Gebam, Inc. v. Investment Realty Series I, LLC
15 F. Supp. 3d 1311
N.D. Ga.2013Background
- GEBAM and IRS formed IRH Properties, LLC to invest in Remington Park, Paces Park, and Brentmoor properties.
- IRS, as Developer Member, managed the LLC; GEBAM could approve Major Decisions.
- Capital-sharing ratios favored IRS on initial contributions but residual distributions were split evenly.
- Investment Realty, LLC, affiliated with IRS, managed properties and charged fees up to 3.5% of operating revenues.
- GEBAM alleges unauthorized disbursements to IRS affiliates and over-allocated management fees; defendants dispute authorization.
- Court granted default judgment against IRS; now entertained cross-motions for summary judgment on aiding/abetting fiduciary duty, unjust enrichment, and veil-piercing; court sua sponte dismissed veil-piercing claims against Savage, Noltes, and Brannen in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Aiding and abetting breach of fiduciary duty by the Individual Defendants | GEBAM claims self-dealing and knowledge/participation by non-fiduciaries. | Defendants deny unauthorized disbursements and argue authorization by GE-BAM. | Genuine issues of material fact as to authorization and knowledge; denial of summary judgment. |
| Veil piercing of IRS | IRS was alter ego; piercing warranted due to misuse of corporate form. | No extreme abuse of corporate form or fraud proven; veil piercing inappropriate. | Veil-piercing claim dismissed against Brannen; sua sponte dismissed against Noltes and Savage. |
| Unjust enrichment | Enrichment of Defendants at GEBAM's expense with no legal justification. | Contract claim provides adequate remedy; enrichment not shown. | Summary judgment denied for both sides; claim to proceed to trial. |
Key Cases Cited
- In re Sunstates Corp. S’holder Litigation, 788 A.2d 530 (Del. Ch. 2001) (veil-piercing and misuses of corporate form; high bar to pierce)
- Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963 (Del. Ch. 2000) (aiding and abetting fiduciary breach standard; scienter considerations)
- Malpiede v. Toumson, 780 A.2d 1075 (Del. 2001) (aiding and abetting fiduciary breach; knowledge and participation required)
- Wallace ex rel. Cencom Cable Income Partners II, Inc. v. Wood, 752 A.2d 1184 (Del. Ch. 1999) (civil conspiracy/aiding and abetting framework; factual inquiry)
- Dwight v. Tobin, 947 F.2d 455 (11th Cir. 1991) (waiver/ratification of fiduciary breaches with disclosure)
- Feliciano v. City of Miami Beach, 707 F.3d 1244 (11th Cir. 2013) (summary judgment when testimony is non-conclusory and objective)