Judgment rendered September 27, 2023. Application for rehearing may be filed within the delay allowed by Art. 2166, La. C.C.P.
No. 55,214-CA
COURT OF APPEAL SECOND CIRCUIT STATE OF LOUISIANA
*****
PATRICK GRAYSON, Plaintiffs-Appellees GRAYGULL HOLDINGS, L.L.C., AND CLASS ACT TRANSIT, L.L.C.
versus
ALAN JEFFEREY GULLEDGE, Defendants-Appellants KELLY ALDY, AND J&K OPERATIONS, L.L.C.
Appealed from the Second Judicial District Court for the Parish of Jackson, Louisiana Trial Court No. 36,055
Honorable Charles Glenn Fallin, Judge
THE PESNELL LAW FIRM, APLC Counsel for Appellants By: J. Whitney Pesnell
LAW OFFICES OF RUSSELL A. Counsel for Appellees WOODARD, JR. LLC By: Russell A. Woodard, Jr.
Before COX, ROBINSON, and MARCOTTE, JJ. COX, J.
This case arises out of the Second Judicial District Court, Jackson
Parish, Louisiana. Patrick Grayson, individually and on behalf of Class Act
Transit, LLC (“CAT”) and Graygull Holdings, LLC (“GGH”) (collectively
referred to as the “Plaintiffs”), filed suit against Alan Jefferey Gulledge,
Kelly Aldy, and J&K Operations, L.L.C. (“J&K”) (collectively referred to as
the “Defendants”). The trial court granted the Plaintiffs’ motion for partial
summary judgment against Gulledge on the issue of breach of fiduciary
duty. Defendants now appeal the trial court’s judgment. For the following
reasons, we affirm the trial court’s judgment.
FACTS
On August 30, 2018, Grayson and Gulledge formed CAT and GGH in
order to operate a commercial trucking business. They each have 50 percent
ownership in CAT, which is registered in Nebraska. Grayson owns 85
percent of GGH and Gulledge owns the remaining 15 percent. GGH is
registered in Louisiana. CAT and Reserve Equipment, Inc. (“Reserve”)
entered into a transportation services agreement on September 13, 2018.
On October 15, 2019, Grayson filed a criminal complaint against
Gulledge with the Jackson Parish Sheriff’s Office alleging that Gulledge had
embezzled or stolen funds or property from CAT/GGH. On July 9, 2020,
Grayson filed a criminal complaint with the Louisiana State Police making
the same allegations of embezzlement/stolen funds and adding allegations of
drug trafficking. Criminal charges were never filed against Grayson.
On December 9, 2019, Gulledge resigned as manager of CAT/GGH.
On December 10, 2019, Gulledge was employed by Steven White to manage
SS7, LLC (“SS7”). On January 6, 2020, Grayson, individually and on behalf of CAT and
GGH, filed a petition for damages against Gulledge. The Plaintiffs asserted
that Gulledge breached his fiduciary duties of trust, loyalty, and candor
owed to them through various acts and omissions, including but not limited
to self-dealing and mismanagement. According to the Plaintiffs, from June
2018 through November 2019, Gulledge incurred between $128,000 and
$400,000 in expenses that were not reasonably attributable to CAT/GGH
and grossly mismanaged the companies. They alleged that Gulledge’s
expenses were used for his personal benefit in the following ways: Gulledge
withdrew over $70,000 in cash without receipts; Gulledge spent over
$17,000 at Wal-Mart, Sam’s Club, sporting goods stores, clothing stores,
restaurants, liquor stores, and a strip club; Gulledge transferred $16,500
from CAT/GGH to his personal account and $14,650 from CAT/GGH to
another business owned by Gulledge; Gulledge used company funds for
dog-sitting fees, PayPal transfers, and CashApp transfers to individuals not
associated with CAT/GGH; Gulledge used a CAT/GGH account to purchase
a boat; Gulledge purchased approximately $10,000 in unleaded fuel, but the
company vehicles do not use unleaded fuel; Gulledge wire-transferred large
sums of money to a ComData1 account without receipts to explain why the
funds were disbursed; CAT/GGH accounts were overdrawn when Gulledge
resigned; and, Gulledge spent CAT/GGH money on himself, his family, and
friends, which caused multiple overdraft and insufficient funds fees.
