BLUEWATER LOGISTICS, LLC v. WILLIFORD


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Docket Number: 2008-CT-00250-SCT
Linked Case(s): 2008-CA-00250-COA ; 2008-CA-00250-COA ; 2008-CT-00250-SCT

Supreme Court: Opinion Link
Opinion Date: 01-27-2011
Opinion Author: Justice Dickinson
Holding: Court of Appeals reversed; Chancery court reinstated and affirmed; remanded.

Additional Case Information: Topic: Contract - Standard of review - Sufficiency of complaint - M.R.C.P. 8 - M.R.C.P. 54(c) - Fair-market value of interest in limited liability company - Section 79-29-306(3)(a) - Individual judgments - Operating agreement - Factual basis - Attorney's fees - Post-judgment interest - Section 75-17-7


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Topic: Contract - Standard of review - Sufficiency of complaint - M.R.C.P. 8 - M.R.C.P. 54(c) - Fair-market value of interest in limited liability company - Section 79-29-306(3)(a) - Individual judgments - Operating agreement - Factual basis - Attorney's fees - Post-judgment interest - Section 75-17-7

Summary of the Facts: James Williford Jr., Patricia Mosser, Marquetta Smith, and Michael Floyd formed two Mississippi limited liability companies – Bluewater Bay, LLC, and Bluewater Logistics, LLC, – to bid on lucrative government contracts related to the aftermath of Hurricane Katrina. After Bluewater had completed more than $5 million in contracts, and with more than $1 million in payments due from the government, Smith called Williford (who was working in Louisiana) to inform him that she, Mosser, and Floyd – as a “super majority” of seventy-five percent of the Bluewater ownership – had exercised their right under the operating agreements to buy him out. Williford returned to the Bluewater offices the next day and found the locks on the company offices had been changed. He then received from the Bluewater LLCs a formal notice of termination. Williford sued both LLCs and the three individual, super-majority members. In addition to damages, he asked for injunctive relief to protect his interest in the LLCs, and to prevent the three super-majority members from improperly ousting him. At the conclusion of a trial, the chancellor held for Williford against all defendants, jointly and severally. He awarded Williford the value of his interest in the companies, together with five percent interest from the date of the ouster to the date of judgment, for a total judgment of $340,760.25. He also ordered defendants to pay the CPA’s bill in the amount of $4,386.63, and post-judgment interest on the judgment at the “statutory rate.” Finally, the chancellor denied Williford’s request for attorney fees. The defendants appealed, and Williford cross-appealed. The Court of Appeals reversed the judgment, holding that Bluewater successfully had rescinded its ouster of Williford and that the chancellor’s award was beyond the scope of the pleadings. The Supreme Court granted certiorari.

