· [Plaintiff] disclosed Timbers’ involvement and responsibilities to its investors and potential investors in a memo sent to January 2015, shortly after the transaction closed. (SS ¶ 36.)

· On January 30, 2015, Tower sent an update to its investor that touted Timbers’ involvement in the project and said that the “Company had also authorized Timbers Resorts to conduct development planning that is continuing and will continue into February. (SS ¶ 37.)

In reviewing this evidence, the Court must first determine whether the Agreement was integrated. This is because “[w]here the parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing.” (Scott-Douglas Corp. v. Greyhound Corp. (Del. 1973) 304 A.2nd 309, 315, emphasis added.)

To determine whether a written contract is the final expression of the parties’ agreement, “‘a court should consider the facts and circumstances surrounding the execution of the instrument. Some of the factors a court should consider are: the intent of the parties, where such intent is discernible; the language of the contract itself and whether it contains an integration clause; whether the instrument was carefully and formally drafted; the amount of time the parties had to consider the terms of the contract; whether the parties bargained over specific terms; and whether the contract addresses questions that naturally arise out of the subject matter.’ [] This is nearly the same as the California rule. The Court of Chancery, noting the contract in question did not have an integration clause, added that “[s]uch a clause would create a presumption of integration.

(Scott-Douglas Corp., supra, 304 A.2nd, citing Carrow v. Arnold ((Del. Ct. of Chancery, Oct. 31, 2006, No. 182-K), 2006 WL 3289582 pages *4.)

Here, the Agreement contains an integration clause, stating:

This Agreement contains the entire agreement between the parties relating to the subject matter hereof and all prior agreements relative hereto which are not contained herein are terminated. Amendments, variations, modifications or changes herein may be made effective and binding upon the Members by, and only by, the setting forth of same in a document duly executed by each Member, and any alleged amendment, variation, modification or change herein which is not so documented shall not be effective as to any Member.

(Defendants’ Evidence, Exh. S, section 14.12)

Under Delaware law, the presence of an integration clause creates a rebuttable presumption that the contract is integrated. (Kanno v. Marwit Capital Partners II, L.P. (2017) 18 Cal.App.5th 987, 1006.) While the presumption may be rebutted by extrinsic evidence showing the parties did not intend the writing to be the final expression of their agreement, Defendants did not submit any evidence to show or suggest that the Agreement was not intended to be the final expression of their agreement. (Ibid.) Rather, Defendants’ evidence seeks to argue that the Timbers agreements were included in the Agreement as part of the final expression of their agreement. In other words, Defendants do not argue that the Agreement was not the final expression of their agreement, but rather argues that the Timber agreements were part of that final expression. Moreover, Defendants own evidence suggests that there was significant negotiation and bargaining over the terms of the contract. Accordingly, given the unrebutted presumption of integration, the Court concludes that the Agreement is integrated.

As a result of the Court’s finding that the Agreement is integrated, the Court is barred from considering any extrinsic evidence of “antecedent understandings and negotiations” submitted by Defendants to contradict or supplements the meaning of Section 7.04. (Scott-Douglas Corp., supra, 304 A.2nd at p. 315.)

Much of Defendants’ submitted evidence attempts to show that the agreements with Timbers were preapproved under Section. 7.04. However, the parol evidence rule bars the Court from considering these extrinsic communications to determine the meaning of Section 7.04. Rather, in interpreting Section 7.04, the Court is bound to the language within the four corners of the Agreement. A review of the integrated Agreement reveals that it does not include any provision that provides for payment of $30,000 monthly development fees to Timbers, nor does it provide advanced approval of the subsequent development actions taken by Timbers. (Defendants’ Evidence, Vol. 2, Exh. S.) While Timbers is listed as the developer manager, there is nothing to suggest that this was meant to preclude the application of Section 7.04 to agreements with Timbers. The clear language of Section 7.04 requires approval of any agreement or compensation to an affiliate of any member, which Timbers undisputedly is. There is nothing in the integrated Agreement which would suggest that any agreements with any member affiliates had already been approved, or to suggest that agreements with Timbers would be excluded from Section 7.04. Accordingly, Defendants’ submitted evidence fails to establish as a matter of law that the payments to, and agreements with, Timbers did not violate Section 7.04 of the Agreement.