The Plaintiffs alleged that Gulledge mismanaged CAT/GGH in the
following ways: Gulledge failed to properly hire, train, and supervise
1 ComData provides cash payments to drivers. 2 employees; Gulledge exhibited purposeful lack of upkeep on federally
mandated electronic log equipment; Gulledge failed in multiple federal and
state reporting requirements, including the federally mandated International
Fuel Tax Agreement (“IFTA”); when Gulledge resigned, all company
equipment loans were past due; Gulledge did not submit quarterly IRS
payments or reports timely; Gulledge withdrew approximately $4,400 on his
last day as “a portion of his capital investment,” but Gulledge had not put
any capital investment into the companies; Gulledge left all trucks dirty and
with empty fuel tanks; Gulledge removed necessary chains, straps, and
binders from the trucks; Gulledge switched good front tires from one truck
with old, bald, dangerous tires; televisions and microwaves were missing
from the large trucks; Gulledge left one Peterbilt 579 tractor sitting near
Orlando, Florida, and one reefer trailer sitting outside Birmingham,
Alabama, unattended and with no plan on returning them to the Quitman,
Louisiana, area; Gulledge retained one Volvo tractor and a 3-car “wedge”
trailer until “an appropriate arrangement has been made for his portion of the
business to be negotiated”; and, Gulledge left the Plaintiffs’ remaining
vehicles on a lot owned by White in Simsboro, Louisiana, who was going to
have the equipment impounded if it was not removed.
The Plaintiffs claimed that Gulledge concealed his self-dealing and
mismanagement from Grayson; therefore, Grayson did not suspect any
problems until August 2019. They stated that as a result of Gulledge’s
actions, Grayson’s credit score has dropped from the high 800s to the 600s,
which directly affects his personal and professional ability to obtain credit.
They listed their damages as stolen funds, lost profits and earning capacity,
attorney fees as authorized by law, court costs and legal interest, bad-faith 3 damages, and any other relief to which they may be entitled. The Plaintiffs
asserted that they have causes of action against Gulledge for breach of
fiduciary duty, fraud, unfair trade practices under LUTPA, conversion/theft,
and breach of contract.
On February 25, 2020, Gulledge filed a separate action to dissolve and
liquidate CAT and GGH in Jackson Parish. On February 26, 2016, Gulledge
filed exceptions of vagueness and ambiguity, no right of action, no cause of
action, and prescription. He asserted that the Plaintiffs’ petition was vague
and ambiguous because they did not plead the times or places where the
alleged acts of malfeasance or breach of fiduciary duties occurred. He also
stated that they did not distinguish between CAT and GGH, which are
located in different states. He argued that the Plaintiffs do not clearly state
who was defrauded, with whom the self-dealing occurred, the substance of
the misrepresentations, and when the misrepresentations were made.
Gulledge argued that the petition does not state a right of action in
favor of Grayson individually because a shareholder has no separate or
individual right of action against third persons, including directors and
officers of a corporation, for wrongs committed against or causing damage
to the corporation. He stated that for a member to sue another member
individually for breach of fiduciary duty, the breach must be grossly
negligent and damage the suing member directly; he contended that Grayson
did not allege any damage directly to himself that was caused by a breach of
fiduciary duty.
Gulledge argued the petition did not state a cause of action against
him because the Plaintiffs do not allege any contracts between the Plaintiffs
and Gulledge and do not allege he was authorized to issue and sign checks 4 on the accounts of CAT/GGH. He pointed out that LUTPA limits private
actions to customers and business competitors, and the Plaintiffs did not
allege that they were customers or business competitors. Gulledge asserted
that La. R.S. 51:1409 does not allow Grayson to bring representative claims
on behalf of CAT/GGH. He argued that the Plaintiffs did not allege facts to
show gross negligence. Gulledge asserted that although the Plaintiffs did
not allege dates in which the self-dealing occurred, all actions arising more
than one year prior to the filing of the suit have prescribed under La. R.S.
51:1409 and 12:1502.
On August 26, 2020, the Plaintiffs filed their opposition to
Gulledge’s exceptions. They argued that the vagueness exception was not
well-founded because the petition did contain specific details, and the facts
were beyond sufficient to support the claims asserted. They argued that
Gulledge misstated the law by not quoting the portion of La. R.S.
12:1502(D), which provides for a two-year prescriptive period. They assert
that their claims had not prescribed because the earliest date stated is June
2018 and their petition was filed January in 2020, which is within the two-
year prescriptive period.
