2021 Ark. App. 382
Ark. Ct. App.2021Background
- Pinnacle Partners, LLC (Pinnacle) formed in 1999 to own/operate a parking lot; original members: McGill Companies, LLC (McGill, 50%), Michael Mattox (25%), and Alice Mattox (25%). Michael Mattox was designated manager but the operating agreement required unanimous member consent for actions that would obligate the company over $1,000.
- Pinnacle leased the lot to Main Entrance, Inc. (Main), owned by Jeffrey Clay Smith (Smith); after the mortgage was paid in 2012, Main stopped remitting rent to Pinnacle and arrears arose.
- In April 2018 McGill (via Smith) and Alice Mattox (total 75%) met, removed Michael as manager, and voted to dismiss Pinnacle’s lawsuit against Main and Smith; Michael did not attend.
- The trial court granted partial summary judgment dismissing Pinnacle’s claims with prejudice (but preserving Michael Mattox’s individual claims). Pinnacle’s appeal was dismissed because the suit lacked the unanimous consent required by the operating agreement.
- The court later granted additional partial summary judgments dismissing Michael Mattox’s individual claims against Main and Smith (statute-of-limitations, lack of individual statutory cause, and lease language), and ultimately dismissed his remaining claims against McGill as well. The appeal affirmed in part and dismissed in part.
Issues
| Issue | Plaintiff's Argument (Mattox) | Defendant's Argument (Main/Smith/McGill) | Held |
|---|---|---|---|
| Validity of members’ April 19, 2018 vote to remove Michael and dismiss Pinnacle’s suit | Vote was tainted by Smith’s self-interest (he owned McGill, Main, and Peri) and should be voided | Vote was valid; notice given; majority (75%) voted to remove Michael and dismiss | Vote/dismissal of Pinnacle upheld — even if McGill’s vote were invalid, Alice’s independent 25% vote combined with McGill’s made unanimous-consent requirement unsatisfied for Michael to prosecute the suit; Pinnacle’s suit dismissed |
| Manager authority to prosecute suit without unanimous consent under operating agreement | Manager had authority to manage day-to-day and could sue; dismissal improper | Operating agreement required unanimous consent for actions obligating the company > $1,000; retaining counsel/ litigation could obligate company | Michael lacked unanimous consent under §5.4; prosecution of litigation required consent; dismissal affirmed |
| Individual statutory/common-law claim for self-dealing (A.C.A. §4-32-402) and lease-based duty breach | Section creates individual remedies; Smith usurped corporate opportunity (Peri) and used Pinnacle property to benefit Peri; claims tolled by fiduciary duty/fraudulent concealment | §4-32-402 remedies belong to the company, not individual members; no duty or privity to Mattox personally; claims time-barred; lease allowed Main’s use | Claims against Main and Smith dismissed — court treated statute as company remedy, found statutes of limitations and lease language barred relief; Michael didn’t adequately preserve or contest statute-of-limitations on appeal |
| Piercing McGill’s corporate veil / liability of McGill and Peri | McGill should be liable and veil pierced to reach Smith for self-dealing profits | No sufficient evidence to pierce veil; separate entities; defenses include laches, statute of limitations, lack of standing | Claims against McGill ultimately dismissed on summary judgment for reasons stated by court (statute-of-limitations/merits); veil-piercing not sustained |
Key Cases Cited
- Greenlee v. J.B. Hunt Transp. Servs., 342 S.W.3d 274 (summary-judgment standard: no genuine issue of material fact)
- McGrew v. Farm Bureau Mut. Ins. Co. of Ark., 268 S.W.3d 890 (burden of moving party in summary-judgment context)
- In re Estate of Cook v. Willhite, 601 S.W.3d 453 (contract-construction: enforce plain meaning of unambiguous written instrument)
- Brock v. Townsell, 309 S.W.3d 179 (appellate courts may affirm for a correct result even if trial court gave a wrong reason)
- Quarles v. Courtyard Gardens Health & Rehab., LLC, 488 S.W.3d 513 (when trial court does not state basis, ruling encompasses issues presented by briefs/arguments)
- Windsong Enters., Inc. v. Red Apple Enters. Ltd. P’ship, 542 S.W.3d 177 (summary-judgment ruling deemed to include all issues raised in motions/briefs)
- Fennell v. City of Pine Bluff, 492 S.W.3d 887 (arguments raised first in a reply brief are not considered on appeal)