Hamed ex rel. Hamed v. Yusuf

62 V.I. 38, 2014 WL 3697817, 2014 V.I. LEXIS 52
CourtSuperior Court of The Virgin Islands
DecidedJuly 22, 2014
DocketCivil No. SX-12-CV-370
StatusPublished

This text of 62 V.I. 38 (Hamed ex rel. Hamed v. Yusuf) is published on Counsel Stack Legal Research, covering Superior Court of The Virgin Islands primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hamed ex rel. Hamed v. Yusuf, 62 V.I. 38, 2014 WL 3697817, 2014 V.I. LEXIS 52 (visuper 2014).

Opinion

BRADY, Judge

MEMORANDUM OPINION

(July 22, 2014)

THIS MATTER is before the Court on Defendant/counterclaimant Fathi Yusuf’s Motion to Nullify Plessen Enterprises, Inc.’s Board Resolutions, to Avoid Acts Taken Pursuant to those Resolutions and to Appoint Receiver and Brief in Support (“Motion”), filed May 20, 2014; [41]*41and Plaintiff’s Opposition, filed May 27, 2014. For the reasons that follow, Defendant’s Motion will be denied.

FACTUAL BACKGROUND

Plessen Enterprises, Inc. (“Plessen”) is a closely held corporation jointly and equally owned by the Hamed and Yusuf families. Motion, at l.1 Plessen owns various assets, including the real property on which Plaza Extra-West is located. Id. Plessen is a Counterclaim Defendant in this case by virtue of the Counterclaim of Defendants Fathi Yusuf and United Corporation.

On April 28, 2014, Plaintiff served Defendant Yusuf with a Notice of Special Meeting of Board of Directors of Plessen Enterprises, Inc. (“Notice”) to be convened at 10:00 a.m. on April 30, 2014. Motion, at 4 (Exhibit A).2 On April 29, 2014, Yusuf responded to the Notice in writing by pointing out the deficiencies of the Notice and demanding that the meeting not take place. Id. (Exhibit B). Defendant Yusuf moved to enjoin the meeting by emergency motion filed at 8:19 a.m. on April 30, 2014. That motion came to the attention of the Court after the meeting had concluded and the motion had become moot.

[42]*42At the special meeting, Plessen’s board of directors, over director Yusuf’s objection, adopted Plessen Enterprises, Inc. Resolutions of the Board of Directors (“Resolutions”) (Motion, Exhibit G) wherein the board: 1) ratified and approved as a dividend the May 2013 distribution of $460,000 to Waleed Hamed; 2) authorized Plessen’s president, Mohammad Hamed, to enter into a lease agreement (“Lease”) with KAC357, Inc. for the premises now occupied by Plaza Extra-West; 3) authorized the retention of Attorney Jeffrey Moorhead to represent Plessen in defense of the Counterclaim filed against it in this action and in defense of the separate action (Yusuf v. Hamed et al.) filed relative to the May 2013 distribution to Waleed Hamed; 4) authorized the president to issue additional dividends to shareholders, up to $200,000, from the company bank account; and 5) removed Fathi Yusuf as Registered Agent, to be replaced by Jeffrey Moorhead.

By his present Motion, Defendant Yusuf objects to Plaintiff’s service of the Notice of the special meeting one business day in advance as “an obvious attempt to avoid judicial scrutiny of an action that . . . was unlawful and an end-run around pending litigation between the Hamed and Yusuf families.” Motion, at 4-5. Further, Defendant argues that the Notice violated Plessen’s By-Laws which require that the corporate secretary, Yusuf himself, issue notices of meetings. Motion, at 4 (Exhibit C, §§ 3.4, 7.2).

Plaintiff responds that Plessen’s By-Laws require only that the meeting take place on at least one day’s notice if the directors are served by hand-delivery. Opposition, at 1-2 (citing Exhibit B, § 2.6). Since director Yusuf was personally served with the Notice two business days prior to the special meeting, the By-Laws’ notice requirement was satisfied. Plaintiff notes that the By-Laws allow the president to serve notice upon directors if the secretary “is absent or refuses or neglects to act.” Opposition, Exhibit B, § 7.2.B).

