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Gambel v. Tullis

United States District Court, E.D. Louisiana

August 2, 2017

RACHAEL T. GAMBEL
v.
ELI W. TULLIS, JR.

         SECTION “L” (4)

          ORDER AND REASONS

          ELDON E. FALLON UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant Eli W. Tullis, Jr.'s motion to dismiss. Rec. Doc. 5. Plaintiff opposes the motion. Rec. Doc. 6. The Court held oral argument on the matter on July 19, 2017. Having considered Defendants arguments, submissions, and the applicable law, the Court now issues this Order and Reasons.

         I. BACKGROUND

         This cases arises from a disagreement between the co-managers of Ragweed, LLC (“Ragweed”) regarding whether the company was dissolved by consent of its members. Rec. Doc. 1. Plaintiff Rachael T. Gambel, a Louisiana resident, is a manager-member of Ragweed, a Louisiana company. Rec. Doc. 1 at 3. Defendant Eli W. Tullis, Jr., an Illinois resident, is also a member-manager of Ragweed. Rec. Doc. 1 at 3. Ragweed was established by Debroah and Eli Tullis, Sr., who distributed shares of the company among their children and various heirs. Rec. Doc. 1 at 7.

         Ragweed is an investment vehicle with mostly cash assets that Plaintiff invested and managed for the benefit of the members. Rec. Doc. 1 at 6. Ragweed is not governed by an operating agreement, but the company's Articles of Organization specifically prohibits a member from receiving a distribution upon withdrawal or resignation from the company. Rec. Doc. 1 at 6. A member who wishes to cease involvement in the company may transfer his or her shares to another member. Rec. Doc. 1 at 6.

         Plaintiff agreed to a distribution of the company's assets to any member who requested one. Rec. Doc. 1 at 2; Rec. Doc. 6 at 2. Defendant disagreed with the distribution, citing the objection of the elder Tullis. Rec. Doc. 1 at 7. In January 2017, Plaintiff called for a special member meeting at which the company's members voted, in proportion to their percentage of shares and some by proxy, to dissolve the company. Rec. Doc. 1 at 2. In March 2017, however, Defendant continued to object to the dissolution of the company and, with majority support of Ragweed's members, voted to nullify the January vote. Rec. Doc. 1 at 2. Plaintiff believes that she is authorized and obligated to dissolve the company and distribute the funds as a result of the January special member meeting vote. Rec. Doc. 1 at 11.

         Plaintiff argues that Louisiana law prevents Defendant from blocking dissolution of the company and the distribution of its funds after members voted in January. Rec. Doc. 1 at 13. Plaintiff seeks a declaratory judgment from this Court that Ragweed was dissolved during the special member meeting in January 2017. Rec. Doc. 1 at 13. Plaintiff asserts that because Ragweed has no written operating agreement, it can be dissolved with the consent of its members through a majority vote. Rec. Doc. 1 at 12 (citing LSA R.S. § 1334 (2) and LSA R.S. § 12:1318B. (1)). Plaintiff further contents that Defendant's resolution attempting to nullify the vote is ineffective because neither Ragweed's Articles of Organization nor Louisiana law allows a manager or member to adopt a resolution nullifying an earlier dissolution vote. Rec. Doc. 1 at 13. Plaintiff seeks a declaration that the company was dissolved by consent of its members, such that she may distribute the company's funds and wind up its affairs. Rec. Doc. 1 at 15, 16. Alternatively, Plaintiff seeks judicial dissolution of Ragweed pursuant to Louisiana Revised Statute § 12:1335, which allows for a court to dissolve a limited liability company when it is no longer reasonably practical for the company to continue conducting business in accordance with its articles of organization. Rec. Doc. 1 at 13-15.

         II. PRESENT MOTION

         A. Defendant's Motion to Dismiss

         Defendant proffers three arguments in support of a motion to dismiss. First, Defendants moves to dismiss Plaintiff's claim, alleging that she failed to adequately plead facts that demonstrate her authority to dissolve Ragweed. Rec. Doc. 5 at 1. Second, Defendant alleges that judicial dissolution is unwarranted because Plaintiff failed to adequately show that the members of Ragweed are in deadlock. Rec. Doc. 5-1 at 23. Third, Defendant moves to dismiss Plaintiff's claims for failure to join necessary and indispensable parties - including Ragweed and other members. Rec. Doc. 5-1 at 4. Each of these arguments will be set forth with more specificity in turn.

