978-1285770178 Case Printout Case CPC-03-06 Part 1

Miss.,2011.

Bluewater Logistics, LLC v. Williford

55 So.3d 148 Supreme Court of Mississippi.

Background: Ousted limited liability company (LLC) member brought action against remaining members, request-

ing that he be allowed to remain a member of the LLCs. After remaining members decided to grant the request, the

Chancery Court, Forrest County, Johnny Lee Williams, J., awarded damages to ousted member. LLCs and remain-

30 Appeal and Error

the Court concludes that the chancellor abused his or her discretion, and no reasonable chancellor could have come

to the same factual conclusions.

[3] Appeal and Error 30 847(1)

On review of chancellor’s decision, the Supreme Court’s duty requires it in every case to be as careful and as

sensitive to error as it can be.

[4] Constitutional Law 92 2974

[5] Appeal and Error 30 842(2)

30 Appeal and Error

30XVI Review

30XVI(A) Scope, Standards, and Extent, in General

[6] Corporations and Business Organizations 101 3642(7)

101 Corporations and Business Organizations

101XV Unincorporated Business Organizations

101XV(E) Limited Liability Companies

101k3632 Members, Owners, and Shareholders

101k3642 Actions

101k3642(7) k. Pleading. Most Cited Cases

(Formerly 241Ek45 Limited Liability Companies)

Ousted limited liability company (LLC) member‘s complaint against remaining members and LLCs was suffi-

cient to put them on notice that ousted member was seeking monetary relief, where complaint was titled “Complaint

for Preliminary and Permanent Injunction and Damages,” complaint’s opening paragraph stated that ousted member

was seeking damages, another paragraph alleged the ouster was unlawful, “warranting equitable and monetary re-

[7] Corporations and Business Organizations 101 3642(9)

101 Corporations and Business Organizations

101XV Unincorporated Business Organizations

101XV(E) Limited Liability Companies

[8] Contracts 95 249

95 Contracts

95IV Rescission and Abandonment

156III(B) Grounds of Estoppel

156k82 Representations

156k85 k. Future events; promissory estoppel. Most Cited Cases

While equitable principles ordinarily are not applied under contract law, it is not unheard of, as rescission is an

equitable remedy available in certain contract cases, and promissory estoppel is a quasi-contract remedy.

95II Construction and Operation

95II(C) Subject-Matter

95k206 k. Legal remedies and proceedings. Most Cited Cases

The Legislature is free to establish, as a matter of substantive law, any contract remedy it finds appropriate.

101k3637 k. Rights and liabilities as to other members, owners, or shareholders in general. Most Cited

Cases

(Formerly 241Ek25 Limited Liability Companies)

Remaining limited liability company (LLC) members, who essentially froze out ousted member and prohibited

him from participating in the LLCs‘ business, were individually liable, on finding of willful and intentional breach of

101 Corporations and Business Organizations

101XV Unincorporated Business Organizations

101XV(E) Limited Liability Companies

101k3632 Members, Owners, and Shareholders

101k3641 k. Liability for acts and debts of company. Most Cited Cases

101 Corporations and Business Organizations

101XV Unincorporated Business Organizations

101XV(E) Limited Liability Companies

101k3617 Formation, Organization, and Existence

shares which later could be rescinded, remaining members did not tender payment for the shares at the time of the

ouster, and remaining members continued to insist that member was “fired” and could not be involved in any LLC

business, even though, pursuant to both statute and operating agreements, ousted member was entitled to participate

101XV(E) Limited Liability Companies

101k3617 Formation, Organization, and Existence

101k3621 k. Organizing documents; operating agreement. Most Cited Cases

(Formerly 241Ek14 Limited Liability Companies)

A limited liability company (LLC) operating agreement is contractual in nature and binding on the members of

95II(A) General Rules of Construction

95k172 k. Alternative stipulations and options. Most Cited Cases

An option contract gives a clear right to the option holder, regardless of the wishes of the option giver.

