Sutherland v. Sutherland
348 S.W.3d 84
Mo. Ct. App.2011Background
- Appellant Martha Sutherland is the trustee and owner of a membership interest in Sutherland Lumber Company of Kansas City, LLC (SLKC).
- Mark Sutherland and Pearson are the two managing members of SLKC and also hold membership interests; they previously held managerial roles in SLKCLP, the predecessor to SLKC.
- SLKCLP leased Liberty, Missouri property with a right of first refusal; in 2001 SLKCLP elected not to exercise and assigned the right to Cimarron, which purchased the property.
- In 2002 Cimarron sold a portion of the Liberty parking lot to McDonald’s after SLKC agreed to terminate its lease on that portion.
- In July 2004 Appellant demanded access to SLKC’s books; SLKC conditioned access on a confidentiality agreement which Appellant refused, resulting in a settled dispute.
- In 2007 Appellant filed a derivative action alleging fiduciary breaches related to the Liberty property transaction and the records demand; the petition was dismissed for failure to demand action from SLKC's managing members prior to filing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the business judgment instructions accurately stated the rule | Sutherland contends the instructions misstate the business judgment rule. | Sutherland argues the instructions accurately reflect the rule and preserve presumptions. | Denied; instructions supported by law and not prejudicial. |
| Whether ratification instructions properly instructed on retrospective ratification | Missouri law does not permit retrospective ratification by an LLC; lacks knowledge requirement. | Operating statute § 347.065.3 permits ratification with informed members; common law applied. | Denied; ratification instructions upheld. |
| Whether instruction on reliance on counsel adequately stated the defense | Defense should require full disclosure of material facts to counsel; current instruction is too broad. | Instruction 28 aligns with § 347.090; implicit disclosure requirement exists. | Denied; instruction properly states the defense. |
| Whether SLKC’s participation in trial was improper and prejudicial | SLKC’s involvement prejudiced Appellant by appearing to endorse the company’s position. | Limited participation was appropriate to defend corporate process and internal ratification. | Denied; trial court did not abuse discretion; issue not preserved but would be denied on merits. |
Key Cases Cited
- Weldon Revocable Trust v. Weldon, 231 S.W.3d 158 (Mo. App. W.D. 2007) (business judgment rule in LLCs; good faith, best interests)
- Ironite Prods. Co. v. Samuels, 985 S.W.2d 858 (Mo. App. E.D. 1998) (business judgment rule standard in Missouri)
- Jackson v. St. Regis Apartments, Inc., 565 S.W.2d 178 (Mo. App. E.D. 1978) (burden when self-dealing or bad faith shown)
- Zakibe v. Ahrens & McCarron, Inc., 28 S.W.3d 373 (Mo. App. E.D. 2000) (presumption of self-dealing with fiduciary interests; burden shifting)
- Carter v. St. John's Reg'l Med. Ctr., 88 S.W.3d 1 (Mo. App. S.D. 2002) (agency authority and ratification concepts in LLCs/corporations)
- Sobba v. Elmen, 462 F. Supp. 2d 944 (E.D. Ark. 2006) (corporation as real party in interest; derivative action defense mechanics)
- Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am. v. Hoffa, 242 F. Supp. 246 (D.D.C. 1965) (derivative actions and corporate defense principles)