Summary of Opinion Analysis: Issue 1: Standard of review The defendants argue that the Court must apply a different and higher standard of review because the chancellor adopted, verbatim, the plaintiff’s proposed findings of fact and conclusions of law. When a chancellor adopts verbatim, or nearly verbatim, a party’s proposed findings of fact, precedent provides that the Court should apply heightened scrutiny to the chancellor’s findings of fact. Applying a “heightened-scrutiny” or “lessened-deference” standard would require us to abandon the traditional standard (accepting a chancellor’s factual findings that the evidence supports), and employ some different standard. And although the new standard of review has been named (“heightened-scrutiny” or “less-deference”), the Court has yet to explain how it is to be applied. Therefore, the Court shall continue to apply the familiar abuse-of-discretion standard to a trial judge’s factual findings, even where the judge adopts verbatim a party’s proposed findings of fact. And should a party suspect and suggest that the judge’s factual findings are somehow tainted or untrustworthy, the party – upon proper proof – may seek a new trial. In this case, there is no evidence that the chancellor’s factual findings were untrustworthy or suspect. His bench opinion discussed his factual findings. And at the hearing on post-trial motions, he engaged in lengthy discussions with counsel concerning his view of the facts and his factual findings – whether or not identical to those submitted by the plaintiff – were supported by substantial evidence. Issue 2: Sufficiency of complaint The defendants argue that Williford sought only injunctive relief, and that his pleadings did not justify the chancellor awarding him the fair-market value of his interest in Bluewater. Under M.R.C.P. 8, a complaint need only contain a short and plain statement of the claim showing that the pleader is entitled to relief, and a demand for judgment. M.R.C.P. 54(c) states that every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled by the proof and which is within the jurisdiction of the court to grant, even if the party has not demanded such relief in his pleadings. A trial judge may award a party any relief to which he is entitled, even if the party fails to make a specific demand for such. In holding that the chancellor erred in granting Williford money damages, the Court of Appeals inexplicably relied on three prerules cases, two of which date to the 1850s. Those cases are overruled to the extent that they conflict with the requirements and provisions of the Mississippi Rules of Civil Procedure and subsequent decisions. Williford’s complaint was clearly sufficient to support an award of monetary damages. Issue 3: Fair-market value of interest The defendants argue that the chancellor exceeded his legal authority by awarding Williford the fair market value of his interest. Although an LLC operating agreement is a contract, subject to contract law, section 79-29-306(3)(a) of the Limited Liability Act specifically allows a chancellor to enforce a limited liability company agreement by injunction or by such other relief that the court in its discretion determines to be fair and appropriate in the circumstances. This language clearly established the chancellor’s authority to award Williford the fair-market value of his interest in the LLCs. Issue 4: Individual judgments The defendants argue that the chancellor had no authority to grant judgments against them as individuals. Under the Act, members of a limited liability company (such as Bluewater) normally are not individually liable for the obligations of the LLC. But because the members may modify this rule in the operating agreement, they may agree among themselves to be individually liable. The Act also says that – subject to certain exceptions inapplicable here – an LLC’s operating agreement may address the liability of the individual members for any action taken, or any failure to take any action, as a manager or member. In this case, both LLCs’ operating agreements included a provision that no member shall be liable, responsible or accountable in damages or otherwise to any other member or to the company for any act or omission performed or omitted by him except for acts of gross negligence or intentional wrongdoing. This provision – agreed to by all members – clearly establishes the chancellor’s authority to hold the individual defendants personally liable for acts of gross negligence or intentional wrongdoing. Issue 5: Factual basis The chancellor found that defendants had breached the Bluewater operating agreements in a willful, grossly-negligent manner. The defendants argue, without any citation of authority, that they were authorized to change their minds and allow Williford to remain an LLC member while, and at the same time, to “fire” him and exclude him from any involvement in the LLCs’ business. While their argument might apply to other types of legal entities, it has no application to member-managed LLCs. According to the statute and the operating agreement, Williford – as a member of both LLCs – was entitled to participate in the management of both LLCs, and he could not be “fired.” Defendants could have removed him as a manager only by amending the operating agreements. But both operating agreements specifically prohibited amendment without “consent of all Members,” which would have required Williford’s vote. The defendants locked Williford out and excluded him from all business affairs, and then later claimed they hadn’t really decided for sure to purchase his interest. The chancellor found this to be a willful, grossly negligent breach of contract, and the chancellor was not manifestly in error. Issue 6: Attorney’s fees Williford argues on cross-appeal that the chancellor erred in failing to award him reasonable attorney fees. While Williford is correct that attorney fees may be awarded in some cases of intentional breach of contract and breach of fiduciary duty, that decision is within the chancellor’s sound discretion. The chancellor was of the opinion that he had no authority to award attorney fees. On remand, the chancellor may consider an award of attorney fees to Williford. And if the chancellor decides not to award attorney fees, the decision must be based on the chancellor’s conclusion that attorney fees are not factually warranted, rather than the legally erroneous conclusion that they are not allowed. Issue 7: Post-judgment interest The chancellor awarded post-judgment interest at the “statutory rate.” For many years, Mississippi had a statutory rate of interest to be applied to judgments. However, in 1989, the Legislature amended section 75-17-7 to provide that interest on judgments must be awarded “at a per annum rate set by the judge hearing the complaint from a date determined by such judge to be fair but in no event prior to the filing of the complaint.” Under the statute, a two- or three percent interest rate might sometimes be fair and reasonable, while, at other times, market conditions and other relevant factors might require the trial judge to set a higher rate. Yet many trial judges continue – without proof, protest or argument of counsel, or agreement of the parties – to award post-judgment interest at the eight-percent rate previously mandated by statute. The chancellor in this case awarded post-judgment interest “at the statutory rate.” Since there is no specific “statutory rate” for post-judgment interest, the award of post-judgment interest is reversed and remanded for a determination of post-judgment interest at a rate that complies with the requirements of the statute.


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