         1. Status of Ragweed

         Defendant argues that Plaintiff failed to state a claim that warrants a judicial declaration that Ragweed was dissolved by the consent of its members. According to Defendant, Plaintiff attempted to liquidate the company against the wishes of the majority of members by invalidly obtaining proxy votes, scheduling the special member meeting at an inconvenient time and place, and failing to notify members of the meeting. Rec. Doc. 5-1. Specifically, Defendant avers that Plaintiff never obtained consent to dissolve the company because the proxies held by Plaintiff and her sister were invalidly obtained from a trustee rather than from the beneficiaries of the trust. Rec. Doc. 5-1 at 3, 20. Defendant also argues that while members can vote by proxy, a proxy vote is valid only so long as it is not challenged before the vote occurs. Rec. Doc. 5-1 at 19 (citing La. Rev. Stat § 12:1318(E)(4)). Defendant argues that the proxy votes were invalid because he challenged their validity at the special member meeting before the vote took place, and therefore Ragweed was not dissolved by consent of its members. Rec. Doc. 5-1 at 20.

         Defendant alternatively argues that even if the initial vote was valid, the consent was withdrawn before she could effectively dissolve the company. Rec. Doc. 5-1 at 18. Defendant notes that the invalid consent was withdrawn when a majority of members adopted a resolution in March to nullify the approval. Rec. Doc. 5 at 3. Plaintiff never filed the necessary paperwork to dissolve the company before the resolution was issued: a certification of dissolution was never issued by the Secretary of State. Rec. Doc. 5 at 3 (citing La. Rev. Stat. § 12:1340(C)). Because no such certificate has been issued, nor have any of the requisite steps for dissolution been completed, Defendant argues that Ragweed remains in existence. R. Doc. 5-1 at 22.

         2. Judicial Dissolution

         Defendant contends that Plaintiff's claims are too vague to warrant judicial dissolution of Ragweed. Rec. Doc. 5-1 at 4. Defendant argues that the requirements for judicial dissolution are narrowly prescribed, and Plaintiff's complaint is too broad to justify the dramatic intervention of the Court into the company's operation. Rec. Doc. 5-1 at 4. Noting that Plaintiff's sole reason for seeking judicial dissolution is the inability of the co-managers to decide whether the company should be dissolved, Defendant argues that Plaintiff's conclusory allegations do not warrant the intervention of the Court. Rec. Doc. 5-1 at 22. Defendant also notes that while Louisiana courts have judicially dissolved companies whose members are evenly split over future operation, the majority of Ragweed members are opposed to dissolution, and thus judicial dissolution is inappropriate. Rec. Doc. 5-1 at 23.

         3. Failure to Join

         Defendant further argues that Plaintiff failed to join necessary and indispensable parties pursuant to Rule 19 of the Federal Rules of Civil Procedure. Rec. Doc. 5-1 at 4. In particular, Defendant notes that Ragweed is a company with 25 members, but only one member is named as a defendant in this suit. Rec. Doc. 5-1 at 4. Defendant argues that Ragweed and the other members are necessary parties, but because they would destroy diversity jurisdiction, the action should be dismissed by this court pursuant to Rule 12(b)(7) and Rule 19. Rec. Doc. 5-1 at 4. According to Defendant, Ragweed and the additional members are necessary parties because it would be impossible for this Court to provide complete relief without them and because a judicial determination would affect their interests. Rec. Doc. 5-1 at 24.

         B. Plaintiff's Reply

         Plaintiff opposes Defendant's Rule 12(b)(6) motion and argues that she has provided sufficient factual allegations to support her claims. Rec. Doc. 6. First, Plaintiff alleges that consent to dissolve the company was validly demonstrated at the special member meeting, and that she sufficiently began to wind up the company's affairs following the vote. Rec. Doc. 6. Second, Plaintiff argues that the managerial difficulties of operating Ragweed warrant judicial dissolution. Rec. Doc. 6 at ...


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