In short, there is insufficient evidence for the Court to conclude as a matter of law that the agreements entered into with affiliate Timbers were preapproved at the time the Agreement was entered into. However, the Court must note that this conclusion does not foreclose Defendants from introducing any extrinsic evidence of how Plaintiff behaved after the Agreement was entered into for purposes of determining whether the Timbers agreements were in fact approved under Section 7.04. Based on Plaintiff’s evidentiary objections, Plaintiff seems to assume that any evidence which concerns the parties’ communications about agreements with Timbers must be excluded from evidence. This is not so. The parol evidence rule bars extrinsic evidence of “antecedent understandings and negotiations” to determine the meaning of Section 7.04. (Scott-Douglas Corp., supra, 304 A.2nd at p. 315.) However, it does not bar Defendants from submitting evidence to show that the agreements with Timbers were, in fact, approved in a manner consistent with Section 7.04. As noted by Defendants, “Section 7.04 does not require that affiliate contracts be approved by the other member in writing. It does not provide a line item veto.” (Motion, 25: 21-22.) Indeed, based on the evidence, there is a triable issue of material fact as to whether or not there was approval of the agreements with Timbers.

Finally, Defendants’ evidence is insufficient to show that: (1) Plaintiff has failed to establish a claim for breach of contract because it cannot show that it substantially complied with the contract, or (2) Plaintiff cannot show that it has suffered damages. Plaintiff has submitted evidence that it made 7 million in capital contributions as required by the Agreement, and submitted evidence that Timber’s “incompetent implementation” of a woefully deficient business plan” has required repeated equity infusions, and has halved the projected internal rate of return. (Opp., 20: 15-21; Plaintiff’s AMF ¶¶ 49-51; 106-111.)

Based on the foregoing, the Court concludes there are triable issues of material fact as to whether Defendants’ conduct with respect to Timbers breached the Agreement. Accordingly, summary judgment is denied.

II. Breach of Fiduciary Duty

Defendants argue that Plaintiff cannot establish a breach of fiduciary duty because the Agreement expressly waived the members’ fiduciary duties, which is allowable under Delaware law. Moreover, even assuming there was no waiver, Defendants argue that Plaintiff has failed to establish breach because “everything that Timbers did was expressly authorized or directed by the TKL executive committee, which had the sole authority to make business decisions for the joint venture.” (Motion, 2:17-19.)

“The duty to act in good faith is a “subsidiary element of the duty of loyalty.” (In re Solutions Liquidation LLC (Del. 2019) 608 B.R. 384, 401.) The Delaware Supreme Court has identified three examples of conduct that may establish a failure to act in good faith:

First, it has held that such a failure may be shown where a director intentionally acts with a purpose other than that of advancing the best interests of the corporation. Second, it has held that a failure may be proven where a director “acts with the intent to violate applicable positive law.” Third, it has held that a failure may be shown where the director intentionally fails to act in the fact of a known duty to act, demonstrating a conscious disregard for his duties...[T]here “may be other examples of bad faith yet to be proven or alleged, but these three are the most salient.

(Ibid, quoting In Re Walt Disney Co. Derivative Litig. (Del. 2006) 906 A.2d 27, 67.)

I. Waiver

Section 3.01 of the Agreement provides:

None of the Members shall have any fiduciary duties toward any other Member, the Company or any Property Company.

Defendants argue that section under section 3.01, the parties expressly waived any fiduciary duties owed by members.

In opposition, Plaintiff apparently concedes that any fiduciary duties owed by and between members were waived under the Agreement. However, Plaintiff contends that its claim against GAP is for its breach of a fiduciary duty owed as a manager to the LLC, rather than as a member, and therefore there is no waiver. In support, Plaintiff cites three Delaware cases and two California cases. However, neither California case cited to presents facts analogous to those here. Indeed, in neither case was there any waiver of member owed fiduciary duties. As such, there is nothing in the cited cases that would suggest Courts have still imposed a fiduciary duty on an LLC member, despite express waiver, based on the member’s status as a “de facto” manager.

