SUPERIOR COURT OF THE VIRGIN ISLANDS
DIVISION OF ST THOMAS AND ST JOHN
DR TYLUR ARVIDSON and DR TYGUE ARVIDSON ) )CASE NO ST 16 CV 410 Plaintiffs ) Cite as 2020 VI SUPER 48 ) ) V ) ) DR WILLIAM BUCHAR and VI CHIROPRACTIC LLC ) ) Defendants ) “—J
MEMORANDUM OPINION 111 Before the Court is Defendant s fully briefed Motion for Partial Summary Judgment asserting that the Plaintiffs breach of fiduciary duty claim must fail as a matter of law because the Plaintiffs failed to show that they incurred harm in the form of damages Because Defendants have failed to prove that no genuine issue of material fact exists regarding the harm element of the Arvidsons’ claim, the motion is denied
Factual and Procedural History 112 A more detailed rendering ofthe facts giving iise to this lawsuit was piovided in the Court s June 6 2018 Memorandum Opinion Ultimately, this is a dispute between business partners who entered into discussions to dissolve their business venture, V l Chiropractic, LLC, upon their inability to decide how their chiropractic practice should be managed and operated During these discussions and the ensuing incomplete dissolution process relations further deteriorated 113 As a result, on July 12 2016, Tyhir and Tygue Arvidson initiated this suit against William Buchar ‘ After filing a First Amended Complaint and completing motions practice the Arvidsons claim Buchar breached his fiduciary duties to them by failing to execute the dissolution ofV l Chiropractic in an effort to lower the market value ofthe Arvidsons shares during buy out negotiations They also ask this Couit to dissolve the LLC Z 114 In response, Buchar filed counterclaims grounded in contract and tort Buchar asserts the Arvidsons breached their contiactual duties under the LLC 5 Operating Agreement and the covenant of good faith and fair dealing, intentionally interfered with prospective business relations slandered him, and were unjustly enriched 3
l Pls Compl 7 Pls Fiist Am Vellfied Compl ’Def 5 Second Am Countereompl Alyrdran at a! v Buchw Ll ul 2020 VI SUPER 48 Case No ST 1(kCV410 Memorandum Opinion, March 24 2020 Page 2 of 13
Summary Judgment Standard
115 Motions for summary judgment are governed by V I R Civ P 56 which provides that the Court must “grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law "‘ A factual dispute is deemed genuine if the evidence is such that a reasonablejury could return a verdict for the nonmoving party[ ] 5 and a fact is material only where it ‘might affect the outcome ofthe suit under the governing law[ pa [T]hc party moving for summaryjudgment possesses the initial burden ofidentifying evidence indicating that there is an absence of any issue of material fact 7 If the moving party does so the burden shifts to the non moving party to present affirmative evidence front which a Jury might reasonably return a verdict in [its] favor ‘3 But, ‘ [i]fa moving party fails to carry its initial burden ofproduction, the nonmoving party has no obligation to produce anything, even ifthe nonmoving party would have the ultimate burden of persuasion at trial 5' A party asserting that a fact cannot be or is genuinely disputed must support the assertion by (i) citing to particular parts ofmaterials in the record including depositions documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions interrogatory answers, or other materials, or (ii) showing that the materials cited do not establish the absence or presence of a genuine dispute or that an adverse party cannot produce admissible evidence to support the fact 1“ 116 ”The [C]ourt must credit all reasonable inferences from the evidence on record in favor of the nonmoving party in considering whether there are any disputed issues ofrnaterial fact ’“ and must take the non moving party's eonflictrng allegations as true if supported by proper proots ‘2 Further, the Court should not weigh the evidence, make eredrbility determinations, or draw legitimate inferences from the facts when ruling upon sumrnaryjudgntent nrotions because these are the functions ofthejury ‘3 The Court's role in deciding a motion for surrrmary judgment is not to determine truth, but rather to detemrine
‘ VI R (.rv P 56(a) 5 Greene v V! Wale; undl’aner Co 65 VI 67 73 (VI Super Ct 2016) (quoting Anita/Jan v Liberty Lobby Inc 477 U S 242 2480986)) 5 William: t Untrech mp 50 VI 191 194 (V I 2008) (quotingAnde/ion 477 U S at 248) 7 UnrtedCoIp 64 VI at 309 (VI 2016) (quoting ann v Mar/1n 54 VI 379 391 (VI 2010)) (Citations omitted) x Hawkins v ("emu 66 V l 112 (V I Super Ct 2017) (citation and quotation marks omitted) ’ United C07}; 64 VI at 309 10 (citing Mar an 54 VI at 391) (quotation marks omitted) ‘0 V I R Civ P 56(c)(1) ” Wullersv Waller: 60VI 768 794 (VI 2014)(citing Bmdv Anltllei YachtingServr [m 57 VI 354 358 (VI 2012) and M1 Hall) burdens Cm an; rn/tcnon Inc v Ton/mm); a] Mount Holly 658 F 3d 375 381 (3d Cir 201 1)) ' Summon v Golden Rerorlr LLLP 56 V I 597 605 (V I 2012) (citations and quotation marks omitted) ” W/lllanu 50 V I at 197 (citing Anderson 477 U S at 255) AI'VIdSOVl a a] v Buchw e! a! 2020 VI SUPER 48 Case No ST 16 CV410 Memorandum Opinion March 24 2020 Page 3 of 13
