FEELEY V. NHAOCG, LLC 62 A.3d 649 (Del Ch. 2012) CASE BRIEF

FEELEY V. NHAOCG, LLC

62 A.3d 649 (Del Ch. 2012)

NATURE OF THE CASE: Feeley (P), managing member of an LLC, sought to block the non-managing member, NHAOCG (D) from attempting to take over the managerial role. After the management dispute was resolved, P moved to dismiss D's counterclaims.

FACTS: Feeley and Akel wanted to start their own company, but they needed financing. Akel turned to her father, George Akel, who is a successful real estate developer. George had invested in other real estate projects with David Newman, who joined the discussions. Newman in turn brought in David Hughes, with whom Newman had invested in the past. George, Newman, and Hughes liked the idea of backing George's daughter, but they were 'not previously acquainted with Feeley and were concerned about going into business with an untested stranger. They insisted 'that the relationship would be an experiment' and 'that the entity formed would be able to end after two years if they were not satisfied with the outcome. The plain language of the relevant agreements does not impose a two-year time limit on the venture or give the entity a termination right. The parties formed Oculus as a Delaware limited liability company. The two members of Oculus are AK-Feel, LLC (P), a Delaware limited liability company, and NHAOCG, LLC (D), a New York limited liability company. P's two members are Feeley and Andrea Akel. D's three members are entities affiliated with Newman, Hughes, and George Akel. P and D each hold a 50%-member interest in Oculus, but AK-Feel serves as the managing member. As managing member, AK-Feel generally has authority to run the day-to-day business of Oculus, subject to D having approval rights over certain major decisions. Feeley serves as the managing member of P. In that capacity, he controls the activities of both P and Oculus. In addition, Feeley serves as the President and CEO of Oculus pursuant to the terms of an employment agreement. The Employment Agreement mandates that any disputes arising under or relating to its terms be referred to arbitration. D alleges that Feeley failed in his managerial roles and that his 'vaunted 'book of business' and his supposed acumen as a financier proved to be illusory.' One of the only projects he found, The Gatherings, ended in disaster due to Feeley's gross negligence.' D also asserts that after the failed Gatherings project, Feeley began 'negotiating student housing deals for his own account' instead of presenting them to D for consideration by Oculus. For The Gatherings project, Feeley tendered less than what the contract specified. The seller declared a default and cancelled the contract. Oculus forfeited a portion of its deposit, became obligated to reimburse a co-investor for its investment, suffered financing penalties, and lost the fees that would have been earned had the deal closed. Feeley has offered to make D whole for its losses, but D regards that as an empty promise. D decided to end their business relationship with Feeley and attempted to take over Oculus. Feeley and P filed this litigation, in which they sought to block D's attempt and establish their continuing control. The parties entered into a stipulation resolving the near-term control issues and mooting the need for an expedited trial. P filed an amended complaint, which D answered. P moved for judgment on the pleadings on certain of their claims, and that motion was largely granted. All the matters were eventually settled except D's counterclaims to recover damages from P and Feeley for the failed Gatherings transaction, Feeley's alleged diversions of real estate opportunities, and other events that caused the parties' relationship to fracture. Ps have moved to dismiss the counterclaims.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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