Defendant Yusuf’s Motion focuses on the substance of the Resolutions adopted by the board of directors at the April 30, 2014 special meeting. Primarily, he argues that the board’s approval of the Lease with KAC357, Inc., a newly formed entity of the Hamed family, is not in Plessen’s best interests and constitutes an act of self-dealing by the interested directors designed to position the Hamed family to benefit upon the proposed [43]*43winding-up of the Hamed-Yusuf partnership.3 Defendant notes that a corporate transaction involving interested directors can survive only if it meets the “intrinsic fairness test,” in that “... the transaction was entirely fair to the corporation.” Motion, at 11, 10.

Defendant Yusuf argues that interested directors Mohammad Hamed and Waleed Hamed cannot demonstrate that the Lease is intrinsically fair to Plessen for the following reasons: 1) The Lease does not become effective “until some unspecified date in the future,” namely when the current tenant, Plaza Extra-West, ceases operations. This provision creates a “poison pill... designed to dissuade any outside investor from bidding to acquire the Plessen property that is subject to the Lease.” (Motion, at 12.) 2) Unlike most commercial leases, the Lease requires no personal guarantees, an omission which could jeopardize Plessen’s ability to collect outstanding rent because the “Hameds can simply walk away.” (Id. at 13.) 3) The Lease’s assignment clause allows KAC357, Inc. to freely assign its interest as tenant without the consent of Plessen, raising the potential of an unqualified future tenant. (Id. at 14.) 4) The Lease contains a rent structure with increases pegged to the Consumer Price Index, which does not allow Plessen the ability to renegotiate rents in the event KAC 357, Inc. exercises its option to renew after the initial ten-year term has concluded. (Id.) 5) The insurance provisions of the Lease do not require the tenant to maintain hazard insurance in the amount of full replacement value, including windstorm coverage. Id. at 14-15.

Defendant Yusuf also challenges other actions of the Plessen board, including its retention of Attorney Jeffrey Moorhead “with absolutely no discussion at the sham meeting.” Motion, at 16.

Yusuf also objects to the board’s authorization to pay shareholder dividends, and asks the Court to expand the scope of the April 25, 2013 Preliminary Injunction to enjoin future payment of dividends to Plessen’s shareholders without vote of shareholders. Id. at 17.

Defendant Yusuf further notes that procedural requisites of 13 V.I.C. §§ 52-55 were not met in the board’s replacement of Yusuf as Plessen’s resident agent, and argues that the board action should be nullified accordingly. Id. at 18.

[44]*44Defendant Yusuf finally asks the Court to appoint a receiver to oversee the dissolution of Plessen due to the mutual distrust between the Yusuf and Hamed families and the unworkable managerial situation that is the result. Id.

Plaintiff responds that Plessen’s Lease with KAC357, Inc., contingent on the cessation of Plaza Extra-West operations, is objectively fair and benefits Plessen in that it ensures that the corporation’s property will not become vacant, and provides a continued rental income stream to Plessen. Opposition, at 4. In light of Yusuf’s objection to the lack of personal guarantees by the principals of KAC357, Inc., Plaintiff has caused the Lease to be amended to provide his own personal guarantee in the event of the monetary default of KAC357, Inc. Id. Exhibit 2.

Plaintiff asserts that the Lease provision setting initial rent at $710,000 per year is commercially reasonable as is pegging increases, in the manner of many commercial leases, to the Consumer Price Index. Id. at 4. Plaintiff discounts Defendant’s concern regarding the Lease’s assignment clause, noting that KAC357, Inc.

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Cite This Page — Counsel Stack

Bluebook (online)
62 V.I. 38, 2014 WL 3697817, 2014 V.I. LEXIS 52, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hamed-ex-rel-hamed-v-yusuf-visuper-2014.