Techner v. Greenberg

ASHLEY TECHNER, Plaintiff,

v.HELEN GREENBERG, Defendant.

Case No. 11-14722

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

Dated: August 29, 2012

Honorable Patrick J. Duggan

BENCH OPINION

This case concerns distributions from Greenberg Properties, LLC, to its members, including the Ashley Greenberg Irrevocable Trust ("Ashley Greenberg Trust") of which Plaintiff, Ashley Techner (nee Greenberg) ("Ashley" or "Plaintiff")¹ , is the sole beneficiary and current Trustee. Prior to this lawsuit, Ashley successfully sued Barry Greenberg ("Barry"), her father and a manager of Greenberg Properties, based inter alia on his distributions from Greenberg Properties in contravention of his fiduciary duties and the limited liability company's operating agreement. Here, Ashley is suing her paternal grandmother and a co-manager of Greenberg Properties, Helen Greenberg ("Helen" or "Defendant"), claiming that she is jointly liable to the Ashley Greenberg Trust for the distributions that the trust should have received.

Ashley has alleged breach of contract and breach of fiduciary duty claims againstHelen. On June 26 and 28, 2012, this Court conducted a bench trial with respect to Ashley's claims. The Court now is prepared to rule on those claims.

Procedural Background

On or about May 16, 2011, Plaintiff filed this action against Defendant in the Circuit Court for Oakland County, Michigan. Defendant removed the action to federal court based on diversity jurisdiction on October 26, 2011.² In her Complaint, Plaintiff asserts the following claims against Defendant: (1) breach of contract; (II) breach of fiduciary duty under the Michigan Limited Liability Company Act; (III) "equitable estoppel"; and (IV) minority member oppression under the Michigan Limited Liability Company Act.

On February 13, 2012, Defendant filed a motion for summary judgment in which she argued that Plaintiff should be estopped from bringing this action because she received a state court judgment against Barry for the amount of the unpaid distributions from Greenberg Properties- the same unpaid distributions she is seeking to recoup here. Defendant further argued that even if Plaintiff's lawsuit is not barred by the doctrine of estoppel, the applicable limitations periods prevent her from recovering most of thealleged unpaid distributions and the amount of the distributions that were not properly paid that are timely sought fall below the Court's jurisdictional threshold of $75,000. Defendant argued that the Court therefore lacks subject matter jurisdiction over Plaintiff's Complaint.

On May 16, 2012, this Court issued an opinion and order granting in part and denying in part Defendant's summary judgment motion. (Doc. 20.) As to Defendant's estoppel argument, the Court ruled that Plaintiff may seek the unpaid distributions from Defendant, despite the judgment she obtained to recoup the same unpaid distributions from Barry, because she has not been able to recover the monies from him despite her collection efforts. (Id. at 11-12.)

With respect to the statute of limitations issue, the Court held that even if Plaintiff is barred from pursuing recovery of the full amount of the unpaid distributions due to the applicable statutes of limitations, subject matter jurisdiction is not lacking. (Id. at 10-11.) The Court further held that neither fraudulent concealment nor the continuing wrong doctrine tolled the limitations periods applicable to Plaintiff's claims. (Id. at 5-6.) As such, the Court concluded that, on her breach of contract claim, Plaintiff is barred from recovering damages accruing more than six years before her lawsuit was filed, and more than two or three years prior with respect to her Michigan Limited Liability Corporation Act claims. (Id. at 5 (citing Mich. Comp. Laws §§ 600.5807(8), 450.4404(6), and .4515(1)(e).)

During the bench trial on June 26 and 28, 2012, the Court heard testimony fromAshley and Barry. The parties submitted a stipulation of facts in lieu of Helen's testimony. (Doc. 24.) The parties stipulated to the admission of a number of exhibits at trial, including but not limited to the following (as identified by exhibit number):

3. Greenberg Properties' Operating Agreement;

9. A January 10, 2010 letter from Greenberg Properties' accountant to Ashley's attorney in a previous lawsuit;

10. The Ashley Greenberg Trust Agreement;

11. A September 7, 2005 letter from an attorney representing Ashley seeking information concerning the trust of which she was a beneficiary;

12. The arbitrator's decision in the lawsuit Ashley filed against Barry;

19. Schedules prepared by Ashley's accounting expert in a previous lawsuit detailing the distributions from Greenberg Properties and the amounts that should have been paid to the Ashley Greenberg Trust pursuant to the Operating Agreement;

20. A spreadsheet setting forth the current value of the unpaid distributions.

Following the bench trial, Helen submitted a brief concerning her statute of limitations and laches defenses (Doc. 26); and Ashley submitted a brief concerning a manager's duty of care under the Michigan Limited Liability Company Act. (Doc. 27.) Responses were filed to each brief. (Docs. 28, 29.)