whether a factual dispute exists that warrants trial on the merits “ The Court must deny summary judgment where a factual dispute exists15 and must grant summaryjudgment ifthe non moving party
cannot establish an essential element of its claim ‘5
Analysis
117 Buchar argues that (I) because V I Chiropractic was not dissolved, as the Arvidsons initially alleged in their Original Complaint and because it remains in good standing, the Arvidsons suffered no damages ’ with regard to the breach of fiduciary duty claim ‘7 (2) the Operating Agreement precludes Buchar from incurring liability in executing his managerial duties for the LLC and (3) 13 V I C § 1303 prevents Buchar from incurring liability A The incomplete dissolution ofV I Chiropractic does not prevent the Arvidsons from fulfilling the harm element
SIB The Virgin Islands Limited Liability Act controls the claims of Virgin Islands LLC members and managers against other members and managers ofthe same LLC "‘ Specifically 13 V I C § 1409(h)(2) (4) establish that managers in manager managed LLCs owe fiduciary duties to other LLC members and the LLC Referring to 13 V I C § 1409(b) (d) 13 V l C §1409 (h)(2) provides that a manager [Ufa manager managed LLC] is held to the same standards of conduct prescribed for members in member managed LLCs, namely, managers owe the duty of loyalty the duty of care, and the obligation of good faith and fair dealing ‘9 Similarly under Section l409(h)(3) the same fiduciary duties apply to LLC members ‘who pursuant to [their] operating agreement excicise[] some or all of the rights of a manager in the management and conduct oi the [LLC s] business "" But 13 V I C § 1409(h)(4) indicates that a managei is relieved of liability imp0sed by law for violation ofthe standards prescribed by subsections of this section to the extent 0/th managerial authority (IL/Lgalcd In the members by the operating agrccment 7‘
” Hawkins 66 VI at 117 (Citing Williams 50 VI at 195) '5 M ”1 (Citing may Ch! 15mm v Swim} Isle shopping Center 52 v1 410 423 (VI 2009)) ” See (timer Corp v Cullen 477 U S 317 322 23 (1986) (explaining that sumniaiyJudgment is mandated against a party who fails to make a showing sufficient to establish the existence of an element essential to that pai‘ry‘s ease and on which that party will bear the burden ol'proofat tiial ) *7 Def 5 Reply to P15 Opp to Def s Mot Summ J 2 ‘3 See Title 13 Chapter 15 ofthe Virgin Islands Code Subchaptei IV Relations ofMembeis to Each Other and to Limited Liability Company (establishing the statutes that govern rights obligations, and duties that govern iclations between individuals who are members and managers of the same LLC) Cumpm e to Chapter 15 ofthe Virgin Islands Code Subchaptcr III Relations ofMembers and Managers to Persons Dealing with Limited Liability Company (establishing iights obligations and duties that govein relations between individuals who are members or managers of an LLC and those individuals or entities who are not part ofthe same LLC e g creditors) ”‘13VlC § 1409mm Z“13VIC §1409(li)(3) ' 13 V I ( § 1409 (h)(4) (emphasis added) Arv/dauri e! a! v Ericka; at a] 2020 VI SUPFR 48 Case No ST lEkCV410 Memorandum Opinion March 24 2020 Page 4 of 13
119 Here the V I Chiropractic Operating Agreement establishes that Buchar is the LLC s Manager 2’ Further the Operating Agreement requires the Arvidsons’ to perform consulting services in a fashion akin to employees in an employer employee relationship 7‘ Neither party argues the contrary 110 The standards governing LLC fiduciary duties are found in 13 V I C § 1409(1)) (c) and (d) which define the duties of loyalty,” care ’5 and good faith and fair dealing ’5 respectively when addressing the duty ofloyalty, 13 V I C § l409(b)(l), in pertinent part requires managers ofmanager managed LLCs to account to the company and to hold as trustee for it any property, profit, or benefit derived by the [manager] in the conduct or winding up of the company's business or derived from a rise by the [manager] ofthe company s property including the appropriation ofa company s opportunity 17 Title 13 V IC § 1409(e) makes clear that a manager 5 duty ofeare is owed to the LLC and its other members in [the course of] the [manager 5] conduct of and winding up ofthe company’s business, ’3 but requires only that the manager “refrain[] from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation oflaw ’9 Finally, 13 V I C § 1409(d) indicates that a manager‘ shall discharge [his] duties to [his LLC] and its other members under this chapter or under the [LLC 5] operating agreement and exercise any rights consistently with the obligation of good faith and fair dealing 1“