[15] Corporations and Business Organizations 101 3642(10)

101k3642(10) k. Costs and attorney fees. Most Cited Cases

(Formerly 241Ek45 Limited Liability Companies)

Chancellor had discretion to award reasonable attorney’s fees to ousted limited liability company (LLC) mem-

ber, who prevailed on breach of contract claims and breach of fiduciary duty claims against LLCs and remaining

members, if such fees were factually warranted.

102k194.25 k. In general. Most Cited Cases

Costs 102 194.32

102 Costs

LLCs and the individual defendants. The defendants claim that, because they withdrew their offer to purchase the

plaintiff’s interest, the chancellor had no authority to force them to buy him out, and that there was no basis for indi-

vidual liability.

¶ 2. Under Mississippi law, every member of a member-managed LLC is entitled to participate in managing the

business. But even after the defendants claim they had changed their minds about buying the plaintiff’s interest in

mand for a hearing on those issues.

BACKGROUND FACTS AND PROCEEDINGS

¶ 3. James Williford Jr., Patricia Mosser, Marquetta Smith, and Michael Floyd formed two Mississippi limited

liability companies—Bluewater Bay, LLC, and Bluewater Logistics, LLC,—to bid on lucrative government con-

tracts related to the aftermath of Hurricane Katrina.

and desist from performing any business” on behalf of the company; and that he would be paid “one-quarter of the

fair market value” of the companies.

¶ 5. Williford sued both LLCs and the three individual, super–majority members (“Defendants”). In addition to

damages, he asked for injunctive relief to protect his interest in the LLCs, and to prevent the three super-majority

members from improperly ousting him.

his share of the corporation; it’s going to be tendered to him…. They fired him and they don’t want him back….

The 75% ownership can stop his salary. They can stop his benefits. They can do anything they want to do.

¶ 7. The chancellor granted a preliminary injunction and appointed Havard to “oversee the financial affairs of

the LLCs.” The court ordered that Havard was to have “unlimited access to the financial records of the company on

the premises” and that the records “may be made available to the plaintiff.” The court’s order further provided:

uation of the LLC is irrelevant and [there] is no necessity for Nancy [Carpenter] to evaluate anything, so at this

point I need not take up the issues of the information requested by her and confidentiality. The answer to your

query and statement: (“… and I think it would be in the best interest of all the shareholders to see her evaluation.

Do you agree? ….”) is NO. As an aside, I am not much interested in what you think; but aside from that fact, not

only does the best interest of the shareholders have nothing to do with this litigation, an evaluation by Nancy

[Carpenter] is unnecessary, useless, and irrelevant because the offer to purchase Mr. Williford’s stock is with-

drawn.

(Emphasis in original.)

¶ 14. Defendants’ counsel followed up the letter with a motion asking the court to dissolve, in part, the prelimi-

nary injunction. The primary argument was that, because defendants had withdrawn their offer to purchase Willi-

quested, court-ordered, information. On September 11, 2006, the chancellor entered an agreed order temporarily

staying all proceedings. The order stated that the parties had agreed to a procedure for appraisal of the LLCs; that the

court’s previous orders were still in effect; and that Defendants were to provide the information Carpenter previously

had requested. Specifically, Defendants were to provide her “any and all other financial records, as she deems nec-

essary, to determine a fair market value of the Bluewater entities.”

¶ 17. When the chancellor heard the motion on February 6, Carpenter‘s testimony clearly established that De-

fendants had failed to comply with discovery and the court‘s previous orders. On one occasion during the hearing,

the chancellor—referring to documents that had not been provided—vented his frustration to the defendants’ coun–

sel:

And for any party to make a promise to this court that they’re going to in good faith—and I’m troubled by it—

the sanction on February 12, as ordered, Defendants waited until February 16, and then filed a motion requesting the

court to “set aside, alter or amend” its February 8, 2007, order.

March 8, 2007, Hearing

¶ 19. Williford’s counsel responded by filing another motion for sanctions, informing the court that the sanc-