Findings of Fact

1. Ashley is Barry's daughter. Barry is the son of Nathan and Helen Greenberg.

2. On December 22, 1998, Barry formed the Ashley Greenberg Trust. (Trial Ex. 10.) Barry initially was named Trustee. (Id.) Ashley was appointed Trustee in July 2011.

3. Prior to May 4, 1999, Helen, as Trustee of the Helen Greenberg Trust, and Barry formed Greenberg Properties Limited Partnership. (Trial Ex. 3.) On May 4, 1999, Helen and Barry executed an Operating Agreement which converted the partnership to a limited liability company pursuant to the Michigan Limited Liability Company Act. (Id.)

4. The Operating Agreement identifies Helen and Barry as Greenberg Properties' initial managers. (Id. ¶ 4.1.) With respect to management of the company, Paragraph 4.1 provides in part:

The management of the Company shall in all respects be the full and complete responsibility of the Manager.³ . . . If more than one Manager has been elected, the group shall act by majority vote. . . .

The Managers shall devote to the management of the Company as much time as is reasonably necessary for the efficient operation of the Company.

(Id.) Paragraph 4.2 of the Operating Agreement sets forth limitations on the managers' authority:

Notwithstanding anything to the contrary contained in this Agreement, the manager shall not, without the unanimous written consent of all of theMembers:

(a) take any action in contravention of this Agreement;

(b) take any action that would make it impossible to carry out the purposes of the Company; or

(c) confess a judgment against the Company.

(Id. ¶ 4.2.)

5. On May 14, 1999, Helen, as Trustee of the Helen Greenberg Trust, assigned the trust's Class B Non-Voting Units in Greenberg Properties as follows:

Barry S. Greenberg: 475 Class B Non-Voting Units

Rachel N. Greenberg⁴ : 163.33 Class B Non-Voting Units

Ashley L. Greenberg

Agreement of Trust-1998: 163.33 Class B Non-Voting Units

Steven Granitz⁵ : 163.33 Class B Non-Voting Units

(Id. Attachment ["Assignment of L.L.C. Membership Units Greenberg Properties, L.L.C."].) The Operating Agreement states that profits and losses of Greenberg Properties "shall be allocated to the Members in direct proportion to the number of Units owned by each of them." (Id. ¶ 3.1.) Paragraph 3.2 further provides that "[d]istributions shall be made . . . subject to the fiduciary requirements of the [Michigan Limited Liability Company] Act and Michigan law generally." (Id. ¶ 3.2.) Pursuant to these provisions, theAshley Greenberg Trust is entitled to 16.33% of every distribution authorized by the managers of Greenberg Properties.

6. Barry made the decision when to issue distributions from Greenberg Properties, to which members the distributions would be made, and the amount of the distributions. Initially, distributions were made in direct proportion to the number of Units owned by each member (i.e., in accordance with the Operating Agreement). Beginning around February 2003, however, Barry started to make distributions randomly, based on when a member asked him for money and the amount of money the member needed at the time. (Trial Ex. 19 Schedule 9.)

7. Helen was neither consulted about nor aware of the basis for any distributions from Greenberg Properties. (Doc. 24 ¶ 1.) Helen did not do anything to manage Greenberg Properties. (Id. ¶ 2.) She did not discuss the management or affairs of Greenberg Properties with anyone, nor supervise Barry's actions in any manner. (Id. ¶ 3.) Helen did not create, receive, review, or request any information regarding distributions from Greenberg Properties. (Id. ¶ 4.) She "assumed" Barry was making proper distributions. (Id. ¶ 5.)

8. At some point in time, Ashley formed the belief that there might be a trust in her grandfather's name of which she was a beneficiary. After her attempts to obtain information from her father concerning her interest in the trust proved unsuccessful, Ashley had a lawyer contact her father. (See Trial Ex. 11.) Barry referred Ashley's lawyer, Ian Pesses, to Robert Schwartz at Raymond & Prokop, P.C. in Southfield,Michigan. (See id.) On September 7, 2005, Attorney Pesses sent Attorney Schwartz a letter requesting certain information related to "the Trust of which [Ashley] is a beneficiary." (Id.) Ashley testified that she and Attorney Pesses were seeking information concerning her grandfather's trust, as this was the only trust of which she was aware at that time.

9. In 2008, Ashley filed a petition in the Probate Court for Oakland County, Michigan, in which she sought an accounting of the Nathan Greenberg Trust and alleged that the trustees of the Nathan Greenberg Trust had breached their fiduciary duty to account for the trust funds ("Nathan Greenberg Trust litigation"). See In re Nathan Greenberg Trust, No. 292511, 2010...