On September 23, 2020, the trial court signed its order denying all of
Gulledge’s exceptions. On October 2, 2020, Gulledge filed an answer and
recoventional demand. He generally denied the allegations made against
him. He stated that he submitted receipts for cash withdrawals and the
purchases were made for business purposes. He admitted that he did transfer
money from CAT/GGH to his personal or other business accounts, but those
were for payments on loans he made to CAT/GGH. He explained that he
used the CAT/GGH account to pay dog-sitting fees when he was out of town 5 on business and did not have anyone else to care for his dogs. He stated that
he also used PayPal and CashApp to pay business-related expenses on behalf
of CAT/GGH; one payment on PayPal or CashApp was made to an
employee of his other business, but those funds were placed in the CAT
account in advance of the transfer. Gulledge responded that he did use
$411.90 from CAT to buy a boat, but those funds were part of a
reimbursement to Gulledge for funds previously loaned to CAT for business
operations.
In response to the unleaded fuel purchases, Gulledge stated that
vehicles used by him, Justin Dailey, Patrick C. Grayson, Jimmy Culpepper,
Damond Allen, and Ed Roddy did use unleaded fuel and these vehicles were
used in connection with the business operations of CAT/GGH. He stated
that money transferred to ComData was used to provide the drivers with
money for fuel, truck washes, tolls, lumpers (load and unload reefer trailers),
motel rooms, repairs, parts, and/or compensation. Gulledge stated that the
receipts for ComData transfers have been and are still available. Gulledge
admitted to charging one vacation trip to CAT/GGH with the permission of
Grayson, and he charged CAT/GGH for personal expenses (gasoline, hotel,
etc.) incurred while on business trips.
Gulledge admitted that he hired and supervised all employees of
CAT/GGH, including an employee who he alleged embezzled funds and
pawned company equipment. He stated that the pawned equipment was
returned and the employee was arrested on drug charges. Gulledge
explained that the E-log equipment had numerous defects and malfunctions,
causing inaccurate reports. He stated that all IFTA reporting was completed
every quarter except the last quarter of 2019, and Sharon Lee’s Fuel Tax 6 Services was paid on September 25, 2019. Gulledge stated that to the best
of his knowledge, only one loan was past due at the time of his resignation.
He stated that he was unaware that quarterly payments to the IRS were
required and was not instructed to send payments. He further stated that
when he received the IRS notice to seize property, he informed Grayson that
the operating account had insufficient funds to cover the bill.
Gulledge admitted to withdrawing $4,400 from the CAT account
before his resignation for a partial repayment of the loans made by him to
CAT. Gulledge denied that he was personally responsible for maintaining
the cleanliness of the equipment and stated that was the responsibility of the
truck driver. He stated that the televisions and microwaves were located in
the truck at the time it was parked on White’s lot. Gulledge admitted that
one truck was left in Orlando, Florida, because the driver had been
medically disqualified from driving and was working to get his license back.
He explained that two trailers were parked at a dealership in Alabama
because they were not in use. Gulledge stated he picked up one trailer and
the other was waiting to be picked up by Grayson.
Gulledge stated that four of the five trucks he purchased for GGH
were defective and GGH has filed suit against General Motors, LLC in East
Baton Rouge Parish under docket number 688148.
Gulledge’s reconventional demands against CAT and GGH are for the
recovery of reasonable compensation for services rendered by him as Chief
Executive Manager in the amount of $115,000. He asserted that he used one
room in his home as an office and is entitled to recover the fair rental value
of the space used for the benefit of the companies. He also asserted that he
used his personal truck for business purposes while acting as Chief 7 Executive Manager and is entitled to recover the reasonable rental value of
his truck.
Gulledge’s reconventional demand against Grayson is for defamation.
He asserted that in October 2019, Grayson began publishing false and
defamatory statements to at least ten people, stating that Gulledge stole from
CAT/GGH and converted assets from CAT/GGH for his personal benefit.
He stated that Grayson falsely accused him of criminal activity and made
reports to the Jackson Parish Sheriff’s Office and Louisiana State Police.
Gulledge claims that these defamatory communications were made with
actual malice—knowledge of their falsity and reckless disregard for the
truth. Gulledge alleged that he sustained injury and damage to his reputation
and suffered severe mental anguish and pain as a result of the defamatory
publications. Gulledge attached the certificate of organization for CAT and
articles of incorporation for GGH.
