Shachoy v. Conrades, et al. (Lawyers Weekly No. 09-068-17)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
CIVIL ACTION
- 2017-02621-BLS2
MEREDITH CLARK SHACHOY, individually
and derivatively on behalf of LONGFELLOW VENTURE PARTNERS I, LLC
And TECH SQUARE PRINCIPALS 2 LLC,
Plaintiff
vs.
GEORGE CONRADES, individually and as trustee of the
GEORGE CONRADES REVOCABLE TRUST, and as manager of
TECH SQUARE TRADING (GP) LLC, WILLIAM WILSON, as manager of
LONGFELLOW VENTURE PARTNERS, and CONRADES FAMILY, LLC
Defendants,
And
LONGFELLOW VENTURE PARTNERS I, LLC and
TECH SQUARE PRINCIPALS 2 LLC
Nominal Defendants
MEMORANDUM OF DECISION AND ORDER
ON DEFENDANTS’ MOTIONS FOR REAL ESTATE ATTACHMENTS
AND FOR TRUSTEE PROCESS ATTACHMENTS
Plaintiff Meredith Shachoy instituted this action asserting various rights as a minority shareholder of Longfellow Venture Partners I, LLC (LVP). Specifically, she claims that she has been frozen out of LVP and, in her derivative claim, that LVP had been improperly managed by the defendant George Conrades. On September 8, 2017, this Court denied Shachoy’s request for a injunctive relief, concluding that not only had she failed to satisfy the requirements of Packaging Industries v. Cheney, 380 Mass. 609 (1980) but also that she came before the Court with “unclean hands.” The defendants answered and asserted counterclaims against Shachoy alleging that she had misappropriated millions of dollars from LVP and breached her contractual and fiduciary obligations.
In December, the parties were once again before this Court for hearing on defendants’ motions to attach real estate and bank accounts in Shachoy’s name. On December 21, 2017, this Court allowed both motions in the amount of $ 5,000,000. This memorandum sets forth the basis for that decision.
Under Rules 4.1 and 4.2, Mass.R.Civ.P., a party is entitled to an attachment if he can demonstrate a reasonable likelihood of recovering judgment equal to or greater than the amount requested and there is no liability insurance available to satisfy such judgment. Shachoy offers no evidence as to liability insurance. As to the defendants’ likelihood of recovering judgment against her, the Court has considered the affidavits submitted by all parties and makes the following findings:
- According to bank and corporate records, Shachoy withdrew more $ 9.8 million from LVP from 2009 until the time of her termination in September 2016. About $ 1.7 million of that sum was transferred directly to her husband’s company, CMS, LLC. Another $ 8.1 million was paid directly to her. Shachoy does not dispute this figures.
- An examination of credit card and bank records also shows that Shachoy charged approximately $ 400,000 to LVP and/or Conrades for what she claims were business expenses. The description of those charges, however, raise serious questions as to whether they are indeed business-related. They include: $ 5,600 at a boutique jewelry store in St. Barths, Virgin Islands; $ 4,600 for limousines in London; $ 2,500 to Barney’s in New York, and $ 5,500 to her child’s sailing coach.
- In an effort to justify the $ 9.8 million in withdrawals, Shachoy claims that at least a portion of that amount was her yearly salary. Using Shachoy’s own figures, however, the total salary she would have received between 2009 and 2016 amounts to $ 3.7 million. Shachoy also claims that Conrades agreed to yearly bonuses between 2011 and 2015 totaling $ 1.2 million. This still falls far short of justifying the $ 9.8 million in total withdrawals. Moreover, she has produced no document that would support her claim as to salary and bonus in the amounts she is asserting.
- Shachoy’s primary justification for these withdrawals is that, beginning in December 2012, she was an equity partner in LVP entitling her to a percentage share of the company’s assets. She relies an agreement, entitled “Amended Restated Limited Liability Company Agreement of Longfellow Venture Partners, LLC” (the LLC Agreement) dated December 24, 2012. That Agreement makes Shachoy a “Special Member” of LVP and states that:
[T]he Special Member’s interest in the Company [LVP] was issued in exchanged for each such Special Member’s provision of future management services to the Company, it being understood that the interest of each Special Member constitutes a ‘profits interest’ within the meaning of Revenue Procedure 2001-43 (2001 I.R.B.191) and Revenue Procedure 93-27 (June 9, 2003).
Section 7.2(c) of LLC Agreement. Revenue Procedure 93-27 states that a “profits interest” is a “partnership interest other than a capital interest.” (Emphasis supplied). A capital interest would give the holder a share of the partnership’s assets at fair market value, which is what Shachoy claims she has. Given the IRS definition and the language of the LLC Agreement itself, this claim is dubious to say the least.
Based on the above, the defendants have shown that they are reasonably likely to succeed in obtaining a judgment against Shachoy of at least $ 5 million. As to the trustee process attachments, this Court limited that to the attachment of bank accounts that stand in
Shachoy’s name only because her husband (with whom she apparently maintains joints accounts) has not been named as a defendant in this matter.
_____________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: December 26, 2017