fill] Outside ofthcse provisions the Virgin Islands Code provides no further guidance Similarly, no Virgin Island Supreme Court precedent addresses a breach of fiduciary duty claim in an LLC context Fortuitously another Judge on this coun conducted a Banks” analysis of the breach of fiduciary duty cause of action in bbner v Pclrahan ’7 Finding its research, reasoning and conclusion sound the Court adopts them here Under Elmer the Restatement (Second) of Torts § 874 represents the soundest rule for establishing a breach of fiduciary duty claim in the Virgin Islands “3 Section 874 states that, [o]ne
* VI Chiropractic Operating Agreement Clause 3 7( Manager means Dr William L Buchar or the party or parties then acting in that capacity ) Clause e. 1 ( The name ofthe Manager IV William L Buchdr ) ’5 VI Chiropractic Operating Agreement Lxhibit B See also Aiyidsan v BllL‘hlII Case No ST 16 (.V 410 2019 VI LEXIS 122 W 34 39 W53 56 (VI Super Ct September II 2019) 413VIC§1409(b) z13VIC§1409[c) b13vrc §1409(a) 713 VIC § l409(b)(1) 2" 13 VIC § 1409(e) “13VIC§1409(c) 3" 13 VIC § 1409M) 5' Bank.) v Intenutmrml Rental and Leasing Coip 55 V I 967 (VI 2011) J Case No ST 14 CV 537 2018 VI LEXIS 80 (VI Super Ct Aug 14 2018) ‘3 M at *15 (quoting Guardian) Aunt/son et [If v Buchar 21 a! 2020 VI SUPER 48 Cast. No ST 1&CV410 Memorandum Opinion March 24 2020 Page 5 ofll
standing in a fiduciary relation with another is subject to liability to the other for harm resulting from a breach of fiduciary duty imposed by the relation 34 1112 Elmer also determined that a plaintiff asserting a claim of breach of fiduciary duty must provide the following four elements (1) that a fiduciary relationship exists (2) that the fiduciary breached the duty imposed by said relationship, (3) that the plaintiff must have been harmed, and (4) that the fiduciary s breach was the proximate cause of said harm ” fill} A fiduciary relation exists between two persons when one ofthem is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation’ ’5 Some fiduciary relations such as those of tmstee and beneficiary, principal and agent[ I and director and corporation are the subject of a considerable group of substantive rules of law 37 However, a survey of case law originating from this jurisdiction fails to reveal precedent addressing a breach of fiduciary duty in the LLC context, or even an analogous case addressing the cause of action in a partnership context W4 In their Original Complaint, the Arvidsons alleged that by filing for dissolution ofV I Chiropractic Buchar breached his fiduciary duties owed to them as members of V I Chiropractic 1” In his initial Motion for Summary Judgment, Buchar argued that this Court should grant summary judgment in his favor because the LLC dissolution of which the Arvidsons complained never occurred and as a result, it was undisputed that they could not fulfill the harm clement required for a successful breach of fiduciary duty claim ”I In response the Arvidsons filed a First Amended Complaint in which they still maintain their breach of fiduciary duty cause of action against Buchar 4“ However they now allege
26 Buchar as manager of the Company owed certain fiduciary obligations to the Arvidsons who are members ofthe Company 27 Buchar s Indication was that he Wat ging to dissolve the Company and IhL actions he took in initiating dissolution ofIhL Company were for the sole purpose afredming the price the Arvidsonr could demand for their interest in the Company Buchar acted in his own self interest to Plaintiffs detriment which violated Buchar‘s fiduciary obligations to the Arvidsons as members of the Company 28 Buchar having pruvlilzd formal notice ofdissolution did not disclose he had not dissolved the Company until sometime after thefiling ofthe original Complaint 29 Buchar s action violated the duty of good faith and fair dealing because, among other things Plaintiffs relied on Buchar 5 Notice of Dissolution in the filing of their complaint and then were compelled to
3‘ Restatement (Second) of Torts § 874 ( 1979) 5’ Guardian [nsmanee (a i Khalil 64 VI 3 18 (VI Super Ct 2012) "‘ Id ‘7 Restatement (Second) of Torts § 874 Reporter 5 Notes “ Original Cempl 3" Def 5 Mot Summ J l S 4" First Am Cempl AWN/tan at a! v Buchm at a! 2020 V1 SUPFR 48 Case No ST 1&CV410 Memorandum Opinion March 24 2020 Page 6 of 13
