Mooney, et al. v. Diversified Business Communications, et al. (Lawyers Weekly No. 09-030-18)

COMMONWEALTH OF MASSACHUSETTS SUFFOLK, ss. SUPERIOR COURT. 1684CV03726-BLS2 1784CV03423-BLS2 ____________________ JOHN J. MOONEY and MORGAN D. WHEELOCK and JOHN SQUIRE and MACGREGOR INVESTMENTS CORPORATION v. DIVERSIFIED BUSINESS COMMUNICATIONS; DBC PRI-MED, LLC; THEODORE WIRTH; KATHY WILLING; and OAKLEY DYER ____________________ MEMORANDUM AND ORDER ON DEFENDANTS’ MOTIONS TO DISMISS FIVE OF SIX CLAIMS IN EACH ACTION The four Plaintiffs are former minority members of a closely-held Delaware company called DBC Pri-Med, LLC. The majority member is and was defendant Diversified Business Communications. The three individual defendants are all managers of Pri-Med; none of them has any ownership interest in the company.1 In January 2017 Pri-Med called Plaintiffs’ shares, as expressly permitted in Pri-Med’s operating agreement. This LLC Agreement provides that an appraisal firm to be selected by the parties shall determine the value of any called (or put) shares, based on a valuation of Pri-Med as a going concern and without discounting that value for the illiquidity or minority nature of any shares. Plaintiffs allege that Defendants carried out a scheme to artificially deflate the value of Pri-Med in order to avoid paying Plaintiffs a fair and proper price for redeeming their shares. According to Plaintiffs, this scheme involved artificially decreasing Pri-Med’s assets by selling off its major subsidiary (a company called Amazing Charts) and artificially increasing the company’s liabilities by inflating its expenses and debt. 1 The ownership of Pri-Med was divided into three classes of shares. The Series A shares were voting shares. The Series B-1 and B-2 shares were not. Diversified controlled the company because it held roughly 93 percent of the Series A shares. Each of the Plaintiffs held roughly 1.7 percent of the Series A shares. The four Plaintiffs each held one-fourth of the Series B-1 shares, which gave them certain approval rights. Four other individuals held the Series B-2 shares, which had no approval rights. – 2 – Each set of Plaintiffs asserts six claims.2 Count One seeks a declaratory judgment that the sale of Amazing Charts violated the LLC Agreement, and therefore is null and void, because Defendants did not obtain Plaintiffs’ approval. The other claims are for breach of the LLC Agreement, breach of the implied covenant of good faith and fair dealing in the same contract, breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, and certain equitable relief. Defendants have moved to dismiss all of the claims under Mass. R. Civ. P. 12(b)(6) except for the claims in Count Two for breach of contract. The Court will order that declaratory judgment enter in Defendants’ favor on Count One of each complaint, deny the motions with respect to the claim for breach of the implied covenant of good faith and […]

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