Vinton v. Grayson , 189 A.3d 695 ( 2018 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
BROCK J. VINTON, R. ROBERT
RUGGIO, DONALD S. ROBITZER,
JR., TIMOTHY L. JONES, AND
ROUTE 9 ASSOCIATES LLC,
Plaintiffs, C.A. No. N17C-08-167 PRW
vi
DAVID J. GRAYSON,
Defendant.
Submitted: March 16, 2018
Decided: June 13, 2018
Upon Defena'ant David J. Grayson ’s Motion to Dismz``ss,
DENIED.
MEMORANDUM OPINION AND ORDER
Neil R. Lapinski, Esquire, Gordon Four'naris & Mammarella, P.A., Wilmington,
Delaware, Attorney for Defendant.
David B. Anthony, Esquire, Sean A. Meluney, Esquire, Berger Harris LLP,
Wilmington, Delaware, Attorneys for Plaintiff.
WALLACE, J.
I. INTRODUCTION
Plaintiffs Brock J. Vinton (“Vinton”), R. Robert Ruggio (“Ruggio”), Donald
S. Robitzer, Jr. (“Robitzer”), and Timothy L. J ones (“Jones”; collectively, “Member
Plaintiffs”) formed Route 9 Associates LLC (“Route 9”; together with Member
Plaintiffs, “Route 9 Plaintiffs”) with Defendant David J. Grayson (“Grayson”) on
November 22, 2005 .' This suit arises from Grayson’s failure to contribute his pro
rata share of a capital call to repay Route 9’s debts.
II. FACTUAL AND PROCEDURAL BACKGROUND
Route 9 is a limited liability company organized under Delaware law.2
Vinton, Route 9’s designated Manager, owns a 28% membership interest in the
company; Ruggio owns a 27% interest; Grayson owns a 27% interest; Robitzer owns
a 9% interest; and J ones owns a 9% interest.3 Each member executed an “Agreement
of Limited Liability Company of Route 9 Associates LLC” (the “Route 9
Agreement”) that, together with the Delaware Limited Liability Company Act,4
governs the company’s operations5
l Am. Compl. at 11 14.
2 ld. at 11 8.
3 Id. at 1111 9_13.
4 DEL. CoDE ANN. tit. 6, §§ 18-101-18-1107.
5 Am. Compl. 1 15.
Formed as a land development company, Route 9 repurposed defunct
brownfield sites into industrial and warehouse lots; its work included the installation
of utilities, roadways and entrances to the properties6 While developing these
properties, Vinton, as Route 9’s Manager, made several capital calls gathering funds
to repay a loan taken out by the company.7 Each member paid his pro rata share of
these capital calls.8 Although Route 9 developed several lots, the company never
became profltable,9 and once work was completed in 2009 it began to wind down
operations10
In 2017, the Department of Transportation redeemed a completion bond that
required Route 9 to pay $146,700.00 to a third-party financier. Route 9 also then
owed another $12,900.00 on a different outstanding construction loan.ll At the time
of the bond’s redemption, Route 9 had less than $6,500.00 in its accounts.12 The
owed money put Route 9 at a deficit of $153»,121.31.'3 Vinton issued a capital call
6 Am. Compl. at 11 l6.
7 Id. at ‘n 19.
8 Id. ar 11 20.
9 ld. at v 28.
10 Id. at 11 4.
11 ld. at im 22_23.
'2 ld. ar 11 24.
‘3 1d.ar1125.
requiring that each member pay his pro rata share of Route 9’s debt, and sent a “first
notice” on July 12, 2017, informing each member of his owed share.14
On July l4, 2017, Grayson responded to the first notice, stating that he would
“only be making the call required for the loan” and directing further communications
to his attorney.15 A second notice was issued to Grayson on August 3, 2017, listing
his total owed share as $41,850.00.16 Grayson never paid.
