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Williams, et al. v. Charles, et al. (Lawyers Weekly No. 11-122-13)

NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us       12‑P‑1216                                       Appeals Court   BRENT WILLIAMS, trustee,[1] & another[2]  vs.  JEAN BERNARD CHARLES & another.[3]       No. 12‑P‑1216. Suffolk.     April 4, 2013.  ‑  October 3, 2013. Present:  Kantrowitz, Brown, & Kafker, JJ.       Practice, Civil, Dismissal, Standing.  Corporation, Stockholder’s derivative suit, Close corporation, Derivative action.  Fiduciary.     Civil action commenced in the Superior Court Department on January 28, 2008.   A pretrial motion to dismiss was heard by Margaret R. Hinkle, J., and the case was heard by Douglas H. Wilkins, J.     Leonard M. Singer for the plaintiffs. Richard C. Bardi for the defendants.       BROWN, J.  In this appeal, we consider whether the plaintiffs, members of a Massachusetts limited liability company, have standing to bring derivative claims on the company’s behalf against the company’s manager, as provided in the Massachusetts Limited Liability Company Act, G. L. c. 156C, § 56.  Brent Williams, as trustee of Frowmica Nominee Trust, and Carlo Noel appeal from the dismissal of claims they brought on behalf of Frowmica, LLC (Frowmica), as stated in their second amended verified complaint (second amended complaint), against the defendants, Jean Bernard Charles and Frowmica.  The issue of standing turns primarily on whether Williams’s contribution to Frowmica, which was in the form of services rather than cash, should be included in calculating the votes of the members in favor of authorizing the derivative suit under the statute.  We also consider whether the ownership interest of Charles’s mother, Anna Charles, should be deemed adverse to interests of Frowmica, and her interest therefore excluded from the vote, because of her relationship with Charles.  We affirm.   1.  Background.  We take the facts from the second amended complaint.  Frowmica was organized as a limited liability company pursuant to G. L. c. 156C, and in accordance with the terms and conditions set out in the “Frowmica Limited Liability Company Operating Agreement” (operating agreement).  The purpose of Frowmica was to own and operate a taxicab business.  To that end, Diamond Universal Corporation (Diamond) set out to purchase the assets of Bay State Taxi LLC (Bay State), and formed Frowmica to negotiate and finance the purchase.  Diamond raised capital for the transaction, with the understanding that it would reserve a 32.93 percent ownership interest in Frowmica for itself, which was subsequently reduced to 31.29, and would allocate the remainder […]

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Posted by Massachusetts Legal Resources - October 3, 2013 at 4:13 pm

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