conduct discovery to detennine the true status of the Company as the only official paperwork stated it would be dissolved in thirty (30) days 30 Buchar’s actions benefitted himselfto the detriment ofthe Arvidsons, minority owners of the Company without any justifiable business purpose 31 Although the Arvidsons eould have sold their membership interests in the Company to a third party on the open market as an alternative to selling to Buchar Buchar by noticing the dISXD/UIIOI’I oflhe C umpany Initially appropriated that Opportunity for home/fin the detriment of the A: vrdrom, and when they discovered the company was not actually dissolved, they were no longer in a reasonable position to sell their interests 32 Buchar appropriated the Arvidsons opportunity for selling the Company to him by indicating that he was unilaterally electing to dissolve the Company 33 Buchar s conduct constitutes intentional misconduct because he knowingly violated his fiduciary obligations to the Arvidsons despite having the advice of counsel at all times 34 Buchar’s breach of fiduciary obligations also includes his failure to cause the Company to issue K 15 as the Company is required to do 35 thchar 3 Hula/ion ofhii fiduciary obligarianr to [he Arvidsons caused the Arvidsons damage in an minim! In In shown at trial 4‘
1115 As noted, the Arvidsons allege that Buchar s actions violate[d] the duty of good faith and fair dealing 1“ and other language from the First Amended Complaint indicates that the Arvidsons intend to bring breach ofthe duty ofloyalty‘” and breach ofthe duty of care“ claims as well
1116 Because Buchar limits his motion’s attack to the harm element set out in the Restatement (Second) ofTorts § 874, the Court will limit its analysis to that element as well In support ofthe harm element in their First Amended Complaint the Arvidsons now allege that Buchar (1) ‘rednc[ed] the price the Arvidsons could demand for their interest in the Company ‘5 (2) benefitted himselfto the detriment ot the Arvrdsons minority owners of the Company, ’4“ (3) prevented “the Arvidsons [from selling] their membership interests in the Company to a third party on the open market as an alternative to selling to Buchar [thereby] appropriate[ing] that opportunity for himself [and placing them in an un]reasonab1e position to sell their interests, "7 (4) appropriated the Arvidsons opportunity for selling the Company to
“ First Am Compl W 26 35 4 m 11 29 4‘ I11 1] 31 ( Buchar by noticing the dissolution ofthe Company Initially appropriated that opportunity for himself to the detriment oftlie Arvidsons and when they discovered the company was not actually dissolved they were no longer in a reasonable position to sell their interests ) ” Id 11 33 ( Buchar s conduct constitutes intentional misconduct because he knowingly violated his fiduciary obligations to the Aivrdsons ) ‘5 Id 27 “‘ Id 30 47 Id 3] AI when at a! i Buchar at a! 2020 VI SUPER 48 Case No ST 16 CVAIO Memorandum Opinion March 24 2020 Page 7 of 13
him by unilaterally indicating that he would dissolve the LLC ”‘ and (5) ‘ fail[ed] to cause the Company to issue K Is ‘9 ii 17 By amcnding their Complaint the Arvidsons made new allegations which demonstrate that Buchar has failed to establish that no genuine issue of material fact exists regarding the harm element Buchar did not file a restyled Motion for Summary Judgment that responds to the five different types of harm allegcd the First Amended Complaint‘s allegations nor to the changed nature ofthe Arvidsons‘ claim Instead, Buchar filed a Reply in response to the Arvidsons Opposition Motion that addressed the Arvidsons First Amended Complaint In it, Buchar still maintains that he is entitled to summary judgment because V I Chiropractic was never dissolved)0 and continues by contending that the Arvidsons First Amended Complaint fails to allege the Arvidsons suffered damages and fails to define what those damages are or could be Ultimately, Buchar unpersuasively concludes as a result this lack of damages defeats their claim )' This particular argument is unavailing 1MB Further one ofthe more hotly contested issues of fact in this dispute is whether the Arvidsons made additional capital contributions to V l Chiropractic in the latter part of2015 In this Coon 5 March l0, 2020, Memorandum Opinion the Court addressed the issue of whether to disallow evidence which could possibly show at trial whether the Plaintiffs made additional capital contributions after V I Chiropractie’s initial founding )7 Because this evidence has not been deemed inadmissible a genuine dispute exists regarding whether the Arvidsons made additional capital contributions and, more importantly gained larger ownership percentages of V I Chiropractic an issue of fact direetly impacting the determination of monetary damages at trial