A. THE RoUTE 9 AGREEMENT
Article l of the Route 9 Agreement provides that Route 9 was formed “under
the Delaware Limited Liability Company Act, and . . . the rights, duties, and
liabilities of the Members shall be as provided in the Act, except as otherwise
provided herein.”'7 Article IV of the Route 9 Agreement addresses capital
contributions, and Section 4.2, subtitled “Additional Capital Contributions,” states
that:
No additional Capital Contributions to the Company shall
be required of any Member except as follows:
In the event the Company requires funds in addition to the
Capital Contributions set forth in Section 4.1 [upon the
14 Am. Compl. at 1l 28.
15 Id. at 11 29.
16 Ia’. at W 31-32.
17 Pls.’ Opp. to Def.’s Mot. to Dismiss, Vinton v. Grayson, C.A. No. Nl7C-08-l67 PRW, Ex.
B at l (Del. Super. Ct. Dec. 27, 2017) (hereinafter “Pls.’ Opp.”).
_3_
formation of the Company], the Members agree to make
additional Capital Contributions from time to time in
accordance with their Units as a percentage interest in the
Company. The need for any such additional contributions
shall be determined in good faith solely by the Manager
[Vinton]. If additional Capital Contributions are so
required to be made, the Manager shall give notice writing
to each Member (the “First Notice”) which First Notice
shall provide reasonable evidence of the Company’s
requirement of additional funds, and each Member within
forty-five (45) days of the receipt of the First Notice, shall
deposit in the Company the additional Capital
Contribution required. In the event a Member fails to
make the Capital Contribution within the time frame of the
First Notice, a second notice (the “Second Notice”) Shall
be sent to the Member who has failed to contribute (the
“Non-Contributing Member”). If the Non-Contributing
Member fails to make the required Capital Contribution
within forty-five (45) days following the First Notice, the
Non-Contributing Member shall be deemed to have
automatically, immediately and irrevocably, without
further notice or action, transferred fifty percent (50%) of
the Non-Contributing Member’s Units to the Members
who have made their (but not the Non-Contributing
Member’s) respective Capital Contributions (the
“Contributing Members[”]). The Units of the Non-
Contributing Members so transferred shall be allocated
among the Contributing Members in accordance with their
respective Units as a percentage interest in the Company
and the records of the Company shall be adjusted by the
Contributing Members to reflect this transfer. In the event
a Non-Contributing Member fails to make the Capital
Contribution in full prior to the one hundred eighty (180)
days following the First Notice, the Non-Contributing
Member shall be deemed to have automaticall[y],
immediately and irrevocably, without further notice or
action, transferred the balance of the Non-Contributing
Member’s units to the Contributing Members and the
Contributing Members shall be obligated to make the
entirety of the Capital Contribution that had been required
_4_
of the Non-Contributing Member, in accordance with their
Units as a percentage interest in the Company. The Units
of the Non-Contributing Member so transferred shall be
allocated among the Contributing Members in accordance
with their respective Units as a percentage interest in the
Company and the records of the Company shall be
adjusted by the Contributing Members to reflect this
transfer.18
The Route 9 Agreement further provides in Article VI, “Allocation of
Revenues and Expenses,” that Route 9’s losses “shall be allocated to the Members
in proportion to their Membership Interests.”19 And Article XII_
“Miscellaneous”_includes a “Rights and Remedies Cumulative” clause that states:
[t]he rights and remedies provided by this Agreement are
given in addition to any other rights and remedies any
Member may have by law, statute, ordinance or otherwise.
All such rights and remedies are intended to be cumulative
and the use of any one right or remedy by any Member
shall not preclude or waive such Member’ s right to use any
or all other rights or remedies.20
B. PRoCEDURAL BACKGROUND
Member Plaintiffs filed a Complaint in August 2017. Grayson filed a Motion
to Dismiss that Complaint, arguing that the Member Plaintiffs had no standing to
pursue their claim without joining Route 9. Route 9 Plaintiffs thereafter filed an
18 Pls.’ Opp., Ex. B at 7-8.
19 Ia'., Ex. B at 10.
20 Ia'., Ex. B at 22.
Amended Complaint alleging one count of breach of contract (between Member
Plaintiffs and Grayson), one count of breach of good faith and fair dealing (between
Member Plaintiffs and Grayson), and an additional count of breach of contract
(between Route 9 and Grayson).
