Rhyne v. MartianCraft, LLC

CourtDistrict Court, E.D. Virginia
DecidedJune 17, 2021
Docket2:20-cv-00568
StatusUnknown

This text of Rhyne v. MartianCraft, LLC (Rhyne v. MartianCraft, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rhyne v. MartianCraft, LLC, (E.D. Va. 2021).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Norfolk Division ) ROBERT RHYNE, II, et al., ) Plaintiffs, ) ) v. ) Civil Action No. 2:20cv568 (RCY) ) MARTIANCRAFT, LLC, ) Defendant. ) ) MEMORANDUM OPINION This matter is before the Court on Plaintiffs’ Motion to Remand and to Stay Briefing Schedule for Defendant’s Motion to Dismiss (ECF No. 4). Robert Rhyne, II, Joseph Keeley, and Melissa Rhyne (“Plaintiffs”) bring this action against MartianCraft, LLC (“MartianCraft” or “Defendant”) seeking declaratory and injunctive relief. Defendant removed this case to federal court, and Plaintiffs move to remand the action to the NorfolkCircuit Court. The motion hasbeen fully briefed, and the Court dispenses with oral argument because the facts and legal contentions are adequately presented in the materials before the Court,and oral argument would not aid in the decisional process. E.D. Va. Loc. Civ. R. 7(J). For the reasons stated below, the Motion to Remand will bedenied,and the Motion to Stay Briefing Schedule will be denied as moot. I. BACKGROUND This is a lawsuit for declaratory and other equitable relief, brought by three individuals who are or were affiliated with a Virginia-based software development company, MartianCraft, LLC, against MartianCraft. The parties have been engaged in a protracted legal dispute since 2017 over control of the company and related damages that has played out before the Richmond Circuit Court and the Supreme Court of Virginia. In the instantaction, filed in the Norfolk Circuit Court, the Plaintiffs raise five claims for equitable relief: (1) a declaratory judgment, based on MartianCraft’s Operating Agreement, that the Plaintiffs are entitled to indemnification by MartianCraft for their legal fees in the Richmond Circuit Court action (allegedly worth hundreds of thousands of dollars); (2) a declaratory judgment that, under the Operating Agreement, they cannot be held liable for damages claimed in the Richmond Circuit Court lawsuit; (3) access to records and information from MartianCraft; (4) a calculation of their membership interests and a

determination that prior dilutions of their membership interests were wrongful; and (5) an accounting of MartianCraft’s finances, records, and activities, with fourteen specific categories of information requested. (Compl., ECF No. 1-2 at 14-27.)1 MartianCraft is a software development company that was formed in 2010 by Plaintiff Robert Rhyne, II (“R. Rhyne”) and two other individuals who later transferred their interests in the company. (Id. ¶¶ 1-3, 16.) MartianCraft entered into a Plan of Merger with Empirical Development LLC, a company owned by Kyle Richter and Marcus Zarra, on February 3, 2014. (Id. ¶¶ 5-6.) Plaintiffs contend that this merger was never actualized in accordance with the terms of the Plan of Merger, and that subsequently, in September 2014, an Operating Agreement was

entered into on behalf of MartianCraft that included Richter, R. Rhyne, Zarra, and one of the original MartianCraft members, along with a few other signatories. (Id. ¶¶ 9, 12-15.) A dispute among members of MartianCraft apparently aroseby 2017. MartianCraft claims that all members except for Richter had resigned from the board by the fall of 2017, and then those resigned members, including Plaintiff R. Rhyne, “attempted to forcibly take control of the Company.” (Mem. Opp’n Mot. Remand, ECF No. 7 at 4 n. 4.) On November 8, 2017, R. Rhyne and another purported member, Nathan Eror, executed a written Consent of Members in Lieu of Meeting (“First Consent”) that sought to remove Richter as CEO of the company and as a member