As for the Delaware cases, Plaintiff cited two unreported cases—which this Court cannot, and will not rely—and Feeley v. NHAOCG, LLC (Del. 2012) 62 A.3d 649, 662 (Feeley). Plaintiff cites in support to the portion of the Feeley opinion, wherein the Court stated that, “a ‘person’ may owe fiduciary duties depending on whether that person controls a manager of the LLC or otherwise has a fiduciary relationship to the LLC.” However, the full quote reads:

The same is true for the LLC Act. Two of the three nouns that follow the phrase “[t]o the extent that” in Section 18–1101(c)(“member or manager or other person”) may, or may not, owe fiduciary duties depending on the situation. Under the LLC Act, there are two basic types of members: members who are also managers and exercise managerial functions in a member-managed LLC, and members who are passive investors like limited partners. [] Managers and managing members owe default fiduciary duties; passive members do not. As with a limited partnership, a “person” may owe fiduciary duties depending on whether that person controls a manager of the  LLC or otherwise has a fiduciary relationship to the LLC. The phrase “[t]o the extent that” recognizes these differing possibilities without implying that all members or all persons necessarily always or never owe default fiduciary duties.

(Feeley, supra, 62 A.3d at p. 662-663.)

Put into context, it is clear from the full passage that the Feeley Court is not suggesting that a waiver of a member’s fiduciary duty would only extend to his or her membership conduct alone, and would not constitute a waiver with respect to his or her managerial actions. Rather, the Court’s discussion of managerially-related fiduciary duties is directed at situations where a “person” would not owe a fiduciary duty by “default,” but where there evidence that the “person” acted as a de facto manager. In such a situation, the Court suggests that it would be possible to impose a fiduciary duty. Moreover, there is nothing in Feeley which would suggest that it would be appropriate to impose a fiduciary duty on a member for its actions as a manger, despite having waived its fiduciary duty as a member.

Put simply, Plaintiff has provided inadequate support for its contention that a fiduciary duty may be imposed on a member in their capacity as a manger, despite an express waiver of that member’s fiduciary duties. Plaintiff repeatedly asserts that GAP has acted as a de facto manager without providing any on-point caselaw to inform this Court as to how such a status is determined, or to show that this status has been found in analogous circumstances.

The Court concludes that the Agreement waived any fiduciary duties owed by GAP to Plaintiff. Accordingly, Plaintiff cannot state a claim for breach of fiduciary duty as a matter of law.

Based on the foregoing, summary adjudication of the second cause of action is granted.

III. Accounting

Given the Court’s conclusion that triable issue of material fact exist as to Plaintiff’s breach of contract cause of action, the Court also denies summary adjudication of Plaintiff’s accounting cause of action.

IV. Declaratory Relief

Plaintiff’s declaratory relief cause of action seeks a judicial determination as to whether or not Defendants conduct runs afoul of section 7.04 of the Agreement. Because Plaintiff’s breach of contract already necessarily requires a determination as to the scope of Section 7.04, and whether Defendants’ conduct constituted a breach of it, Plaintiff’s declaratory relief cause of action is duplicative of the breach of contract cause of action.

Accordingly, summary adjudication is granted as to the fourth cause of action.

It is so ordered.

Dated: November , 2020

Hon. Jon R. Takasugi Judge of the Superior Court

 

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative. If all parties to a motion submit, the court will adopt this tentative as the final order. If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.

Due to Covid-19, the court is strongly discouraging in-person appearances. Parties, counsel, and court reporters present are subject to temperature checks and health inquiries, and will be denied entry if admission could create a public health risk. The court encourages the parties wishing to argue to appear via L.A. Court Connect. For more information, please contact the court clerk at (213) 633-0517. Your understanding during these difficult times is appreciated.

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