Grayson now brings this Motion to Dismiss Plaintiffs’ Amended Complaint.21
The Court heard arguments on the motion and then allowed the parties supplemental
briefing to identify relevant case law regarding which remedies an LLC or its
members can pursue against a member who is delinquent in paying a capital call.22
III. STANDARD OF REVIEW
“In Delaware, the interpretation of a contract is a question of law suitable for
determination on a motion to dismiss.”23 But, on a motion to dismiss, “‘[d]ismissal
is proper only if the defendants’ interpretation is the only reasonable construction as
a matter of law.”’24
21 Def.’s Mot. to Dismiss Pls.’ Am. Compl., Vinton v. Grayson, C.A. No. Nl 7C-08-l 67 PRW
(Del. Super. Ct. Dec. 15, 2017) (hereinafter “Def.’s Mot.”).
22 Def.’S Supp. Submission in Support of his Mot. to Dismiss, Vinton v. Grayson, C.A. No.
Nl7C-08-l67 PRW (Del. Super. Ct. Feb. 23, 2018) (hereinafter “Def.’s Supp.”); Pls.’ Supp.
Memo. in Opp. to Def.’s Mot. to Dismiss, Vinton v. Grayson, C.A. No. Nl7C-08-l67 PRW (Del.
Super. Ct. Mar. 17, 2018) (hereinafter “Pls.’ Supp.”).
23 Markow v. Synageva Biopharma Corp., 2016 WL 1613419, at *4 (Del. Super. Ct. Mar. 3,
2016) (internal quotation marks omitted).
24 L&L Broad. LLC v. TriadBroad. Co., LLC, 2014 WL 1724769, at *3 (Del. Super. Ct. Apr.
8, 2014) (quoting Deere & Co. v. Exelon Generation Acquisitions, LLC, 2014 WL 904251, at *4
(Del. Super. Ct. Mar. 7, 2014)).
_6_
A motion to dismiss for lack of standing presents “a threshold question
relating to jurisdiction.”25 “[T]he interpretation of a contract as a prerequisite to [a
party’s] standing is . . . a determination involving the merits.”26 And “where ‘the
issue of standing is so closely related to the merits, a motion to dismiss based on lack
of standing’ is properly evaluated for its failure to state a claim rather than a lack of
jurisdiction.”27
Under Superior Court Civil Rule l2(b)(6), “[t]he legal issue to be decided is,
whether a plaintiff may recover under any reasonably conceivable set of
circumstances susceptible of proof under the complaint.”28 When considering a
motion to dismiss for failure to adequately state a claim, the Court will:
(l) accept all well pleaded factual allegations as true,
(2) accept even vague allegations as “well pleaded” if they
give the opposing party notice of the claim, (3) draw all
reasonable inferences in favor of the non-moving party,
and (4) [not dismiss the claims] unless the plaintiff would
not be entitled to recover under any reasonably
conceivable set of circumstances29
25 Broadway v. Allstate Prop. & Cas. Ins. Co., 2015 WL 4749176, at *2 (Del. Super. Ct. Aug.
1 i, 2015).
26 Appl”l'va S’hOld€F Lilig. CO., LLC v. EV3, InC., 937 A.2d 1275, l285 (Del. 2007).
27 Id. (quoting Appriva, 937 A.2d at 1286).
28 L&L BFOcld, 2014 WL 1724769, at *2.
29 Cenl'. Mortg. C0. v. Morgan Stanley Mortg. Capital Hla'gs. LLC, 27 A.3d 531, 535 (Del.
201 i).