1 The Court employs the pagination assigned by the CM/ECF docketing system for citations to the parties' submissions. of the board. (Compl. ¶¶ 17-18.) Under this purported Consent, Plaintiffs Melissa Rhyne (“M. Rhyne”) and Joseph Keeley (“Keeley”) were brought into the company, with Melissa Rhyne to serve as a manager and member of the board, and Keeley to serve as Chief Technology Officer. (Id. ¶ 18.) On May 23, 2018, four purported members—Plaintiffs Robert and Melissa Rhyne, along with Eror and Nick Keppol—executed a second Consent of Members in Lieu of Meeting

(“Second Consent”), which again purported to remove Richter as CEO and board member and add Keeley and Keppol as members. (Id. ¶ 19.) Meanwhile, in December 2017, MartianCraft, acting through its purported members after the First Consent, filed a lawsuit against Richter in Richmond Circuit Court based on alleged “acts of misfeasance and malfeasance.” (Id. ¶ 22.) Richter responded by challenging the authority of these members and filing a counterclaim against them. (Id. ¶¶ 22-23.) Then, on June 25, 2018, Richter, claiming to be the sole remaining member on the MartianCraft Board of Directors, executed a Written Consent (“Richter Consent”) that purported to dissociate R. Rhyne, Keeley, and others as members of MartianCraft. (Mem. Opp’n Mot. Remand at 5.) Significant legal

wrangling ensued, including rulings from the Richmond Circuit Court and the Supreme Court of Virginia. (See Compl. ¶¶ 22-34.) Crucially, these state courts largely ruled in favor of Richter on his claim to be the rightful board member and manager of MartianCraft, and it was determined that he successfully dissociated the others, including Plaintiffs R. Rhyne and Keeley, from membership. (See id. ¶¶ 27-30; Mem. Opp’n Mot. Remand at 5; Not. Removal Ex. E, ECF No. 1- 6; Not. Removal Ex. F, ECF No. 1-7.) The parties are still litigating various claims and counterclaims in Richmond Circuit Court. Crucial to the instant Motion, Judge Marchant, who is overseeing the Richmond Circuit Court litigation, ruled that the Richter Consent issued on June 25, 2018, was valid under the MartianCraft Operating Agreement because Richter was the only MartianCraft board member at that time. (Not. Removal Ex. E.) Accordingly, Judge Marchant ruled that the Richter Consent left Richter as “the sole remaining CEO, manager, and director, and only remaining member with any management authority . . . .” (Not. Removal Ex. F at 4.) Thus, “Robert Rhyne, II, Joseph Keeley, and Nicholas Keppol continue to hold an ownership interest, but not management authority, and

shall have the same rights as an assignee of the membership interest would have under Subsection A of § 13.1-1309 of the Virginia Code.” (Id.) Judge Marchant reiterated this ultimate conclusion after the Supreme Court of Virginia remanded the case to him for further consideration. (Not. Removal Ex. G, ECF No. 1-8.) The June 25, 2018 Richter Consent provided in part that, “[t]he following members are removed as Members of the Company and shall have no further rights to participate in the management and affairs of the Company. a) Robert Rhyne II, b) Nathan Eror, c) Joseph Keeley, d) Nick Keppol.” (Not. Removal Ex. C, ECF No. 1-4 at 2.) As did Judge Marchant’s opinion and order, the Richter Consent clarified that the dissociation of these members “shall not affect the

respective membership interest held by such member or the former member’s successor in interest. The former member or successor in interest shall continue to hold a membership interest and shall have the same rights as an assignee of the membership interest would have under subsection A of § 13.1-1039 of the Virginia Code, as amended.” (Id.) The instant claim was first filed by Plaintiffs R. Rhyne, Joseph Keeley, and M. Rhyne in Norfolk Circuit Court, and MartianCraft was served with the Summons and Complaint on October 16, 2020. (Not. Removal, ECF No. 1 ¶ 1; ECF No. 1-2.) On November 13, 2020, MartianCraft removed the case to federal court, claiming that this Court has diversity jurisdiction over the action because the amount in controversy exceeds $75,000 and the parties are completely diverse. (Not. Removal ¶¶ 6-11.) Defendant asserts that Plaintiffs R.

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Bluebook (online)
Rhyne v. MartianCraft, LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rhyne-v-martiancraft-llc-vaed-2021.