{[19 Buchar also argues in his Reply that because V I Chiropractic was never dissolved, [P]laintiffs financial interest remains viable 5’ However the only evidence Buchar submits in support oi this contention is an email chain showing(1) the Arvidsons’ counsel requested a copy ofV I Chiropractic 5 certificate of dissolution from Buchar s counsel in 2016, nearly a year prior to filing this lawsuit and (2) Buchar s counsel‘s two sentence response stating that You should get a response next week We Iiave not filed for dissolution 5* As a result this argument is also unavaiIing H20 First the email chain fails to definitively show that Buchar would not or did not inland to file for dissolution Instead by prefaeing the statement that no dissolution had been completed with a statement infonning the Arvidsons‘ counsel that he should get a response next week, Buchar s counsel lefl open
‘3 1d 32 W [d 34 5° Def s Reply to P1: ow to Defs Mot Summ J 1 2 ’ Id 2 Anade i Buchar Case No ST 16 CV 410 2020 VI SUPER 36 1M] 19 57 (VI Super Ct March 10 2020) >1 Def s Reply to PIs Opp to Defs Mot Sumrn J 2 ”J Def s Reply to Pls Opposition to Def s Mot Sumin I Exh A Arvldatm e! a! v Buchal L111, 2020 VI SUPER 48 Case No ST lflCVAth Memorandum Opinion» March 24, 2020 Page 8 of 13
the possibility that the Arvidsons and their counsel would see a certificate of dissolution the following week Further because Buchar was the only individual empowered by the Operating Agreement to initiate and complete a dissolution the Arvidsons had even more reason to expect a response from Buchai s counsel regarding dissolution because they could not execute the dissolution themselves {[21 Second the email chain does nothing to bolster Buchai s claim that the Arvidsons lack damages or an ability to prove damages or that, with an incomplete dissolution the Arvidsons’ financial interest remains viable 1122 Third and more important to the determination of this motion the email chain fails to Show the absence of a genuine issue of material fact regarding the existence of the types of harm the Arvidsons complain ot in their First Amended Complaint In his Reply, Buchar posits that because V l Chiropractic was never dissolved ‘plaintiffs‘ financial interest remain[ed] viable ‘5 However, the email fails to simultaneously submit new evidence proving a lack of harm In order to respond to the Arvidsons allegations in their First Amended Complaint addressing harm the email and Buchar’s Reply needed to show the Arvidsons did no! incur an injury, loss, or detriment It also needed to show ifor how the plaintiffs financial interest remain[ed] viable due to Buchar 5 failure to dissolve V l Chiropractic Instead, the email fails to respond to the Arvidsons‘ new allegations addressing harm and merely reiterates the argument he made in his Motion for Summary Judgment Further the parties still dispute the percentages ofV I Chiiopractic owned by the respective parties 1123 As the movant, Buchar bore the burden ofproving the absence ofa genuine issue of material fact regarding the Arvidsons lack of harin due to V I Chiropractie’s incomplete dissolution When it became evident that Plaintiffs would not have suffered harm m the way they originally alleged the Arvidsons responded to Buehar 5 Motion for Summary Judgment by amending their Complaint to contend that harm flowed from an incomplete LLC dissolution Having done so the burden shified back to Buchar,’6 who instead of demonstrating the Arvidsons lack of harm regurgitates the same argument he made in his initial motion and relies on an email that fails to show how Buchar’s failure to dissolve V I Chiropractic led to an absence of harm to the Arvidsons under the theory advanced in their Original Complaint, much less that oftheir First Amended Complaint Since Buchal failed to Show how the LLC s continued
3 Id 2 ‘6 The allegations efharm to which Buchar needed to respond in his Reply were (1) reducing the price the Arvidsons could demand for their interest in the Company (2) benefit[ing] himself to the detrlment ofthc Arvidsons minority owners of the Company [3) preventlng the Arvidsons [from selling] their membership interests in the Company to a third party on the open market as an alternative to selling to Buchar [therein] appropriatenng] that opportunity for himself [and placing them in an un]reasonable position to sell their interests (4) appropriate[ing] the Arvidsons opportunity for selling the Company to him by unilaterally indicating that he would dissolve the LLC and (5) fail[ing] to cause the Company to issue K ls First Am Coinpl W 27 30 31 32 and 34 Alvidson at a! v Buchm 2111/ 2020 VI SUPER 48 Case No ST lfrCV~410 Mcmoiandum Opinion, March 24, 2020 Page 9 of 13
existence resulted in the Arvidsons‘ financial interests remain[ing] viable," Buchar failed to meet his summary judgment burden
The V I Chiropractic Operating Agreement does not preclude all liability for Buchar in his capacity as Manager of V l Chiropractic