_7_
If any reasonable conception can be formulated to allow Plaintiffs’ recovery, the
motion must be denied.30
IV. DISCUSSION
Grayson proposes that the several breach-of-contract and fair dealing claims
should be dismissed both because Member Plaintiffs lack standing to bring any
claim, and for failure of any plaintiff to state any claim upon which relief can be
granted.
A. MEMBER PLAINTIFFS HAVE STANDING To ASSERT A
BREACH-oF-CONTRACT CLAIM AGAINST GRAYSON
Grayson argues that none of the Member Plaintiffs have an individual or
collective cause of action under the Route 9 Agreement and the Delaware Limited
Liability Company Act, Plaintiffs counter that Grayson’s view is cabined by a
statutory misunderstanding; and, more directly, that the Route 9 Agreement’s
Cumulative Remedies clause preserves their right to bring breach-of-contract claims
against Grayson.
The Delaware Limited Liability Company Act provides:
Except as provided in a limited liability company
agreement, a member is obligated to a limited liability
company to perform any promise to contribute cash or
property or to perform services . . . . If a member does not
make the required contribution of property or services, the
member is obligated at the option of the limited liability
30 Cem‘. Mortg. Co, 27 A.3d at 535.
company to contribute cash equal to that portion of the
agreed value . . . of the contribution that has not been
made, The foregoing option shall be in addition to, and
not in lieu of, any other rights, including the right to
specific performance, that the limited liability company
may have against such member under the limited
liability company agreement or applicable law.31
Grayson suggests that this provision of the Act applies solely to Route 9, as the
limited liability company, and does not grant an individual right to the several
Member Plaintiffs. Member Plaintiffs point to the provision’s prefatory language_
“[e]xcept as provided in a limited liability company agreement”_and assert that
because Section l2.9 of the Route 9 Agreement expressly provides that the rights
bestowed to Member Plaintiffs by the Route 9 Agreement are given “in addition to
any other rights and remedies any Member may have by law, statute, ordinance or
otherwise,”32 Member Plaintiffs’ common-law right to pursue a breach-of-contract
claim is preserved.33
As the discussion below reveals, neither side has provided the Court with case
law support or other authority that is squarely on point.
In Cline v. Grelock, the Delaware Court of Chancery noted that where a
member wrongfully dissolved an LLC, he no longer had “any legitimate basis” for
3' DEL. CODE ANN. iii. 6, § 18-502(3) (2017) (emphasis added).
32 Pls.’ Opp, Ex. B at 22.
33 Pls.’ Opp. at W 8-9.
his claim for an outstanding capital contribution.34 Member Plaintiffs contend that
the inverse must hold true for them: because Grayson has not alleged wrongful
conduct, Grayson is not relieved of his obligation to make the delinquent capital
contribution in the ongoing venture.
Afremov v. Jarayan,35 a Minnesota federal district case interpreting Delaware
law, lends some support to Member Plaintiffs’ argument. In Afremov, Afremov and
Jarayan entered into the “AM Plaza Agreement” establishing AM Plaza, LLC.36 The
AM Plaza agreement specified that AM Plaza would be owned in equal shares by
Afremov and Object of Vertu, LLC, an entity solely owned by Jarayan, and
designated Jarayan as Manager of the newly-formed LLC.37 When the planned
project fell through, Afremov brought suit against Jarayan and Object of Vertu.
Jarayan filed counterclaims against Afremov asserting, in part, breach of contract
for failure to make capital contributions to AM Plaza.38 Afremov moved to dismiss,
arguing that only AM PlaZa had the right to assert such a claim.39 The Court denied
34 Cline v. Grelock, 2010 WL 761142, at *3 (Del. Ch. Mar. 2, 2010).
35 2012 WL 1049739, at *3 (D. Minn. Mar. 28, 2012).
30 Id. at *1.
37 Id.
38 Id. at *l.
39 ld. at *2.
