Manere v. Collins
Facts
The plaintiff and Collins formed BAHR, LLC to own and operate a cafe, with Collins holding 60 percent and the plaintiff 40 percent; both were managers, but the plaintiff ran day-to-day operations. The trial court found that while managing the business, the plaintiff used BAHR funds for personal expenses and continued taking cash and salary payments despite an oral agreement after Hurricane Sandy that neither member would take guaranteed payments for fifty-two weeks. After reconstructing BAHR's finances, Collins concluded that the plaintiff had misappropriated about $190,000, then amended the operating agreement, removed the plaintiff as manager, terminated the plaintiff's son as an employee, stopped payment on certain checks, changed the locks, and did not provide the plaintiff financial information except through discovery. The plaintiff sought, among other relief, dissolution of BAHR for oppression under § 34-267 (a) (5), while BAHR counterclaimed based on the plaintiff's misuse of company funds.
Issue
Whether BAHR's counterclaim sufficiently stated a claim for breach of fiduciary duty and, if so, which statute of limitations governed it. Whether the trial court used the correct legal standard in rejecting the plaintiff's claim for judicial dissolution of the LLC on the ground of oppression under § 34-267 (a) (5) (B).
Rule
A pleading states a claim for breach of fiduciary duty when it alleges a fiduciary relationship, self-interested conduct adverse to the company, damages, and causation; use of the word misappropriation to describe conduct does not create a separate cause of action if the pleaded facts substantively allege breach of fiduciary duty. An accounting claim requires, among other things, allegations of a prior demand for an accounting and refusal, and it is unavailable when the amount due is readily ascertainable; otherwise, a fiduciary-duty claim sounds in tort and is governed by § 52-577's three-year limitations period. For LLC dissolution based on oppression under § 34-267 (a) (5) (B), oppression is measured by whether the majority's conduct substantially defeats the minority member's reasonable expectations that were objectively reasonable under the circumstances and central to joining or continuing in the venture, and the conduct must be directly harmful to the applicant.
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If Elena argues the counterclaim fails because it never expressly labels the cause of action as "breach of fiduciary duty," how should the court rule?