Halley v. Barnabe6/8/2001
For the reasons set forth in the opinion, we hold the provisions of the Kansas Revised Limited Liability Company Act, K.S.A. 2000 Supp. 17-7662 et seq., is procedural in nature and is to be applied retroactively to pending actions.
Appeal from Johnson district court; JAMES FRANKLIN DAVIS, GERALD T. ELLIOTT, and JANICE D. RUSSELL, judges.
Affirmed in part, reversed in part, and remanded for further proceedings.
This consolidated appeal of three separate actions between two members of a limited liability company raises a myriad of claims and issues which were disposed of below in two cases by granting motions to dismiss and, in the third, by the denial of a motion for summary judgment that is before us in an interlocutory appeal.
Because of the enactment of the Kansas Revised Limited Liability Company Act (KRLLCA), K.S.A. 2000 Supp. 17-7662 et seq., which we deem to be retroactive and procedural in nature, we reverse the granting of the motions to dismiss, affirm the denial of summary judgment, and remand all three cases for further proceedings.
Explanation of the claims of each case and the argument thereunder is not so easily or simply stated.
Factual and procedural background
Bill Creach and Larry Halley jointly formed Infotech of Kansas City, LLC (LLC) in 1995, as member-managers and 50% owners. The members executed an operating agreement governing the LLC, which recognized the right of the managers to engage in other business activities so long as they did not compete with the business of the LLC.
At the time the LLC was formed, Bill Creach and his wife, Sharla Creach, co-owned Infotech, Inc. Sometime after forming the LLC, Bill Creach transferred all his interest in Infotech, Inc., to the corporation, making his wife the sole owner; his son, Bill E. (Gene) Creach, became its president.
One of the defendants in one of the cases, Kevin Barnabe, was originally an employee of the LLC and later Infotech, Inc. Due to his bankruptcy filing and pursuant to an order of the bankruptcy court, which is an issue in this appeal, Barnabe has been dismissed as a party.
There is an additional corporation involved, Search One, Inc., which is owned by Halley.
The LLC provided independent contractor programmers to numerous metropolitan Kansas City businesses from 1995 until 1997, when controversy arose between Bill Creach and Halley and the litigation in issue here began.
In the first lawsuit (district court case No. 98CV237), Bill Creach sued Halley and Search One, Inc., on behalf of himself and the LLC. Bill Creach and the LLC alleged that Halley had breached his fiduciary duties to the LLC, competed with the LLC, and did not perform his agreed responsibilities. Bill Creach prayed for dissolution on behalf of himself and the LLC (as well as a determination that Halley had forfeited his interest in the LLC), damages for breach of the operating agreement, damages for breach of fiduciary duties, and an injunction requiring the defendants to refrain from further harmful acts to the LLC. It was also requested that a receiver be appointed to help dissolve the deadlocked LLC. On behalf of the LLC only, Bill Creach prayed for damages for tortious interference with a business relationship.
Halley counterclaimed for damages arising from the alleged collusive and competitive conduct of Bill, Gene, and Sharla Creach, as well as Barnabe and Infotech, Inc. Halley requested damages for breach of contract and various torts, and he also requested an accounting and an injunction precluding the named parties from competing with the LLC.
Bill Creach, on
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