_1()_
Afremov’s motion, holding that, as a signatory to the AM Plaza Agreement, Jarayan
had the right to sue Afremov for breach of contract.40
Here, as signatories to the Route 9 Agreement, each of the Member Plaintiffs
has standing to sue Grayson for his breach.
B. RoUTE 9 PLAINTIFFS MAY SEEK MoNEY DAMAGES FRoM GRAYsoN
Grayson next contends that Route 9 Plaintiffs fail to state a claim, as Grayson
had no obligation under either the Route 9 Agreement or the LLC Act to meet the
capital call. Route 9 Plaintiffs argue that under the Route 9 Agreement’s terms,
Grayson was obligated to meet the capital call. Further, they say, the Route 9
Agreement preserved their right to pursue a breach-of-contract claim against
Grayson.
Because the relevant language of Kansas’s LLC Act mirrors Delaware’s,41
Route 9 Plaintiffs and Grayson rely principally on two Kansas Court of Appeals
cases to support of their arguments.
ln Canyon Creek Development, LLC v. F0x,42 four individuals signed an
operating agreement forming Canyon Creek Development, LLC, with the intent of
40 Afremov, 2012 WL 1049739, at *3 (citing Bay Center Aparlments Owner, LLC v. Emery
Bay PKI, LLC, 2009 wL 1124451, at *5-6 (Del. Ch. Aprii 20, 2009)).
41 see KAN. sTAT. ANN. § 17-76, 100 (2018).
42 263 P.3d 799 (Kan. Ci. App. 201 i).
_11_
developing residential real estate.43 One member, Fox, failed to meet capital calls,
forcing two other members to cover with additional contributions and loans to the
company.44 The members ultimately demanded the outstanding amount of the
former capital calls from Fox, and brought suit for breach of the operating agreement
when he failed to pay.45 The district court granted summary judgment on the
plaintiffs’ breach-of-contract claims.46
The Court of Appeals of Kansas reversed, holding that while Fox breached
the terms of the operating agreement,47 the same terms failed to specify a damages
remedy for a member’s failure to contribute to capital calls made after the initial
capitalization48 “[The Kansas LLC Act] teaches that a member’s breach of the
operating agreement subjects the defaulting member to specified penalties and
43 Canyon Creek, 263 P.3d at 800.
44 Id.43 Id. at 801.
46 Id.47 The operating agreement specified that where a member fails to make a capital contribution
after initial capitalization, “then the other Members . . . shall have the right, but not the obligation,
to contribute on a pro rata basis determined with reference to the relationship of each respective
other Member’s . . . Percentage Interest to the total Percentage Interests of all of such other
Members . . . any portion of the Non-Contributing Person’s additional capital contribution not
contributed by the Non-Contributing Person[.]” Additional capital contributed by a member
would thereafter be added to that member’s capital account, and the percentage interests of each
member likewise adjusted. Id. at 804.
48 Id. at 807.
_12_
consequences An action for damages is the most fundamental remedy for breach
of contract. The remedy of damages is conspicuously absent from [the terms] of the
operating agreements.”49 The Court ultimately concluded
. . . that failing to specify in the operating agreements so
fundamental a remedy as damages when a member fails to
contribute additional capital to the venture is not an
oversight but rather the expression of a clear intent that
damages cannot be assessed against a member who fails
to contribute additional capital to the venture after it is up
and running.