On October 26, 2020, the Plaintiffs filed their answer, affirmative
defenses, and exceptions to Gulledge’s reconventional demands. They
denied the allegations and asserted the following affirmative defenses:
estoppel, unclean hands and fraud, failure to mitigate, extinguishment, failure
of consideration, fault of others, and immunities. They pled the exceptions of
vagueness, lack of procedural capacity, prescription/peremption, no cause of
action, and no right of action.
On September 20, 2021, the Plaintiffs filed their first supplemental
and amended petition. They added Kelly Aldy,2 SS7, and J&K as
defendants. They asserted that on November 6, 2019, Gulledge emailed a
2 Aldy is later stated to be Gulledge’s wife. 8 business plan to Reserve outlining his plans for a competing trucking
company to obtain Reserve’s business. They alleged that from late October
2019 through December 9, 2019, Gulledge met with White and SS7’s
bankers, insurance agency, and fuel providers to discuss his joining SS7.
Grayson asserted that all of these communications were intentionally
concealed from him. The Plaintiffs asserted that on December 8, 2019,
Gulledge assumed SS7’s tax liability and the following day worked on plans
to get Reserve to move its business to SS7 before resigning from CAT/GGH
in the afternoon. They stated that Gulledge admitted in his deposition that
the December 9, 2019, email at 4:19 p.m. from himself to Grayson was the
moment he resigned as “manager” from both CAT and GGH.
The Plaintiffs stated that based on information from the Louisiana
Secretary of State, Gulledge now owns 49 percent of SS7 and Aldy owns 51
percent, and any acts or omissions of Gulledge are imputed equally to Aldy
and SS7. They alleged:
[O]n or about April of 2021, Gulledge and Aldy created a new entity- J&K - which they use to carry out the illicit activities described above. Specifically, once Gulledge and Aldy learned that Plaintiffs had identified SS7 as a culprit in diverting Reserve’s business, they created J&K in effort to create another artificial layer of separation between themselves and SS7 while continuing to haul freight for Reserve. The Plaintiffs claimed that they have suffered past damages of $2
million from the Defendants’ wrongful solicitation of Reserve, and the
damages continue to increase with every load that is hauled by SS7 instead
of CAT/GGH. In addition, the actions of the Defendants have forced GGH
into bankruptcy proceedings, and those damages are owed and payable from
the Defendants. The Plaintiffs alleged they have claims for RICO violations,
9 fraud and breach of contract/fiduciary duty, reckless disregard and
interference with contract, and conspiracy.
On November 3, 2021, the Defendants responded to the supplemental
and amended petition by reiterating their exceptions of vagueness and
ambiguity, no right of action, and no cause of action.
The Plaintiffs moved for partial summary judgment on the issue of
liability against Gulledge. They argued that there was no genuine issue of
material fact as to whether Gulledge owed a fiduciary duty to the Plaintiffs
and whether Gulledge breached that fiduciary duty. The Plaintiffs attached
copies of CAT/GGH operating agreements; Gulledge’s deposition; the
business plan sent from Gulledge to SS7; Gulledge’s text messages as he
made his move from CAT/GGH to SS7; the transportation services
agreement between Reserve and CAT; and the transportation services
agreement between Reserve and SS7.
The Defendants filed their cross-motion for partial summary
judgment, arguing there are no material facts in dispute as to the following:
theft or conversion of property; diversion and/or loss of business income or
opportunity from Reserve; damages resulting from RICO violations; and,
damages resulting from alleged interference by Gulledge with CAT’s
contract with Reserve. They requested that their partial MSJ be sustained
and the Plaintiffs’ claims be dismissed with prejudice. The Defendants
attached the following: Gulledge’s affidavit; the business filings of CAT and
GGH; Gulledge’s resignation letter; the business plan Gulledge prepared;
text messages between Gulledge and Reserve employees; emails between
the attorneys of record regarding discovery; business filings of Grayson
10 Logistic Solutions, LLC and Absolute Nursing Care of LA, LLC;3 a
transportation agreement between England Logistics, Inc. and CAT dated
December 24, 2019; a waiver of liability and indemnification agreement
between House of Raeford Farms of Louisiana, LLC and CAT dated
December 19, 2019; a motor carrier/broker agreement between LAD
Logistics, Inc. and CAT dated January 17, 2020; the transportation services
agreement between Reserve and CAT dated September 13, 2018; the
transportation services agreement between Reserve and SS7 dated December
10, 2019; a transportation services agreement between Reserve and SS7
dated May 1, 2020; an act of sale of assets from White and SS7 to Gulledge
dated March 31, 2021; loan documents between J&K and b1BANK;4 and, a
transportation services agreement between Reserve and J&K dated June 22,
2021.
