351 So.3d 783
La. Ct. App.2022Background
- On June 23, 2016 JFFCU loaned $1,400,000 to New Orleans Libations & Distilling Co. (Distillery); Kirk E. Coco, sole member of Distillery, personally guaranteed the note and signed an act pledging 65% of his ownership interest in New Orleans Lager and Ale Brewing Company, LLC (Brewery).
- Brewery’s operating agreement (Section 7.1) required written notice, 60-day advance notice, and unanimous consent of all members before any transfer (defined to include pledge) of a member’s interest; no such notice or consent was shown.
- In 2018 the Walner Living Trust invested in the Brewery, receiving additional membership units that diluted Coco’s percentage from 65% to about 24% and increased the Walner Trust to ~69%.
- JFFCU sued (May 21, 2018) the Distillery and Coco on the note and later added the Brewery and Walner Trust; Coco filed Chapter 7 bankruptcy (June 22, 2018) and was discharged from personal liability.
- After JFFCU presented its case at a bench trial (May 17–18, 2021), the Brewery and Walner Trust moved for involuntary dismissal under La. C.C.P. art. 1672(B); the trial court granted the motion (Jan. 14, 2022), dismissing JFFCU’s claims with prejudice; this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the pledge of Coco’s Brewery interest is enforceable against the Brewery and its members | The pledge was valid; a member may assign/pledge his membership interest absent knowledge of any restriction | The operating agreement restricted transfers (including pledges) absent notice and unanimous consent; no notice/consent occurred, and the Brewery had no primary obligation to JFFCU | Pledge not enforceable against the Brewery — pledge is accessory and Brewery had no primary obligation; Coco did not comply with operating agreement transfer restrictions |
| Whether the trial court erred in granting involuntary dismissal under La. C.C.P. art. 1672(B) | JFFCU argued it was entitled to declaratory relief that the pledge was valid and not diluted | Defendants argued JFFCU failed to prove any right to relief as to them | Affirmed: trial court did not err — plaintiff failed to carry burden; involuntary dismissal proper |
Key Cases Cited
- Crowe v. State Farm Mut. Auto. Ins. Co., 309 So.3d 773 (La. App. 4 Cir. 2020) (manifest error standard for involuntary dismissal review)
- Ridgeway v. Pierre, 950 So.2d 884 (La. App. 4 Cir. 2007) (standard for appellate review of bench findings)
- Ragas v. Hingle, 146 So.3d 687 (La. App. 4 Cir. 2014) (plaintiff’s burden at involuntary dismissal)
- Kelly v. Housing Authority of New Orleans, 826 So.2d 571 (La. App. 4 Cir. 2002) (deference to trial court credibility and fact inferences)
- Howard v. Willis-Knighton Med. Center, 924 So.2d 1245 (La. App. 2 Cir. 2006) (pledge is accessory and cannot be enforced without the primary obligation)
- Ark-La-Tex Safety Showers, LLC v. Jorio, 132 So.3d 986 (La. App. 2 Cir. 2013) (operating agreement is contractual and binding on members)
- Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, 112 So.3d 187 (La. 2013) (contract interpretation seeks parties’ common intent)