Pollitt v

McClelland (In re McClelland), No. 09-9030-WLH, 2011 Bankr. LEXIS 2224 (Bankr. N.D. Ga. June 8, 2011). Aiding and abetting in breach of duty. — After plaintiff limited liability company (LLC1), who sold its interest in another limited liability company (LLC2) to the other members in LLC2 (buyers), and alleged that the buyers defrauded LLC1’s members to sign a deed conveying real property from a related leasing company to LLC2 and that defendant financier, who financed the buyers, aided and abetted a breach of the buyers’ fiduciary duty under O.C.G.A. § 14-11-305(1) in connection with that conveyance, the aiding and abetting claim failed because the conveyance had been required for LLC2 to obtain a loan from a bank, and absent the conveyance to enable LLC2 to secure the debt to the bank, the representations of the selling members in the loan application would have been false, subjecting the selling members to liability for bank fraud under 18 U.S.C. § 1344 or theft by deception under O.C.G.A. § 16-8-3. Ledford v. Peeples, 657 F.3d 1222 (11th Cir. 2011). Failure to dissolve business. — Probate court order removing an executor for cause was affirmed because the executor 14-11-305 violated their fiduciary duty in numerous ways by failing to dissolve the estate business, using estate property and funds for their own benefit and to pay personal bills, overpaid executor’s fees, and had a conflict of interest by continuing to operate the business despite the estate losing money but personally benefitting by using the business property rent-free. Myers v. Myers, 297 Ga. 490, 775 S.E.2d 145 (2015). Issue of fact existed concerning whether fiduciary duty was owed. — Defendant’s ability to appoint four managers gave the defendant de facto control of a manufacturer’s eight-member board of managers, which created a genuine fact dispute as to whether the defendant was a managing member of the manufacturer and therefore owed fiduciary duties to another member pursuant to O.C.G.A. § 14-11-305(1). Denim N. Am. Holdings, LLC v. Swift Textiles, LLC, 816 F. Supp. 2d 1308 (M.D. Ga. 2011). In a dispute between a manager and a member of an LLC over the member’s alleged failure to disclose a contractor’s financial problems and failure to supervise the contractor in the contractor’s site work, issues of fact remained regarding whether the member had a fiduciary duty to inform the manager of the problems. Inland Atl. Old Nat’l Phase I, LLC v. 6425 Old Nat’l, LLC, 329 Ga. App. 671, 766 S.E.2d 86 (2014). Failure to consider damages for breach of fiduciary duty. — In a dispute between members of a limited liability company, in light of a stipulated accounting, which proved the defendant was improperly distributing company funds to the defendant and a brokerage firm, the trial court erred by failing to consider whether the plaintiff was entitled to recover damages for the defendant’s breach of fiduciary duty. Niloy & Rohan, LLC v. Sechler, 335 Ga. App. 507, 782 S.E.2d 293 (2016). Construction with Other Law Precedence of operating agreement. — Motion for a new trial by one member of limited liability company (LLC) in action among members for breach of contract, breach of fiduciary duty and other claims was properly denied, as resignation by another member from the LLC did not constitute a breach of fiduciary duty under the LLC’s operating agreement or Georgia law; the remaining member failed to show that members who resigned from the LLC were prohibited from forming a competing business or soliciting customers of the LLC. James E. Warren, M.D., P.C. v. Weber & Warren Anesthesia Servs., 272 Ga. App. 232, 612 S.E.2d 17 (2005). When owners of a limited liability company sued its co-owners for, inter alia, breach of fiduciary duty for negotiating with a third party for financing to buy out the owners’ interest, the co-owners could not be held liable because O.C.G.A. § 14-11-305 provided that the company’s operating agreement governed, notwithstanding O.C.G.A. § 14-11-307, on revealing conflicting interest transactions, and that operating agreement allowed the co-owners to engage in any noncompetitive activity, including negotiating with the third party. Ledford v. Smith, 274 Ga. App. 714, 618 S.E.2d 627 (2005). Breach of Duty Shown Evidence supported finding of breach of fiduciary duty. — In a direct action brought by a medical practice limited liability company member against another, sufficient evidence supported the trial court’s finding that the member who remained in possession of the business failed to act in the best interest of the business and failed to exercise ordinary care when that member made the decision not to take any steps to have the exiting member’s super bills processed and collected after the exiting member’s departure. Given the high level of hostility and the bad blood between the parties over the operation of business, the trial court was authorized to find that the possessing member’s decision was made in bad faith in an effort to negatively impact the exiting member’s ownership interest in the business; therefore, the trial court was authorized to find that the possessing member breached the fiduciary duty owed to the business and the exiting member. Internal Med. Alliance, LLC v. Budell, 290 Ga. App. 231, 659 S.E.2d 668 (2008). Breach of Duty Not Shown Evidence did not support finding of breach of fiduciary duty. — As a limited liability company owed no fiduciary duty to the company’s members, either directly or vicariously for actions taken by the company’s manager pursuant to O.C.G.A. § 14-11-305, a company officer’s claim that the company breached the company’s fiduciary duty when the officer was terminated and forced to sell back the company ownership interest lacked merit, such that the company was entitled to summary judgment on that claim. ULQ, LLC v. Meder, 293 Ga. App. 176, 666 S.E.2d 713 (2008). Financier who secretly supplied the purchase money for managing partners to buy out the corporate principals’ half- interest in a carpet company did not aid and abet a breach of fiduciary duty under the Limited Liability Company Act, O.C.G.A. § 14-11-305(1), because, as a matter of law, no breach of the statute’s obligations occurred. Ledford v. Peeples, 568 F.3d 1258 (11th Cir. 2009). When plaintiffs, a corporation and the corporation’s principals, alleged defendant, the financier for the managing partners of a company who bought out the corporation’s interest in the company, asserted a claim that the financier aided and abetted the managing partners’ breach of their duty of loyalty under O.C.G.A. § 14-11-305(1), in that the managing partners refused to convey property owned by the company to a leasing entity that was set up to hold the property and lease the property to the company, the claim failed because, as a matter of law, there was no breach of fiduciary duty: § 14-11-305 actually obligated the managing partners, as managers of the company, not to do that because if the partners had made the conveyance, the managing partners would, in effect, have given the leasing entity the part of a second bank’s loan the company used to pay off the leasing entity’s note to a first bank while gaining the company nothing in return, since it was contemplated that the property was to be used as collateral to secure the second bank’s loan to the Breach of Duty Not Shown (Cont’d) company. Ledford v. Peeples, 605 F.3d 871 (11th Cir. 2010). As a denim seller was not a managing member of the parties’ joint venture based on the terms of the operating agreement, the seller did not owe fiduciary duties to the manufacturer; therefore, a breach of fiduciary duty claim failed. Denim North Am. Holdings, LLC v. Swift Textiles, LLC, No. 12-11863, 2013 U.S. App. LEXIS 16499 (11th Cir. Aug. 9, 2013) (Unpublished). Evidence did not support finding of 14-11-307 breach of fiduciary duty in bankruptcy case. — Debtor was entitled to judgment on the pleadings as to the plaintiffs’ claim under 11 U.S.C. § 523(a)(4) because the complaint failed to allege any facts showing fiduciary relationship owed to the plaintiffs, and fiduciary duties imposed by Georgia law on managers and members of LLCs were not the type of trust-like duties necessary to meet the strict standard for fiduciary capacity under § 523(a)(4). Nat’l Identity Solutions, LLC v. Logan (In re Logan), No. 13-5092-BEM, 2015 Bankr. LEXIS 2758 (Bankr. N.D. Ga. July 1, 2015).