On January 4, 2022, the Plaintiffs filed an opposition to the
Defendants’ exceptions. They contended that these exceptions were
previously denied by the trial court.
On May 12, 2022, a hearing was held on the Defendants’ exceptions,
where the trial court denied the exceptions. On July 19, 2022, the trial court
signed its judgment denying the Defendants’ exceptions of vagueness and
On July 19, 2022, the trial court heard arguments on the motions for
summary judgment filed by both parties. The trial court stated in its oral
reasons that Gulledge stayed on as manager of CAT/GGH after the criminal
allegations were made, even though he alleges that he could no longer work
3 Grayson is an officer/member of both of these entities. 4 This is the exact spelling listed on their website and official filings. 11 with Grayson. The trial court opined that Gulledge should have resigned at
that time, but Gulledge remained with the companies and chose to actively
seek out their number one customer for his new company. For these
reasons, the trial court found that he breached his fiduciary duties. On
August 10 and 17, 2022, the trial court signed two judgments granting the
Plaintiffs’ motion for summary judgment on the issue of liability and
denying Gulledge’s cross-motion for summary judgment. The trial court
reserved the issue of damages for trial. At the direction of this Court, the
trial court signed a revised judgment stating that the Plaintiffs’ partial
summary judgment on the issue of liability for duty and breach was granted
against Gulledge only, reserving the issue of damages for trial; the
Defendants’ cross MSJ was denied; and, all other claims and defenses were
reserved for trial. Gulledge now appeals.
DISCUSSION
In this appeal, Gulledge alleges the trial court erred in granting
summary judgment in Grayson’s favor. He claims the criminal complaints
made by Grayson terminated his fiduciary duties. He also claims the
transportation services agreement between CAT/GGH and Reserve did not
obligate Reserve to use CAT/GGH. He asserts that the Operating
Agreements do not contain noncompete or non-solicitation clauses. Finally,
he argues that Grayson’s petition, as supplemented and amended, does not
state a cause of action against him for “reckless disregard and interference”
with a contract under La. R.S. 12:1314(B).
No Cause of Action
Gulledge asserts that the petition, as amended and supplemented, does
not state a cause of action against him for “reckless disregard and 12 interference.” He also argues that Grayson could not bring a cause of action
to recover damages against the Defendants.
The peremptory exception of no cause of action is set forth in La.
C.C.P. art. 927(A)(5). It tests the legal sufficiency of the petition by
determining whether the law affords a remedy on the facts alleged in the
petition. Garsee v. Sims, 54,832 (La. App. 2 Cir. 1/11/23), 355 So. 3d 1149,
writ denied, 23-00407 (La. 6/21/23), 362 So. 3d 428; Sharp v. Melton,
53,508 (La. App. 2 Cir. 5/20/20), 296 So. 3d 1135; Pesnell v. Sessions,
51,871 (La. App. 2 Cir. 2/28/18), 246 So. 3d 686. The purpose of the
exception of no cause of action is not to determine whether the plaintiff will
prevail at trial but to ascertain if a cause of action exists. Sharp v. Melton,
supra. A “cause of action,” when used in the context of the peremptory
exception of no cause of action, refers to the operative facts that give rise to
the plaintiff’s right to judicially assert the action against the defendant. Id.
The exception is triable on the face of the petition, and for the purpose of
determining the issues raised by the exception, the well-pleaded facts in the
petition must be accepted as true. Fink v. Bryant, 01-0987 (La. 11/28/01),
801 So. 2d 346; Sharp v. Melton, supra.
No evidence may be introduced at any time to support or controvert
the objection that the petition fails to state a cause of action. La. C.C.P. art.
931. The burden of demonstrating that the petition states no cause of action
is upon the mover. Wright v. Louisiana Power & Light, 06-1181 (La.
