Agarwal v. Est. of Anil Agarwal

2022 NCBC 7
CourtNorth Carolina Business Court
DecidedFebruary 9, 2022
Docket21-CVS-5263
StatusPublished

This text of 2022 NCBC 7 (Agarwal v. Est. of Anil Agarwal) is published on Counsel Stack Legal Research, covering North Carolina Business Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Agarwal v. Est. of Anil Agarwal, 2022 NCBC 7 (N.C. Super. Ct. 2022).

Opinion

Agarwal v. Est. of Anil Agarwal, 2022 NCBC 7.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION GUILFORD COUNTY 21 CVS 5263

ASHISH AGARWAL,

Plaintiff,

v. ORDER AND OPINION ON ESTATE OF ANIL AGARWAL, DEFENDANT’S MOTION FOR Deceased; WENDOVER DONUTS, JUDGMENT ON THE PLEADINGS LLC; KUSH DONUTS, LLC; and SARASH PROPERTIES, LLC,

Defendants.

1. THIS MATTER is before the Court on Defendant Estate of Anil

Agarwal’s Motion for Judgment on the Pleadings (the “Motion”) pursuant to Rule

12(c) of the North Carolina Rules of Civil Procedure (the “Rule(s)”). (ECF No. 35.)

The Motion, which requests partial relief, focuses on the language of identical

provisions in the operating agreements of three closely-held North Carolina limited

liability companies. At issue is whether the language of the operating agreements

requires the dissolution of the LLCs following the death of one of their members.

2. Having considered the Motion, the related briefing, appropriate matters

of record, and the arguments of counsel at a hearing on the Motion, the matter is ripe

for determination.

3. For the reasons set forth below, the Motion is GRANTED in part and

DENIED in part. West Law Firm, by William E. West, Jr., for Plaintiff Ashish Agarwal.

Carruthers & Roth, P.A., by Kevin A. Rust, for Defendant-Estate of Anil Agarwal.

Defendants Wendover Donuts, LLC; Kush Donuts, LLC; and Sarash Properties, LLC are currently unrepresented.

Earp, Judge.

I. FACTUAL AND PROCEDURAL BACKGROUND

4. The Court does not find facts on motions for judgment on the pleadings

under Rule 12(c) but rather recites the facts alleged in the pleadings that are relevant

to the Court’s determination of the Motion. Willard v. Barger, 2019 NCBC LEXIS

43, at *1–2 (N.C. Super. Ct. July 12, 2019) (citing Erickson v. Starling, 235 N.C. 635,

657 (1952)).

5. The events giving rise to this litigation began when Dr. Anil Agarwal

(“Dr. Agarwal”) acquired three Dunkin’ Donuts franchises in North Carolina. (Am.

Compl. ¶ 6, ECF No. 18.) Between April 2014 and April 2015, Dr. Agarwal formed

both Wendover Donuts, LLC and Kush Donuts, LLC to own and operate the

franchises. (Am. Compl. ¶ 7.) Dr. Agarwal also formed Sarash Properties, LLC

(together, with Wendover Donuts, LLC and Kush Donuts, LLC, the “LLCs”) to own

and manage the real property for at least one of the franchises. (Am. Compl. ¶ 7.)

6. At the time the LLCs were organized, Dr. Agarwal was the sole member.

(Am. Compl. ¶ 9.) However, Dr. Agarwal did not have experience managing Dunkin’

Donuts franchises, so he contacted Plaintiff Ashish Agarwal (“Plaintiff”), who was

formerly related to him by marriage, for assistance. (Am. Compl. ¶ 9; Answer, Cross- cl., & Derivative Countercl. ¶ 5, ECF No. 31.) Plaintiff was a successful owner and

operator of Dunkin’ Donuts franchises in New York. (Am. Compl. ¶ 9.) At Dr.

Agarwal’s invitation, Plaintiff agreed to relocate to North Carolina and manage the

LLCs, “provided that he would have membership interests in the [LLCs] equal to that

of [Dr. Agarwal].” (Am. Compl. ¶ 9.) In return, Dr. Agarwal agreed that Plaintiff

“would receive a fifty percent membership interest in each of the companies, as well

as a fifty percent interest in Decedent’s capital accounts in each of the [c]ompanies

and in any other assets of the companies.” (Am. Compl. ¶ 9.)