W4 Second, Buchar’s argument asserts that provisions in the Operating Agreement prevent his being held liable for acts he committed as Manager In his Motion, Buchar points specifically to Articles 6 l, 10 14 1 l4 6 15 l, and 15 2, to Show the managerial authority the Agreement giants to Buchar as Manager ofVl Chiropractic, Articles 17, 18 l 18 2 and 18 3 to show Bucliar possessed exclusive authority to initiate and finalize V l Chiropractic s dissolution and Articles 15 3 and 15 4 to show the Agreement provrdes that Buchar is to be indemnified in instances where he incurred liability for acts completed in his capacity as Manager ofV I Chiropractic ’7 In response, the Arvidsons argue that provisions in the Agreement do not protect Buchar from liability when he commits acts “in bad faith ’ 53 Buchar replies that [P]laintiffs argue, without any factual or legal support, that [D]efendant s conduct was performed ‘in bad faith’ ’° and that Buchar acted beyond the scope of his fiduciary duties [when] handling business operations [Without] point[ing] to a single instance or example to support their desire 5“ 1i25 When interpreting a contract, the Court s task is not to reveal the subjective intentions of the parties but what their words would mean in the mouth ofa normal speaker of English using them in the ciicumstances in which they were used 5‘ In these instances the ‘ goal is to ascertain the intent ofthe parties and give it effect [because] [t]hc cardinal principle of contract interpretation is that the intention of the parties must prevail unless it is inconsistent with some established rule of law 52 The Court “will not rcwute the contract or give it a construction that conflicts with the plain ordinary[,] and accepted meaning of the words used “3 1126 The Agreement s provisions confer upon Buchar the authority to manage and operate V I Chiropractic and to execute its dissolution While Articles Seventeen and Eighteen, the clauses specifically addressing dissolution bestow upon Buchar, and Buchar alone the authority to initiate and complete the dissolution process the Arvidsons’ claim is tor a breach of fiduciary duty Although this particular breach of fiduciary duty claim arises from facts centering on an initiated but incomplete LLC
7Def s Mot Summ J 39 43 ‘3 Pls Opp m Def s Mot Sllmm J 8 9 ;:1[::1ef sReply to Pls Opp to Def sMot Summ I 3
:‘ Phillip v Monk Monsanto 56 VI 612 625 (VI 2017)
“‘ {fig/IMMEV Fireman : [nSltlflVlL‘L §uviccr 1m v CIGNA, 693 A 2d 1330 1339 (Pa Super Ct 1997) Aiwdazm e: a! v Buchur 21 a] 2020 VI SUPER 48 Case No ST ioevaio Memorandum Opinion March 24 2020 Page 10 of 13
dissolution Buchar’s alleged liability must arise from acts that contravene the fiduciary duty Buchar owes to the Arvidsons and the liability that flows from those alleged contraventions Therefore out of the laundry list of provisions to which Buchar points in his Motion for Summary Judgment the Court will read the Agreement 5 indemnity provisions in tandem with the Agreement s dissolution provisions 1|Z7 Clause 15 3 provides
15 3 No Liability Neither the Manager, nor any employee, or any agent ofthe Manger [sic], (including any shareholder, officer director or manager ofa successor manger [sic] that is not an individual) will be liable, responsible or accountable in damages or otherwise to the Company or any Member for any action taken or failure to act on behalf of the Company within the scope of the authority conferred on the Manager by this Agreement or by law unless the action or omission was performed or omitted fraudulently, in bad faith, or constituted gross negligence (‘4 And Clause 15 4 indicates, in pan
15 4 Indemnification and Hold Harmless The Company will indemnify and hold harmless the Manager (and its shareholders, officers, direetois, employees, and agents, if any) and Dr William Buchar, from and against any loss, expense damage, or injury suffered or sustained by them by reason of any acts omissions, or alleged acts or omissions arising out of the Manager’s or Dr William L Buchar’s activities on behall of the Company This includes but is not limited to any judgment award settlemenl, reasonable attomeys’ fees, and other e0sts or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, if the acts omissions or alleged acts or omissions on which the actual or threatened action, proceeding[,] or claim is based were for a purpose reasonably believed to be in the best interests of the Company and were not performed or omitted fraudulently in bad faith or as a result of gross negligence by the party and were not in violation of the Manager’s fiduciary obligation to the Company Any indemnification will only be for the assets ofthe Company D The language in these clauses is clear Indemnification will not be afforded under the Agreement when indemnification arises from acts or omissions executed ‘ in bad faith we Article 17 states The Manager, may initiate a dissolution of the Company in writing in which case the affairs of the Company shall by wound up as soon as is reasonably possible and all remaining aSsets divided as provided for by this Agreement and other applicable provisions ofthe law lfthe Manager intends to initiate the dissolution of the Company the Manager