3/9/07), 951 So. 2d 1058; Sharp v. Melton, supra. All reasonable inferences
are made in favor of the nonmoving party in determining whether the law
affords any remedy to the plaintiff. Villareal v. 6494 Homes, LLC, 48,302
(La. App. 2 Cir. 8/7/13), 121 So. 3d 1246. An exception of no cause of 13 action should be granted only when it appears beyond doubt that the plaintiff
can prove no set of facts in support of any claim which would entitle him to
relief. Sharp v. Melton, supra.
If the petition states a cause of action on any ground or portion of the
demand, the exception should generally be overruled. Every reasonable
interpretation must be accorded the language used in the petition in favor of
maintaining its sufficiency and affording the plaintiff the opportunity of
presenting evidence at trial. Badeaux v. Southwest Computer Bureau, Inc.,
05-0612 (La. 3/17/06), 929 So. 2d 1211; Sharp v. Melton, supra.
An appellate court’s review of a trial court’s ruling sustaining an
exception of no cause of action is de novo because the exception raises a
question of law, and the trial court’s decision is based only on the
sufficiency of the petition. Fink v. Bryant, supra. The essential question is
whether, in the light most favorable to plaintiff and with every doubt
resolved in plaintiff’s favor, the petition states any valid cause of action for
relief. Wright v. Louisiana Power & Light, supra.
The Operating Agreements for CAT/GGH are virtually identical, with
the exceptions of membership percentages and the state in which they are
registered. The Operating Agreements provide, in pertinent part, for the
voting process of managers and the Chef Executive Manager, a list of
managerial duties, and states the manager will not be liable for acts or
omissions “which may cause or result in loss or damage to the Company or
the Members if done in good faith to promote the best interest of the
Company[.]” Both Operating Agreements provide a list of managers in
“Exhibit 1,” which states: “By a majority vote of the Members the following
Managers were elected to operate the Company pursuant to ARTICLE 4 of 14 the Agreement[.]” Gulledge is listed first as the Chief Executive Manager
and then Grayson is listed with the title of President. The Operating
Agreement then provides, “The above listed Manager(s) will serve in their
capacities until they are removed for any reason by a majority vote of the
Members as defined by ARTICLE 4 or upon their voluntary resignation.”
Article 4 of the Operating Agreement provides for management but does not
specifically outline the process for removing a manager. Article 4 provides,
“By a vote of the Members holding a majority of the capital interests in the
Company, as set forth in Exhibit 2 as amended from time to time, shall elect
so many Managers as the Members determine, but no fewer than one, with
one Manager elected by the Members as Chief Executive Manager.”
La. R.S. 12:1314 provides:
A. Subject to the provisions of R.S. 12:1315, a member, if management is reserved to the members, or manager, if management is vested in one or more managers pursuant to R.S. 12:1312:
(1) Shall be deemed to stand in a fiduciary relationship to the limited liability company and its members and shall discharge his duties in good faith, with the diligence, care, judgment, and skill which an ordinary prudent person in a like position would exercise under similar circumstances. Nothing contained in this Section shall derogate from any indemnification authorized by R.S. 12:1315.
(2) In discharging his duties, shall be fully protected in relying in good faith upon the records of the limited liability company and upon such information, opinions, reports, or statements presented to the limited liability company, the members, managers, or any committee thereof by any of the limited liability company’s members, managers, employees, or by any committee of the members or managers, or by any legal counsel, appraiser, engineer, including a petroleum reservoir engineer, or independent or certified public accountant selected with reasonable care by the members, managers, any committee thereof, any agent having the authority to make such selection, or by any other person as to matters the member, if management is reserved to the members, or manager, if management is vested in one or more managers pursuant to 15 R.S. 12:1312, reasonably believes are within such other person’s professional or expert competence and which person is selected with reasonable care by the members, managers, any committee thereof, or any agent having the authority to make such selection.
(3) Is not protected by Paragraph (2) of this Subsection if he has knowledge concerning the matter in question that makes reliance otherwise permitted by Paragraph (2) of this Subsection unwarranted.
(4) Shall not be liable for any action taken on behalf of the limited liability company or any failure to take any action if he performed the duties of his office in compliance with this Section.
(5) Shall account to the limited liability company and hold as trustee for it any profit or benefit derived by him, without the informed consent of a majority of the uninterested members in accordance with R.S. 12:1318(C), from any transaction connected with the conduct or winding up of the limited liability company or from any personal use by him of its property unless he proves under strict judicial scrutiny the fairness of the transaction to the limited liability company.