7. On 28 July 2015, Dr. Agarwal and Plaintiff entered into an operating

agreement for Sarash Properties, LLC, specifying that Dr. Agarwal and Plaintiff each

had a 50% interest in this LLC. (Am. Compl. ¶ 10; Ex. D, ECF No. 43.)

8. Thereafter, on 3 November 2015, Dr. Agarwal and Plaintiff entered into

two more operating agreements: one for Wendover Donuts, LLC, and a second one for

Kush Donuts, LLC. (Am. Compl. ¶¶ 11, 12.) The operating agreement for Wendover

Donuts, LLC provided that Dr. Agarwal owned 50%, Plaintiff owned 45%, and a third

person, who later withdrew as a member, owned the remaining 5%. (Am. Compl.

¶ 11; Ex. E, ECF No. 24.) Dr. Agarwal and Plaintiff were equal members of Kush

Donuts, LLC. (Am. Compl. ¶ 12; Ex. F, ECF No. 25.)

9. On 29 December 2015, Dr. Agarwal and Plaintiff entered into a written

agreement (“29 December Agreement”) providing that “fifty percent of the

membership interests in Kush Donuts, LLC, and fifty percent of the membership interests in Wendover Donuts, LLC were transferred to Plaintiff.” (Am. Compl. ¶ 13;

Ex. G, ECF No. 26.)

10. The operating agreements contain a mandatory dissolution provision

that is triggered upon the death of a member, unless within ninety days following the

death, the members “mutually agree” in writing otherwise. (Ex. D, ECF No. 43; Ex.

E, ECF No. 24; Ex. F, ECF No. 25; collectively the “Operating Agreements”, § 10.1.)

11. Dr. Agarwal died on 15 December 2020. (Am. Compl. ¶ 14.)

12. Three months after his death, Plaintiff, acting alone, executed three

corporate resolutions, one for each LLC, electing not to dissolve the LLCs but to

continue their operations. (Am. Compl. ¶ 15.)

13. The effect of these resolutions, however, is in dispute. Plaintiff and Dr.

Agarwal’s estate (“the Estate”) disagree as to whether the relevant language in the

Operating Agreements affords Plaintiff the unilateral ability to decide the fate of the

three LLCs. (Am. Compl. ¶ 16.)1

14. Consequently, Plaintiff filed suit on 12 May 2021, (Compl., ECF No. 3),

and amended his complaint on 13 September 2021, (Am. Compl., ECF No. 18),

seeking, among other things, a declaratory judgment “with regard to the application,

interpretation, and meaning of the operating agreements . . . and whether the death

of [Dr. Agarwal] requires that the companies be dissolved, and their affairs wound

up.” (Am. Compl. ¶ 20.)

1 (See Exs. D, E, F.) For purposes of this Motion, the relevant language of the three operating agreements is the same. Therefore, the analysis is the same for each of the LLCs. 15. The Estate responded with a cross-claim against the LLCs requesting a

declaration that they be dissolved in accordance with the terms of the Operating

Agreements, as well as pursuant to N.C.G.S. § 57D-6-02(2). (Answer, Cross-cl., &

Derivative Countercl. ¶ 26.) It also counterclaimed on behalf of Kush Donuts, LLC

and Wendover Donuts, LLC against Plaintiff, as manager of the LLCs, for alleged

breach of his fiduciary duties. (Answer, Cross-cl., & Derivative Countercl. ¶ 2.)

16. On 11 November 2021, the Estate moved for judgment on the pleadings

pursuant to Rule 12(c) requesting that the Court enter a partial judgment in its favor.

(Mot. J. Pleadings, ECF No. 35.) Specifically, the Estate seeks a declaration from the

Court that, in accordance with the plain language of the Operating Agreements: (1)

the death of Dr. Agarwal is a mandatory dissolution event pursuant to Section 10.1,

and (2) upon the death of Dr. Agarwal, the Estate became a member of each of the

LLCs and was entitled to vote on Plaintiff’s resolutions to continue their operations.

Plaintiff responds that: (1) Section 10.1 is, at best, ambiguous, and questions of fact

prevent a determination at this stage regarding whether the LLCs must dissolve, and

(2) the Operating Agreements do not establish that the Estate is a member of the

LLCs entitled to vote on whether operations continue.

17.

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