[>l<>l<>l<]
We conclude that in the absence of clear statutory
authority for imposing personal liability on an LLC
member who fails to meet a capital call for an ongoing
venture, when the [LLC’s] operating agreement[]
specif[ies] a reduction in the defaulting member’s capital
share as the sole consequence, the [LLC is] not entitled to
seek [a] personal judgment[] for damages against the
defaulting member.50
Grayson argues that because Delaware’s LLC Act, like Kansas’s, “teaches that a
member’s breach of the operating agreement subjects the defaulting member to
specified penalties and consequences,”51 the Route 9 Agreement’s failure to specify
49 Canyon Creek, 263 P.3d at 807.
50 Id.5 1 Id._13_
a money damages penalty for delinquent capital contributions is fatal to the Route 9
Plaintiffs’ claims.52
The Kansas Court of Appeals returned to the issue in Skyscapes of Castle
Pines, LLC v. Fischer.53 In Skyscapes, ten members, including Fischer, formed an
LLC “for the purpose of acquiring, developing, and selling three exclusive
residential properties in Colorado.”54 The LLC made a series of capital calls after
suffering financial setback.55 Fischer contributed to the first of the capital calls, but
did not respond thereafter.56 Skyscapes sued Fischer for the outstanding
contributions and litigation costs and prevailed in state district court.57 On appeal,
Fischer argued that “the operating agreement limited the remedies available to
Skyscapes to deal with delinquent capital contributions and precluded [the]
action.”58
52 Def.’s Supp. at 3.
53 2014 WL 5801()42 (Kan. Ct. App. 2014).
54 Skyscapes, 2014 WL 5801042, at *2.
55 Id.50 Id.57 Id.58 Id._14_
The Court of Appeals noted that the operating agreement provided that, where
a participant failed to make a capital contribution, the other members “‘have the
right, but not the obligation’ to pay the delinquent amount in proportion to their
respective interests in the company. If the participants choose to do so, the
ownership interests in the company are to be adjusted . . . to reflect the change in
capital contributions.”59 Fischer argued that, as the only remedy specified in the
operating agreement’s terms, this language provided the exclusive remedy.
The Court of Appeals disagreed “[N]othing . . . suggests the remedy outlined
in [the terms] is intended to be exclusive. Especially given other sections of the
operating agreement, We would expect to see that sort of explicit statement if the
participants intended to create an exclusive remedy. That omission is telling.”(’0
Looking to the language of the operating agreement, the Court additionally noted a
provision stating that members “will not be personally liable for any debts or losses
of the [c]ompany beyond . . . capital contributions and any obligation . . . to make
capital contributions.”61 This provision, the Court found, “imposes categorical
59 SkySCapeS, 2014 WL 5801042, at *2.
00 Id. at *3.
6' ld.
_15_
personal liability for unpaid capital contributions extending beyond the remedy
[specified in the operating agreement].”02
The Court of Appeals found too that a later provision stating “[t]he rights and
remedies of the parties hereunder shall not be mutually exclusive” further preserved
equitable and legal remedies for breach: “The parties meant to retain as broad an
array of remedies as possible for breaches of the operating agreement. . . . Preserving
multiple remedies reflects a sensible reading of the operating agreement. The
readjustment-of-interests remedy . . . would be singularly ineffective in
circumstances such as those presented here.”63
The Skyscapes court distinguished Canyon Creek on the express the terms of
each’s operating agreement.04 The Canyon Creek opinion, the Skyscapes court
observed, made no mention of a preservation-of-remedies clause;65 and the Canyon
Creek operating agreement “confine[d] personal liability to capital contributions
alone,” unlike the Skyscapes agreement, which “expressly extends personal liability
02 Skyscapes, 2014 WL 5801042, at *3.
63 Id. at *3.
64 ld. ar *4.
05 Id. (“[N]othing in the Canyon Creek decision suggests the operating agreement at issue
there contained a provision . . . that plainly preserves legal and equitable remedies available
through civil actions for breaches of the agreement. [] Fischer suggests that we should infer the
Canyon Creek Development agreement also contained such a provision because its language is
otherwise similar to or the same as the Skyscapes operating agreement We decline to make that
inference.”).