B. Notwithstanding the provisions of Subsection A of this Section, a member or manager shall not be personally liable to the limited liability company or the members thereof for monetary damages unless the member or manager acted in a grossly negligent manner as defined in Subsection C of this Section, or engaged in conduct which demonstrates a greater disregard of the duty of care than gross negligence, including but not limited to intentional tortious conduct or intentional breach of his duty of loyalty.
C. As used in this Section, “gross negligence” shall be defined as a reckless disregard of or a carelessness amounting to indifference to the best interests of the limited liability company or the members thereof.
D. A member or manager who makes a business judgment in good faith fulfills the duty of diligence, care, judgment, and skill under Subsection A of this Section if the member or manager:
(1) Does not have a conflict of interest with respect to the subject of the business judgment.
(2) Is informed with respect to the subject of the business judgment to the extent the member or manager reasonably believes to be appropriate under the circumstances. 16 (3) Rationally believes that the business judgment is in the best interests of the limited liability company and its members.
E. A person alleging a breach of the duty of diligence, care, judgment, and skill owed by a member or manager under Subsection A has the burden of proving the alleged breach of duty, including the inapplicability of the provisions as to the fulfillment of the duty under Paragraph A(2) and Subsection D, and, in a damage action, the burden of proving that the breach was the legal cause of damage suffered by the limited liability company. The petition and amended petition allege that Gulledge breached his
fiduciary owed to the LLC and its members by failing to maintain records,
failing to pay loans and expenses, and using LLC money for personal
expenses, among other allegations. The Plaintiffs further alleged that
Gulledge breached his fiduciary duty by soliciting Reserve for the benefit of
SS7 while he was still managing CAT/GGH. They state that this shows his
reckless disregard for CAT/GGH’s business in violation of La. R.S.
12:1314(B).
La. R.S. 12:1314 states that a manager shall discharge his duties in
“good faith, with the diligence, care, judgment, and skill which an ordinary
prudent person” would exercise. It further states that a manager will not be
held personally liable unless he acted in a grossly negligent manner. Gross
negligence is defined as “a reckless disregard of or a carelessness amounting
to indifference to the best interest of the [LLC] or the members[.]” La. R.S.
12:1314(C).
Based on the facts alleged in the petition, the duties placed on
managers in La. R.S. 12:1314, and the exculpation paragraph in the
Operating Agreements, we find that the Plaintiffs have stated a cause of
action. At a minimum, they have sufficiently alleged Gulledge’s reckless
17 disregard to the best interest of CAT/GGH and its members through self-
dealing, mismanagement of funds, and soliciting Reserve’s business from
CAT/GGH to SS7 while managing CAT/GGH. This assignment of error
lacks merit.
As to Gulledge’s argument that Grayson is not a manager of
CAT/GGH and unable to bring suit, we disagree. Grayson is clearly listed
as a manager of CAT/GGH in the Operating Agreements and, therefore, able
to bring suit on their behalf.
We affirm the trial court’s ruling denying the Defendants’ exception
of no cause of action.
Transportation Services Agreement
Gulledge argues the trial court erred in its construction of the
transportation services agreement between CAT and Reserve because
Reserve was not obligated to use CAT for its transportation needs. We do
not find this holding or issue in the record from the lower court. If this suit
were for the enforcement of a contract between CAT and Reserve, Reserve
would be a necessary party. Instead, the Plaintiffs brought suit against the
Defendants, not Reserve, for breach of fiduciary duty. The business
between Reserve and CAT is mentioned only because Gulledge solicited
Reserve’s business on behalf of SS7 while still managing CAT/GGH. The
transportation services agreement shows that Reserve was a customer of
CAT while Gulledge was the manager. The trial court did not hold that
Reserve was contractually required to use CAT for its transportation needs
or breached its duty to use CAT. Therefore, this argument lacks merit.
18 Motion for Summary Judgment
A de novo standard of review is required when an appellate court
considers rulings on motions for summary judgment, and the appellate court
uses the same criteria that governed the district court’s determination of
whether summary judgment was appropriate. J & L Oil Co. v. KM Oil Co.,
LLC, 51,898 (La. App. 2 Cir. 2/28/18), 247 So. 3d 147; Creek Mgmt., L.L.C.
v. Unopened Succession & Unknown Heirs or Legatees of Williams, 51,392
(La. App. 2 Cir. 5/17/17), 223 So. 3d 1194, writ denied, 17-1252 (La.
