DUNBAR GROUP, LLC. V. TIGNOR 593 S.E.2d 216 (2004) CASE BRIEF

DUNBAR GROUP, LLC. V. TIGNOR

593 S.E.2d 216 (2004)

NATURE OF THE CASE: This was an appeal by Dunbar (P) from a judgment ordering the dissolution of a limited liability company.

FACTS: XpertCTI, LLC was formed in March 2000, by The Dunbar Group, LLC (Dunbar), and Archie. F. Tignor, who each owned a membership interest of 50 percent in Xpert. Robertson, a computer software developer and consultant, was the sole member and manager of Dunbar. Tignor owned 50 percent of the stock of X-tel, Inc. (X-tel), a telecommunications sales firm. Dunbar and Tignor executed an 'Operating Agreement' for Xpert under which they were the sole managers of Xpert. Dunbar created Xpert's proprietary software and conducted the daily operations of the company. Tignor's main function was to provide Xpert with access to his business contacts in the telecommunications industry. The operating agreement has provisions for asserting a breach of the agreement by another company member. If the breach was not timely cured, the complaining member had the 'right to petition a court of competent jurisdiction for dissolution of the Company. Xpert entered into a contract with Samsung to supply Samsung with software-driven security devices called 'dongles,' which were to be included in all telecommunications systems sold by Samsung. Xpert received about $20,000 per month from the Samsung contract. Disputes arose between Robertson and Tignor over matters primarily related to the management and disbursement of Xpert's assets. In May 2002, Dunbar's counsel sent a letter to Tignor's counsel stating that it was apparent to Robertson that 'his continued working relationship with Mr. Tignor [was] no longer possible.' Dunbar's counsel further stated that 'Mr. Robertson is of the opinion that it is in the parties' best interest to sever their ties as fully and quickly as possible.' In September 2002, Dunbar, Xpert, and Robertson, in his capacity as a manager of Xpert, (Ps) filed an amended bill of complaint against Tignor (D) and X-tel requesting, among other things, entry of an order 'expelling and dissociating Tignor as a member of Xpert pursuant to Virginia Code 13.1-1040.1(5).' P alleged that D engaged in 'numerous acts of misconduct as a member and manager of Xpert,' including the commingling of Xpert's funds with the funds of D and 'his corporate alter ego, X-tel.' D filed a separate 'Application for Judicial Dissolution' under code 1047 alleging that 'serious differences of opinion as to company management have arisen between the members and managers' of Xpert, and that the company was 'deadlocked' in its ability to conduct its business affairs. The evidence showed that D commingled Xpert's funds and used the proceeds to pay some of X-tel's expenses and to meet X-tel's payroll, including the payment of D's own salary. Without informing Robertson, D also authorized a change in the status of Xpert's checking account that prevented checks from being written on the account. Robertson discovered the change, when he wrote a check payable to one of Xpert's vendors and the check 'bounced.' D also evicted Robertson from X-tel's premises even though the LLC was renting space from X-Tel. D also restricted Robertson's access to various testing equipment located in X-tel's offices, reducing Robertson's ability to test Xpert's products. The chancellor entered an order that Tignor be 'immediately expelled as an active member of Xpert' and that Robertson 'shall continue to operate Xpert' and provide to D a monthly accounting of Xpert's finances. This arrangement was to continue until the contract with Samsung expires or otherwise terminates. Once that occurs, Xpert was to be dissolved. P appealed.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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