Tegra Corp. v. Boeshart

311 Neb. 783

976 N.W.2d 165

TEGRA CORPORATION, individually and on behalf of Lite-Form Technologies, L.L.C., appellant and cross-appellee,

v.Patrick E. BOESHART et al., appellees and cross-appellants.

No. S-21-547.

Supreme Court of Nebraska.

Filed June 17, 2022

Mathew T. Watson and Erin R. Robak, Omaha, of McGill, Gotsdiner, Workman & Lepp, P.C., L.L.O., for appellant.

Scott D. Jochim, of Croker Huck Law Firm, Omaha, for appellees.

Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ., and Bataillon, District Judge.

Freudenberg, J.

I. INTRODUCTION

In a derivative action, a minority shareholder brought suit on behalf of the manager-managed limited liability company (LLC). Pursuant to Neb. Rev. Stat. § 21-168 (Reissue 2012), the manager-defendants appointed a single-member special litigation committee to investigate and determine whether it was in the LLC's best interests to pursue the derivative action. The committee determined it was in the LLC's best interests for the derivative action to be settled on terms approved by the committee, which were to disclose to the LLC members certain issues and conduct a majority vote as to how they should be resolved. In reviewing the committee's report, the district court found that the committee acted with "enough disinterested independence and good faith," but that its recommendation for disclosure to and vote of the members was beyond the committee's statutory authority. The court ordered the parties to attempt mediation and thereafter report the outcome of the mediation and make further recommendations to the court. The minority shareholder appeals, and the defendants cross-appeal the order.

II. BACKGROUND

1. PARTIES AND OWNERSHIP INTERESTS

Lite-Form Technologies, L.L.C. (Lite-Form), is an LLC with its principal place of business in South Sioux City, Nebraska. Patrick Boeshart is the president and sole manager of Lite-Form, and his wife, Sandra Boeshart, is the office manager and provides bookkeeping services to Lite-Form. Boeshart Management Company, L.L.C. (Boeshart Management), is an Iowa LLC that conducts business in Nebraska. Boeshart Management is wholly owned and controlled by Patrick and Sandra, with Sandra designated as the registered agent in Nebraska for Boeshart Management. Pat Boeshart Construction, L.L.C. (Boeshart Construction), is an Iowa LLC that conducts business in Nebraska. Boeshart Construction is wholly owned and controlled by Patrick. Patrick, Sandra, Boeshart Management, and Boeshart Construction are collectively referred to hereafter as "the Boesharts." Tegra Corporation (Tegra) is an Iowa corporation with its principal place of business in Sioux City, Iowa, and is a minority shareholder of Lite-Form.

There is some slight discrepancy between the parties’ pleadings as to ownership percentages for Lite-Form. Accounting for this discrepancy, Tegra owns approximately 2.521 to 2.5237 percent of the membership units of Lite-Form, Patrick owns approximately 7.084 to 7.1714 percent of the membership units of Lite-Form, and Sandra owns approximately 7 to 7.0662 percent of the membership units of Lite-Form. The remaining minority members collectively own approximately 22.671 to 24.313 percent of the membership units of Lite-Form. Lite-Form International, L.C. (Lite-Form Int'l), owns approximately 60 to 60.5677 percent of Lite-Form. Tegra owns approximately 37.44 to 37.5755 percent of the membership units of Lite-Form Int'l, and therefore, it indirectly owns approximately 22.46 to 22.7586 percent of Lite-Form. Patrick owns approximately 49.766 to 49.9678 percent of the membership units of Lite-Form Int'l, and therefore, he indirectly owns approximately 29.86 to 30.2643 percent of Lite-Form. Finally, Sandra owns approximately 6.745 to 6.7480 percent of the membership units of Lite-Form Int'l, and therefore, she indirectly owns approximately 4.05 to 4.08711 percent of Lite-Form.

2. TEGRA'S LAWSUIT

Tegra, individually and on behalf of Lite-Form, filed a complaint against the Boesharts alleging breach of fiduciary duty, misappropriation and waste of corporate assets, unjust enrichment, conversion, and, as to Sandra, aiding and abetting a fiduciary breach. Tegra also alleged in its individual capacity that it had made a demand upon Lite-Form to produce information and documentation related to the claims set forth and that Lite-Form had wrongfully withheld that information from Tegra.