10/27/17), 228 So. 3d 1222. A motion for summary judgment shall be
granted if the motion, memorandum, and supporting documents show that
there is no genuine issue as to material fact and that the mover is entitled to
judgment as a matter of law. La. C.C.P. art. 966(A)(3). The only documents
that may be filed in support of or in opposition to the motion are pleadings,
memoranda, affidavits, depositions, answers to interrogatories, certified
medical records, written stipulations, and admissions. La. C.C.P. art.
966(A)(4).
It is undisputed that Gulledge has been a member and manager of
CAT and GGH since August 30, 2018. Gulledge admitted in his deposition
that while he was a manager of CAT/GGH, he owed a fiduciary duty to the
companies and its members. Neither the law nor the Operating Agreements
provide that a fiduciary duty ends upon the filing of a criminal complaint.
The Operating Agreement states that a manager will continue to serve until
he is removed by vote or voluntarily resigns. Nothing in the record indicates
that there was ever a vote to remove Gulledge as manager, and this Court
will not unilaterally make the leap to equate a criminal complaint to a vote
of removal. As noted by the trial court, Gulledge could have resigned from 19 his position or sought to dissolve the companies after the complaint was
filed, but he chose to stay with CAT/GGH and keep his managerial position.
As long as Gulledge was a manager of CAT/GGH, he owed a fiduciary duty
to the LLC and its members. Therefore, we next analyze whether Gulledge
breached his fiduciary duty before he resigned from CAT/GGH.
We agree with Gulledge’s contention that the Operating Agreements
do not contain a “noncompete” or “non-solicitation” clause in compliance
with La. R.S. 23:921. However, under La. R.S. 12:1314, Gulledge owed a
fiduciary duty to CAT/GGH and its members while he was still the manager.
Therefore, this is not an issue of whether he violated a “noncompete” clause,
but rather, the issue is whether he breached his fiduciary duty by acting in a
manner that amounted to “gross negligence” or “a reckless disregard of or a
carelessness amounting to indifference to the best interests of the limited
liability company or the members thereof.”
Gulledge admitted in his deposition that between November 2019 and
December 8, 2019, he communicated with White, the owner of SS7, in
person, by phone, and through text message. He agreed that he spoke with
White about SS7’s “factoring” company, truck paint colors, truck VIN
numbers, MC and DOT numbers, fuel cards, and federal tax ID number, as
well as Gulledge assuming SS7’s tax liability. Although he was unwilling to
agree with whether his actions hurt CAT/GGH and helped SS7, Gulledge
stated that Reserve was aware of talks with White regarding SS7, and he
discussed a “revised rate agreement” with employees from Reserve.
Gulledge stated that he informed the employees of Reserve that he would be
leaving CAT/GGH and going to SS7. When questioned if he informed them
before he resigned on December 9, 2019, Gulledge stated, “I told him on the 20 8th, roughly. I’m not going to quote the exact date. Roughly the 8th. I don’t
really remember the exact dates.”
Based on this deposition testimony, Gulledge, while still managing
CAT/GGH, began making a move to another trucking company and
informed CAT/GGH’s number one customer of his move. Gulledge stated
that he stayed with the companies after the criminal complaints were filed in
order to try to make the best of things; however, his actions prove otherwise.
Gulledge’s conversations with White about SS7’s financials and operating
information, as well as his agreement to assume SS7’s tax liability show that
he acted with a careless indifference to the best interest of CAT/GGH.
Gulledge then informed CAT/GGH’s number one customer, Reserve, of his
move to SS7, and on December 10, 2019, Reserve signed a transportation
agreement with SS7. Gulledge clearly acted in his own best interest with no
regard for the companies he managed. Had Gulledge resigned from his
management position prior to lining up a new position with SS7 or
informing Reserve of his upcoming move, our analysis may have been
different. Gulledge’s actions amount to gross negligence and a breach of his
fiduciary duty to CAT/GGH and its members.
Therefore, we affirm the trial court’s ruling granting Grayson’s partial
MSJ on the issue of liability for breach of fiduciary.
CONCLUSION
For the reasons articulated above, we affirm the judgment of the trial
court. Costs of this appeal are assessed against the Defendants-Appellants.
AFFIRMED.