6* VI Chiropractic Operating Agreement Clause 15 3 (emphasis added) ‘” VI Chiropractic Operating Agreement Clausc 15 A [emphasis added) Arvidmn 2/ a! v 311L111” er a! 2020 VI SUPLR 48 Case No ST l(rCV~410 Memorandum Opinion Match 24 2020 Page 11 of [3
shall first so notify the Members and the Members shall have the right, by written notice to the Manager within 10 days to invoke their right of first negotiation hereunder to purchase the business If the Members invoke such right the Manager and Members shall enter into good faith exclusive negotiations for a period of up to 30 days thereafter for the sale of the Manager s Interest to Members on mutually acceptable terms and conditions The Manager shall not dissolve the Company during such negotiation period If an agreement is not reached, the Manager may continue with the dissolution of the Company Except as set forth in an unalterable part of the Act, no Member may initiate dissolution of the Company except if the Manager is deceased or legally incapacitated 66
Title l3 ofthe Virgin Islands Code §l801 sets out that a limited liability company is dissolved, and its
business must be wound up upon the occurrence of any ofthe following events (1) an event specified in the operating agreement “7 fil29 Buchai argues that no genuine issue of material fact exists with regard to whether Buchar incurred liability due to his actions stemming from his incomplete dissolution ofV I Chiropractic by pointing to provisions in the Agreement that purportedly grant Buchar exclusive authority over V I Chiropractie’s management operation and dissolution However the dissolution provision to which Buchar points states that when Buchar initiates the dissolution process ‘ the affairs ofthe Company shall be wound up at mun as IS rcaranablyporrlble " In their Opposition the Arvidsons contend that Buchar‘s ability to be indemnified by the LLC only exists as long as he has not committed the complained of acts or omissions “in bad faith ‘ Further, the Arvidsons make new allegations in their First Amended Complaint showing that a genuine issue of material fact exists as to whether Buchar did handle the V I Chiropractic dissolution process ‘ in bad faith However when responding to the Arvidsons counterarguments, Buehar fails to present new law, new evidence or even new allegations He only repeats the Arvidsons’ arguments without explaining how no genuine issue of material tact exists regarding whether Buchar s initiating an incomplete LLC dissolution fails to amount to an act or omission pcrtormetl in bad faith in the context of the Agreement s language in Article 17 and the Virgin Islands LLC Act 5 language in 13 V I C § 1801 By failing to point to evidence supporting his arguments Buchar fails to meet his summary judgment burden with regard to this line of argument
Title 13 V I C § 1303 does not prevent Buchar from incurring liability for breaching a fiduciary duty he owes to members within his own LLC
5" V I Chiiopraetie Operating Agreement Anicle 17 (emphasis added) 6713 VIC § 1801(1) Alvidson e! a! v Bitthur at a] 2020 VI SUPER 48 Case No ST 1&CV~410 Memorandum Opinion March 24 2020 Page 12 of 13
1130 In his Motion, Buchai states that, as Manager of V I Chiropractic, he is endowed with specific authorities and powers to conduct its business and posits that acts he commits in his managerial capacity do not open him up to liability under the Virgin Islands Code To give this assertion and his Motion a patina oflegitimacy, Bueliar quotes 3 V I C § 1303 in its entirety” and, in his Reply invokes Sullivan 1/ Sabharwal,‘q which applies the same concept as 13 VIC § 1303 7“ His reliance is misplaced 1131 Section 1303 falls under Chapter Fifteen Subchapter III of the Virgin Islands LLC Act a subchapter which is entitled Relations of Members and Managers to Persons Dealing with [the] Limited Liability Company ’ Subehapter III contains the statutes that govern instances in which members and managers interact and incur liability to actors who are neither members nor managers of the same LLC 7' Since it controls relations that LLC members and managers have with those outside of the LLC, Subchapter 111 s precepts do not apply here 1132 In contrast, Subchaptcr IV of Chapter Fifteen is entitled “Relations of Members to Each Other and to [the] Limited Liability Company " Subchapter IV embodies the statutes that apply in situations and disputes centering on the relatmm between and among members and managers of the tame LLC, whether liability incurring or not 7’ Specifically, I} V I C § 1409 sets out the standards with which an LLC member and an LLC manager must abide when performing their duties with regard to the LLC, and takes care to establish that the duty ofloyalty, duty of care, and obligation of good faith and fair dealing apply in LLC contexts When read with 13 V I C § 1410 13 V I C § 1409 delineates the causes of action that may be brought by members and managers of LLCs against each other when one bieaches one of the statute s named fiduciary duties
