Facts

Individual parties were member-managers of Winchester-Wesselink LLC, which operated a now-defunct Gouda cheese-making company. Richard Van Loon and Dianne Van Loon were minority members holding 18.33 percent of the LLC's membership. After years of litigation brought against the member-managers, and the LLC, by the Van Loons, the remaining 82 percent majority of member-managers, including cross-defendants Leo Wesselink, Betty Wesselink, David Thornton, and Pauline Thornton, voted on Nov. 25, 2013 to dissolve the LLC and liquidate its assets, which included a valuable piece of real property located in Winchester. These majority member-managers located a third party to purchase the real property, which would have avoided foreclosure and bestowed a profit upon the LLC of over $1 million. The LLC voted to proceed with the sale. In order to move forward with the purchase, however, the prospective buyer required all member-managers of the LLC, including the Van Loons, to sign-off on the sale of the real property. The Van Loons refused to sign-off on the sale.

PLAINTIFF/CROSS-DEFENDANTS' CONTENTIONS: Winchester-Wesselink LLC claimed the Van Loons falsely communicated to the prospective buyer that they held a majority membership interest in the LLC. The prospective buyer then chose not to proceed, and the LLC lost the real property at a foreclosure sale resulting in net proceeds to the LLC of just $42,800.

Winchester-Wesselink LLC contended that by refusing to sign-off on the profitable sale of the LLC's real property to a third-party before the foreclosure sale and by falsely claiming majority interest in the LLC, the Van Loons breached the LLC Operating Agreement, breached their fiduciary duties to the LLC, and intentionally interfered with the LLC's prospective economic advantage arising from the proposed sale of the real property to the third-party.

DEFENDANT/CROSS-COMPLAINANT'S CONTENTIONS: Richard Van Loon contended that the other member-managers breached their fiduciary duties to the LLC by ceasing further funding of the defunct company and voting in favor of dissolution, among other contentions. Van Loon also claimed that he and Dianne Van Loon were the majority members of the LLC.

CROSS-DEFENDANTS' CONTENTIONS: Cross-defendants Leo Wesselink, Betty Wesselink, David Thornton, and Pauline Thornton denied Van Loon's contentions as lacking merit and as time-barred.

Settlement Discussions

The parties were ordered to a Mandatory Settlement Conference on the first day of trial. The Van Loons offered a walk-away for all parties. Winchester-Wesselink and the majority members demanded $1 million, dismissal of the Van Loon cross-complaint with prejudice, and attorney fees and costs to be determined by the court. No counter-offer was made by the Van Loons.

Damages

Winchester-Wesselink claimed damages in the amount of $1,856,670 resulting from the lost sale of the real property (including pre-judgment interest), plus punitive damages. The LLC also sought declaratory relief from the court for a determination of the members-managers' relative rights under the LLC Operating Agreement. Richard Van Loon claimed damages in the amount of $450,000 reflecting his alleged contributions to the LLC between 2012 and 2015. Van Loon also sought declaratory relief stating that he and Dianne Van Loon are the majority members.

Result

The jury found in favor of plaintiff and cross-defendant Winchester-Wesselink on all three claims against the Van Loons and awarded the LLC compensatory damages of $1,856,670 and punitive damages of $2.5 million, for a total of $4,356,670. The jury also found in favor of cross-defendants Leo Wesselink, Betty Wesselink, David Thornton, and Pauline Thornton on Van Loon's breach of fiduciary duty claim. As to the LLC's declaratory relief claim, the court ruled that the vote of the members to dissolve the LLC and liquidate its assets was properly authorized under the LLC Operating Agreement and the $450,000 of claimed contributions by Van Loon between 2012 and 2015 were neither capital contributions nor reimbursable expenses under the LLC Operating Agreement. The court also affirmed the collective majority membership interest of cross-defendants Leo Wesselink, Betty Wesselink, David Thornton, and Pauline Thornton.

Other Information

The prevailing parties will be bringing motions for fees and costs under Civil Code 1717. FILING DATE: Aug. 13, 2014 Lead Case (RIC1408039); Feb. 17, 2015 Consolidated Case (RIC1501825).

Deliberation

less than one full day

Poll

12-0 (on all questions)

Length

16 days