_16_
to unpaid capital contribution calls.”00 The Skyscapes court ultimately affirmed
Fischer’s liability for the outstanding capital contributions
“ln deciding a contract interpretation dispute, the court will first ‘examine the
entire agreement to determine whether the parties’ intent can be discerned from the
express words used or, altematively, whether its terms are ambiguous.”’07 “lf the
relevant contract language is clear and unambiguous, courts must give the language
its plain meaning.”68 To determine whether the contract is unambiguous, Delaware
“adheres to the objective theory of contracts.”69 That requires a court to interpret a
particular contractual term to mean “what a reasonable person in the position of the
parties would have thought it meant.”70 And this Court “will read a contract as a
whole and[ ]will give each provision and term effect[.]”71
The language of the Route 9 Agreement approximates the language of the
Skyscapes agreement far more than the Canyon Creek agreement. Like the
00 Skyscapes, 2014 WL 5801042, at *5.
07 Catawl)a Associates-Christiana LLC v. Jayaraman, 2016 WL 4502306, at *6 (Del. Super.
Ct. Aug. 26, 2016) (quoting lnl'eractive Corp. v. Vivendi Universal, S.A., 2004 WL 1572932, at *9
(Del. Ch. June 30, 2004)).
00 Weslfield Ins. Grp. v. J.P. ’s Wharf Ltd., 859 A.2d 74, 76 (Del. 2004).
09 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010).
70 Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006).
71 Kuhn Consl'ruction, Inc. v. Diamond State Port Corp., 2010 WL 779992, *2 (Del. Mar. 8,
2010).
_17_
Skyscapes agreement, Skyscapes contains a preservation-of-remedies clause that
states “[t]he rights and remedies provided by [the Route 9 Agreement] are given in
addition to any other rights and remedies any Member may have by law, statute,
ordinance or otherwise.”72
And like the Skyscapes agreement, the Route 9 Agreement extends personal
liability for unpaid capital calls. The Route 9 Agreement’s Section 8.10 provides
certain protections: “No Member shall be personally liable for the expenses,
liabilities, debts, or obligations of the Company except as provided in the Act.”73
While Section 4.2 requires the payment of capital contributions “[i]n the event the
Company requires funds in addition to [initial capitalization],” the need for which
“shall be determined in good faith solely by the Manager.”74 And so, because the
individual members were expressly required to make additional capital contributions
at the manager’S discretion, they took on personal liability to the other members (and
Route 9) for the failure to make such contributions
Though the Route 9 Agreement may describe just one potential remedy in the
Section 4.2’s readjustment-of-interests provision, that remedy is not, as Grayson
posits, exclusive. If so, the Court “would expect to see [an] explicit statement [that]
72 Pis.’ opp., Ex. B at 22.
73 Pls.’ Opp., Ex. B at l7.
74 Id. at 7. Grayson in no way alleges bad faith.
_18_
the participants intended to create an exclusive remedy” in form of readjustment of
interests.75 But just as in Skyscapes:
The readjustment-of-interests remedy . . . would be
singularly ineffective in circumstances such as those
presented here. lf [the venture] looked to be a bad
investment at the point a call for additional capital went
out, a participant would have a strong economic incentive
to avoid complying. The remaining participants wouldn’t
be too happy about making up the delinquency and,
thereby, garnering a greater interest in what had turned
into a losing proposition. Suing to collect the delinquent
contribution likely would be a preferable remedy. So it
seems unlikely the operating agreement would have been
written to limit the participants’ remedies that way.
Here, nothing in the language of the Route 9- Agreement indicates that the
readjustment-of-interests provision was intended to be an exclusive remedy. And
the preservation-of-remedies clause suggests just the opposite.
V. CONCLUSION
Because the Route 9 Agreement is properly read to have imposed personal
liability upon Route 9’s individual members for failure to make additional capital
contributions for the ongoing venture, Route 9 Plaintiffs have the right to sue
Grayson for breach of contract.
75 Skyscapes, 2014 WL 5801042, at *3.
_19_
Grayson’s Motion to Dismiss is therefore DENIED.
@D;)
Paul R. Wallace, Judge
IT IS SO ORDERED.
_2()_