3. APPOINTMENT OF SPECIAL LITIGATION COMMITTEE AND ITS FINDINGS

Patrick, under the authority granted to LLCs by § 21-168, appointed Cody Carse as a single member special litigation committee (Committee) to investigate the claims asserted by Tegra and to determine whether pursuing the action was in the best interests of Lite-Form. The derivative action was stayed during the pendency of the Committee's investigation. The Committee subsequently timely filed its report and statement of determination with the court. Carse outlined his qualifications, which consisted of the fact that Carse is a certified public accountant, a certified fraud examiner, and certified in financial forensics. The report generally addressed the allegations of the complaint.

(a) Conflicting-Interest Leases

The Committee found that leases between Boeshart Construction and Lite-Form and Boeshart Management and Lite-Form, challenged in the action, were for equipment used by Lite-Form for legitimate business purposes but that some of the leases had rental rates that appeared to be above market. The Committee recommended that the leases be disclosed to all the members of Lite-Form and that the members holding at least a majority of all outstanding units vote to either (1) approve or modify any of the terms of the related-party leases retroactively back to the start of each lease, (2) determine if member approval must be required in the future before entering into any related-party lease, or (3) choose not to address the leases at all or take any action.

(b) Diversion of Profits to Boeshart Family

On a claim of diversion of profits, the Committee found that on October 30, 2018, Lite-Form paid $600,000 to Patrick, $200,000 to Patrick and Sandra's son, and $200,000 to Patrick and Sandra's daughter. Patrick loaned the $600,000 back to Lite-Form, but the loan was reduced to $487,194.03 by July 3, 2019. The $512,805.97 net cash paid out by Lite-Form was repaid to Lite-Form by a deposit of $234,867.03 made on December 23, 2019, and a deposit of $277,938.94 made on January 17, 2020. While the derivative action alleged Lite-Form had lost use of the $1 million for over a year, incurred additional professional fees to unwind the transaction, and incurred Internal Revenue Service penalties and interest due to the payment and unwinding of the transaction, the Committee noted it had not been provided with any documentation regarding additional professional fees or Internal Revenue Service penalties and interest. As a resolution, the Committee recommended that all the details of the $1 million bonus transaction be disclosed to the members of Lite-Form, including any expenses incurred by Lite-Form due to the loss of use of the money that was paid out on October 31, 2018, and not fully repaid until January 17, 2020, and that the members thereafter vote to determine if Lite-Form should be reimbursed by Patrick for any expenses incurred due to the transaction.

(c) Unauthorized Salaries, Bonuses, and Benefits

With respect to alleged unauthorized salaries, bonuses, and benefits, the Committee found that, except for the $1 million bonus in 2018, Sandra and Patrick and Sandra's son were paid salaries comparable to other Lite-Form employees and that Patrick and Sandra's daughter's salary was based on her previous employer. It was a condition of her joining Lite-Form that Lite-Form would match the salary she was receiving previously. With respect to Patrick's salary, the Committee found that the operating agreement states the manager's salary and other compensation are subject to the approval of the members but does not state the manager must request approval from the members. It appeared that for the 18 years of Lite-Form's existence, the members had chosen not to specifically approve the salary and other compensation of the manager of the company. The Committee found it did not have a basis to evaluate the amount of Patrick's salary. It recommended that the relevant section of the operating agreement be discussed at the next member meeting.

(d) Luxury Vehicles

With respect to allegations concerning luxury vehicles, the Committee found that on July 28, 2002, Lite-Form entered into two leases with Lite-Form Int'l, which owned the vehicles, for a term from July 1 to December 31, 2002. The leases included $400 per month for general office and computer equipment and $4,800 per month for "Autos and Trailers." The Committee noted that although the written leases terminated on December 31, the monthly rental payments have continued through the present point in time for the same amounts and Lite-Form Int'l continued to provide Lite-Form with all the company-provided vehicles driven by Lite-Form employees. The Committee found that the vehicles were for the business and personal use of the Lite-Form employees and opined that providing company vehicles and having the employer pay for license, taxes, and registration for company-provided vehicles is a common business practice. The Committee further found that the monthly rental payment of $4,800 has never changed over the years and that the cost to Lite-Form has been the same whether the company provided " ‘new and luxury cars’ or ‘old and cheap cars.’ " Thus, the Committee concluded the purchase price of the vehicles had no impact on the cost to Lite-Form. The Committee recommended that the leases be discussed at the next Lite-Form member meeting, as well as whether Lite-Form should continue providing company vehicles to employees for business and personal use and paying for license, taxes, and...