331 P.3d 942
N.M. Ct. App.2014Background
- BUKE, LLC was a car-dealership LLC with members holding ownership percentages; Randall Eastburg was appointed sole manager and was also a member/operator of several Cross Country dealerships.
- BUKE acquired a GM franchise (Tucumcari Dealership) giving it a GM badge (access to closed GM auctions) and a GMAC credit line (floor plan). Eastburg used those credentials to purchase vehicles for BUKE, the Lovington dealership, and the Cross Country LLCs.
- Eastburg’s use of BUKE’s badge and credit line was public (media interviews, BUKE posted an article), known to BUKE staff and the Cross Country bank, and not objected to by BUKE members except Turner Branch (the lone non-owner of the Lovington dealership) until 2009.
- BUKE sued the Cross Country LLCs/members and BUKE’s accountant (Perner) alleging unauthorized use of assets, unjust enrichment, conversion, various torts, and accountant malpractice. Many defendants were dismissed before appeal; appeal primarily concerns summary judgment for Cross Country entities/members and accountants.
- The Operating Agreement gave the manager exclusive control but prohibited the manager from possessing or assigning company assets for other than company purposes without majority-member consent; the statutory default rules were displaced by that agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Eastburg’s use of BUKE’s GM badge and credit line required consent and, if so, whether a majority of members consented | Eastburg used BUKE assets without requisite consent and concealed the use; therefore his actions were unauthorized | The Operating Agreement required only majority-member consent (not disinterested-manager vote); Eastburg’s use was open, known, and implicitly/expressly consented to by a majority of members | Court held Operating Agreement governs; undisputed facts permit only one reasonable inference: a majority consented, so summary judgment for defendants affirmed |
| Whether BUKE’s unjust enrichment claim against Cross Country members survives if Eastburg had authority/consent | Members were unjustly enriched by benefits traced to unauthorized use of BUKE assets | Distributions to members were lawful and no wrongful act by members; if manager had consent, enrichment was not unjust | Court dismissed unjust enrichment claim because Eastburg’s use was authorized by member consent |
| Whether BUKE’s accountant-malpractice claim based on alleged conflict of interest required expert testimony | BUKE argued conflict of interest and breach were obvious to lay jurors; expert not required | Defendants argued accounting-standard breaches and conflicts require expert proof of standard, breach, causation | Court held that accountant-malpractice claims generally require expert testimony unless breach is so obvious that lay jurors can decide; here expert testimony was required and absent, so summary judgment for accountants affirmed |
| Whether the district court abused its discretion by denying leave to extend the expert-disclosure deadline | BUKE argued good cause for late expert disclosure after adding accountant claim and sought extension | Defendants relied on scheduling order, long delay, and BUKE’s failure to timely seek or identify experts | Court found no abuse of discretion: BUKE’s request was untimely, lacked diligence, and the court properly enforced the scheduling order |
Key Cases Cited
- Self v. United Parcel Serv., Inc., 970 P.2d 582 (N.M. 1998) (standard of review for summary judgment)
- Romero v. Philip Morris Inc., 242 P.3d 280 (N.M. 2010) (summary-judgment evidentiary view and inferences)
- Spencer v. Barber, 299 P.3d 388 (N.M. 2013) (use of professional-conduct rules to illustrate standard of care)
- Pharmaseal Labs., Inc. v. Goffe, 568 P.2d 589 (N.M. 1977) (expert testimony generally required in professional malpractice except in exceptional cases)
- Brown-Wilbert, Inc. v. Copeland Buhl & Co., 732 N.W.2d 209 (Minn. 2007) (accountant-malpractice requires expert to establish standard, breach, and causation)