IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE A&J CAPITAL, INC., : : Plaintiff, : : v. : C.A. No. 2018-0240-JRS : LAW OFFICE OF KRUG, : : Defendant, : : and : : LA METROPOLIS CONDO I, LLC, : a Delaware limited liability company, : : Nominal Defendant. : MEMORANDUM OPINION Date Submitted: October 30, 2018 Date Decided: January 29, 2019 Kurt M. Heyman, Esquire, Melissa N. Donimirski, Esquire and Elizabeth A. DeFelice, Esquire of Heyman Enerio Gattuso & Hirzel LLP, Wilmington, Delaware, Attorneys for Plaintiff. Stephen B. Brauerman, Esquire and Sara E. Bussiere, Esquire of Bayard, P.A., Wilmington, Delaware and Craig H. Marcus, Esquire of Glaser Weil Fink Howard Avchen & Shapiro LLP, Los Angeles, California, Attorneys for Defendant. SLIGHTS, Vice Chancellor A dispute over the management of a Delaware limited liability company has sparked allegations of conspiracy, forged documents and perjured testimony. The company, nominal defendant, LA Metropolis Condo I, LLC (“LAMC” or the “Company”), was formed to raise investment capital under a federal government program whereby the government offers favorable immigration treatment in exchange for qualified foreign investments in new commercial enterprises in the United States. The members of the Company are two hundred Chinese nationals who collectively contributed $100 million to be invested in a construction loan for the development of residential and commercial space in downtown Los Angeles. The loan was extended to Greenland LA Metropolis Development I, LLC (including its affiliates, collectively, “Greenland”). The plaintiff, A&J Capital, Inc. (“A&J” or “Plaintiff”), was engaged to serve as Class B Manager of the Company in exchange for a management fee. It is alleged that Greenland became displeased with A&J and then colluded with certain members of the Company to trump up reasons to have A&J removed as manager. That removal occurred in March 2018. The Company’s operating agreement and the management agreement by which A&J was engaged both provide that the Class B Manager may be removed only for “cause.” In its complaint, A&J alleges that no such cause existed, that certain members were cajoled by Greenland into voting to remove A&J so that Greenland could extract concessions from the Company, and that defendant, Law 1 Office of Krug (“Krug” or “Defendant”), acted as the facilitator of the plot improperly to remove A&J and now occupies the role of Class B Manager without authority. At least as to the management agreement, the “for cause” removal provision was a protection for which A&J bargained and gave consideration. “For cause” removal provisions are not aspirational, nor do they allow the principal to remove the agent on a whimsy and then manufacture “cause” after-the-fact to justify the removal. Nevertheless, the majority of the members of LAMC, influenced by Greenland and guided by Krug, apparently viewed their removal rights differently. As explained in this post-trial Memorandum Opinion, I am satisfied from the preponderance of the evidence that these members removed A&J without cause and then formulated after-the-fact explanations for removal that are neither credible nor adequate under ...
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