Largo Legacy Group, LLC v. Evens Charles, C.A. No. 2020-0105-MTZ

Background

Largo Hotel, LLC (the Company) is a manager-managed Delaware LLC; Manager CD FD Ventures (controlled by Evens Charles) ran operations; Largo Legacy (Plaintiff) holds 15% membership; two Majority Members hold the rest.
The Company owned an adjacent vacant parcel (Adjacent Land) appraised at ~ $900,000 and a DoubleTree hotel; Charles proposed a Homewood Suites project on the Adjacent Land and would manage the new hotel for fees.
Manager/Charles caused the Company to spend approximately $700,000 in predevelopment costs, then subdivided and conveyed the Adjacent Land to 9103 Basil Court Partners LLC (an entity controlled by Charles/Majority Members); Plaintiff alleges the land was assigned zero value and Plaintiff received only $105,000 (its share of predevelopment costs).
Plaintiff alleges Charles used Company funds earmarked for a 2015 renovation to fund the Project predevelopment, issued a capital call to cover the shortfall, withheld distributions to collect a deficiency loan, and refused to provide required monthly financials.
Plaintiff demanded books and records, sued in Delaware Chancery (Books & Records action), dismissed that action, then filed this plenary suit asserting breach of fiduciary duty, aiding and abetting, fraud, and breach of the Operating Agreement (failure to provide monthly financials).
Court disposition on defendants’ motion to dismiss: breach of fiduciary duty (Count I) survives (except to the extent duplicative of the contract claim); aiding and abetting (Count III) survives; breach of contract for failure to provide monthly financials (Count IV) survives; fraud (Count II) is dismissed for failure to plead with particularity.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Timeliness / laches for fiduciary- duty claims	Claims accrued when Plaintiff learned Company would not be reimbursed (March 2017) or when capital call revealed misuse (July 2017); suit filed within 3 years.	Causes accrued in 2016 when predevelopment spending was known, so claims are time-barred.	Court: Accepts Plaintiff’s accrual dates and/or equitable tolling; claims not dismissed as time-barred at pleading stage.
Whether Manager/Charles owe fiduciary duties and whether Operating Agreement displaces them	Manager owes default duties per §5.6; Charles (controller) owes loyalty under USACafes; the Agreement does not unambiguously disclaim duties.	Sections allowing affiliate transactions and 70% approval immunize the actions; procedural approvals foreclose fiduciary challenge.	Court: Manager and Charles owe fiduciary duties; procedural approval does not alone preclude loyalty claim; fiduciary breach claim survives (except duplicative contractual disclosure claim).
Aiding-and-abetting liability for Charles (as Manager’s agent)	If Charles is not personally a fiduciary, he knowingly participated in Manager’s breaches and may be liable as aider/abettor.	An agent cannot aid-and-abet its principal; Charles acts as Manager’s agent so claim fails.	Court: Claim survives at pleading stage because an agent who acts for personal motives can be liable; denied dismissal.
Fraud (Rule 9(b) and reliance)	Defendants concealed material facts, misused funds, and made false statements inducing Plaintiff’s inaction/reliance.	Fraud not pled with particularity; Plaintiff did not reasonably rely or allege specific misrepresentations and reliance.	Court: Fraud allegations are conclusory and fail Rule 9(b) (no particularized misrepresentations or justifiable reliance); Count II dismissed.
Breach of Operating Agreement (monthly financials) and damages	Manager failed to provide required monthly financial statements under §10.4, causing damage.	Plaintiff hasn’t alleged specific damages or need; Books-and-Records pursuit shows Plaintiff had documents; no injury pleaded.	Court: Breach of contract pleaded sufficiently; damages alleged generally; Count IV survives at pleading stage.

Key Cases Cited

Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002) (pleading standard: accept well-pleaded facts and draw reasonable inferences on a motion to dismiss)
Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC, 27 A.3d 531 (Del. 2011) (applicable pleading and dismissal principles)
In re USACafes, L.P. Litigation, 600 A.2d 43 (Del. Ch. 1991) (controllers of a managing entity can owe loyalty duties when they control the entity’s property)
Schnell v. Chris-Craft Industries, Inc., 285 A.2d 437 (Del. 1971) (equity may scrutinize acts that are legally possible but inequitable)
Sonet v. Timber Co., L.P., 722 A.2d 319 (Del. Ch. 1998) (contractual provisions can displace fiduciary duties only if clear and unambiguous)
In re Tyson Foods, Inc. Consolidated Shareholder Litigation, 919 A.2d 563 (Del. Ch. 2007) (statute of limitations / laches principles and tolling doctrines)
Abry Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006) (fraud elements and Rule 9(b) particularity requirements)
In re Walt Disney Co. Derivative Litigation, 906 A.2d 27 (Del. 2006) (principles on duty of loyalty and conduct of fiduciaries)
Beard Research, Inc. v. Kates, 8 A.3d 573 (Del. Ch. 2010) (elements for breach of fiduciary duty claim)