(’3 Mot Summ J 44 45 5" Case No 2016 21 2018 WL 5315198 (D VI Oct 26 2013) (finding that an LLC managing member could not be held liable to the plaintiffin a personal injury negligence action due to principles sounding in personal injury rather than LLC governance) 7" Def 5 Reply to Pls Opp to Def s Mot summ J 4 "59213 v i c § 1301 (establishing the principles ofagency that are to apply when members or managers while eanying on in the ordinary course the company s business bind the LLC sign an instrument in the LLC s name or sign and deliver an instrument transferring or affecting the LLC s interest in real property)' 13 VIC § 1302 (establishing that the LLC is liable for a loss or injury caused to a person or for a penalty incurred, as a result Ufa wrongful act or omission or othei actionable conduct Ufa member 01 manager acting in the ordinary course of business) and 13 V I C § 1303 (establishing that when the LLC incurs debts obligations or liabilities neither the member nor the manager is personally responsible for those debts obligations or liabilities unless a member has so specified he will take on the LLC s debt obligation or liability in a provision in the articles oforganizzition and has consented in wiiting) These sections ofthe Virgin Islands LLC Act affect relations LLC members and managers have with those outside ofthe LLC ofwhieh they are part 77 See 13 VIC §§ 1401 1411 (establishing the law that applies for LLC member contributions members ieimburscment and remuneration from the LLC LLC management distributions members right to information standards of conduct governing members and managers causes ofaction members may bring and the continuation ofthe LLC after a specified teim) These sections ofthe Virgin Islands LLC Act affect relations LLC members and managers have with other members and managers of the same LLC and the LLC itself Aivltirnn e! a! v Elisha! at a! 2020 VI SUPER 48 Case No ST 16 CVAHO Memorandum Opinion March 24 2020 Page 13 of 13
1133 Finally Sullivan v S‘abharwal ‘ addressed a factual scenario in which the managing member of an LLC was sued by an individual who was not another member or manager ofthe same LLC for personal injuries resulting from a fall the plaintiff had on the LLC s villa rental property 7‘ Its precepts do not apply to the present dispute because the Arvidsons and Buchar are members of the same LLC and their dispute does not sound in negligence and personal injury jurispmdenee Accordingly, Subehapter IV ofthe Virgin Islands LLC Act controls Failing to Show how 13 V I C § 1303 and S'i/llivan demonstrate the lack of a genuine issue of material fact with regard to the AiVidsons’ breach of fiduciary duty claim Buchar fails to meet his summary judgment burden with regard to this argument as well
Conclusion 134 Accordingly because Buchar failed to show that no genuine issue ofmateiial fact exists concerning the hann element ofthe Arvidsons breach of fiduciary duty claim, because the Operating Agreement does not preclude all liability that Buchar may incur when acting in his capacity as Manager of V l Chiropractic and because the Vii gin Islands Code does not prevent Buchar from incurring liability in his capacity as Manager ofV I Chiropractic Buchar’s motion for partial summary judgment with regard to the Arvidsons breach of fiduciary duty claim is denied An Order consistent with this opinion shall issue
Dated March 28 2020
HON MICHAEL C DUNgTON ATTEST Tamara Charles JUDGE OF THE SUPERIOR COURT C1 the hurt / / OF THE VIRGIN ISLANDS b. V ’ 1QY 0‘ A» I415 Lori B lyrics Tysln A Court ' lerk Supervisor '/ v
73 Case No 2016 21 2018 WL 5315198 (D VI Oct 26 2018) 7‘ Sullivan 2018 WL at ‘1 SUPERIOR COURT OF THE VIRGIN ISLANDS
DR TYLUR ARVIDSON and DR TYGUE ARVIDSON ) )CASE NO ST 16 CV 410 Plaintiffs, ) ) ) V ) ) DR WILLIAM BUCHAR and V I CHIROPRACTIC LLC ) ) Detendants ) _——_)
ORDER
The Court having issued a Memorandum Opinion on this date; consistent therewith it is
ORDERED that the Detendants Motion for Summary Judgment is DENIED and it is
ORDERED that copies of this Order and of the accompanying Memorandum Opinion shall
be directed to counsel of record
DATED Maich 28 2020 , 7*\E E T MICHAEL C DUNSTON JUDGE OF THE SUPERIOR COURT T T Tamara Charles OF THE VIRGIN ISLANDS C ‘Q the c. n / /
b A.“ , “I” “HAL! 1141 At Donna I Donova Cou lerk Super sor , / /wx7