Scully et al v. Foster et al

Filing 10

MEMORANDUM OPINION re denying 3 Motion for TRO. Signed by Judge William D Quarles, Jr on 8/21/09. (eg, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND, NORTHERN DIVISION ROBERT SCULLY, et al., Plaintiffs, v. RICHARD FOSTER, et al., Defendants. * * * * * * * * * * * * * * * * * * * CIVIL NO.: WDQ-09-2139

MEMORANDUM OPINION Robert Scully and Kevin Scully sued Richard Foster, Joseph Mathews, and others for breach of contract and breach of fiduciary duties. Pending is the Plaintiffs' motion for a For the reasons stated at the

temporary restraining order.

motions hearing and below, the motion was denied. I. Background In 1997, the Plaintiffs, citizens of Florida and Texas, founded Gourmet Express, LLC ("Gourmet Express"). 11. V. Compl. ¶

Gourmet Express is a Texas limited liability company that

sells frozen dinner entrees to private label companies and commercially under the name "Gourmet Dining." Id.

In January, 2008, Gourmet Express was sold and recapitalized. Id. at ¶ 12. The Plaintiffs bought a minority

interest in the new owner of Gourmet Express, Defendant Gourmet Express Acquisition Fund ("GEAF"), a Maryland limited liability 1

corporation.1

Id. at ¶¶ 5, 13.

The Plaintiffs contracted with Def. Resp. at 4;

Gourmet Express to serve in its management. Attach. A, B.

Under the GEAF Operating Agreement, GEAF became

the General Manager of Gourmet Express, and Ilex Capital became the General Manager of GEAF. Resp, Attach. A, B. On July 23, 2007, Mathews and Foster hired Bradley Jackson as the General Manager of Gourmet Express. Id. at ¶ 27. The Id. at ¶ 14, Ex. D ¶ 5.1.1; Def.

parties disagree as to whether Mathews and Foster--as representatives of Ilex Capital--had authority to hire Jackson. Id. at ¶ 27; Def. Resp. at 4 (citing Pl. Ex. D ¶ 5.1, Ex. E ¶ 5.2.2). On July 27, 2009, Gourmet Express employees refused to Id. at ¶ 29. Jackson was locked out of the Def. Resp. Ex. 2.

work for Jackson.

Gourmet Express Plant in Greenville, Kentucky.

The Plaintiffs contend that on July 27, 2009, Mathews and Foster unlawfully: (1) elected themselves to a newly created Gourmet Express Board of Directors; and (2) adopted a "Unanimous There are three classes of GEAF units: Class A, Class B, and common. Defendant Ilex Partners Fund owns 55,888 common units and controls two of the five GEAF board seats. V. Compl. at ¶¶ 13, 16, Ex. E ¶ 5.1.1. Foster and Mathews control Ilex Partners Fund. Id. at ¶¶ 4, 5, 13. The Plaintiffs own 44,112 common units of that fund, and one of the Scullys holds one of the common unit board seats. Id. at ¶¶ 16, 18, 21. A group of investors owns all GEAF's Class A units and controls the two GEAF board seats held by Foster and Mathews. Mathews or Foster holds a common unit board position. Id. at ¶¶ 13, 16, Ex. E ¶ 5.1.2(i)(A); Def. Resp. at 3. The Plaintiffs own all GEAF's Class B units and control one of the Class B board seats. Id., Ex. E ¶ 5.1.2(ii)(A). 2
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Consent of the Board of Directors" to terminate the Plaintiffs' Gourmet Express employment. Id. at Ex. I. On July 31, 2009, the Muhlenberg County Circuit Court for the Commonwealth of Kentucky temporarily restrained the Plaintiffs' management of Gourmet Express. Def. Resp. Ex. 4. On

August 13, 2009, the Plaintiffs filed this suit and moved for temporary and preliminary relief under 28 U.S.C. § 1332, alleging breach of employment contracts and breach of fiduciary duties.2 On August 19, 2009, the Kentucky court permanently enjoined the Scullys from managing Gourmet Express. II. Analysis A. Standard of Review

Temporary injunctive relief should be granted only in limited circumstances when there is a need to protect the status quo and prevent irreparable harm. In re Microsoft Corp.

Antitrust Litigation, 333 F.3d 517, 529 (4th Cir. 2003). Determining whether to issue a temporary restraining order requires the consideration of the likelihood of: (1) irreparable harm to the Plaintiffs if the injunction is denied; (2) harm to the Defendants if the injunction is granted; (3) the Plaintiffs' success on the merits; and (4) the public interest. Id. at 526.

In their reply memorandum and at oral argument, the Plaintiffs acknowledged that the Kentucky injunction mooted this Court's consideration of the Anti-Injunction Act. See Pl. Resp. at 2-4. 3

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Harm to the Plaintiffs and to the Defendants are the two most important factors; the likelihood of success is less important when the balance of harm strongly favors one party. Id. The

Plaintiffs bear the burden of showing that each factor supports granting the injunction. Direx Israel, Ltd. v. Breakthrough Med. "Only if the balance

Corp., 952 F.2d 802, 812 (4th Cir. 1991).

tilts decidedly in favor of the [movant] is a right to preliminary injunctive relief warranted." quotations omitted). B. Balance of Harms Id. at 816 (internal

The Plaintiffs contend that they will suffer irreparable harm unless the Court orders GEAF to convene a Board of Directors meeting to consider and vote on the July 23, 2009 amendment to the Operating Agreement and subsequent termination of the Plaintiffs' employment. The GEAF Operating Agreement defines irreparable injury as the breach of any provision of the Agreement. Compl. Ex. E at 29, ¶ 10.3. require Board meetings. Id. at 6; V.

The Operating Agreement does not

Rather, § 5.1.5.1(A) states that the Id. at § 5.1.5.1(A).

"Board may hold meetings. . .."

Accordingly, the failure to hold a Board meeting is not necessarily a breach of the Operating Agreement. The loss of the

Scullys' right to cast a minority vote at a Board meeting to which they have no clear entitlement is not an irreparable 4

injury. The Plaintiffs' requested relief would interfere with Ilex Capital's authority as GEAF's General Manager under § 5.2.1 of the Operating Agreement and GEAF's authority as General Manager of Gourmet Express. The balance of harms favors the Defendants.

The Plaintiffs have not carried their burden under Blackwelder. Blackwelder Furniture Co. of Statesville, Inc. v. Seilig Mgf. Co., Inc., 550 F.2d 189, 196 (4th Cir. 1977). C. Likelihood of Success on the Merits

When the balance of harms does not favor the movant, the Court looks to the movant's likelihood of success on the merits to determine whether temporary injunctive relief is warranted. Blackwelder, 550 F.2d at 196. Given the GEAF Operating

Agreement, it appears that the Plaintiffs have a limited likelihood of success on the merits. D. The Public Interest

The public interest is not a consideration in this private litigation. See Rum Creek Coal Sales, Inc. v. Caperton, 926 F.2d

353, 367 (4th Cir. 1991).

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III. Conclusion For the reasons stated above, the Plaintiffs' motion for a temporary restraining order was denied on August 20, 2009.

August 21, 2009 Date

/s/ William D. Quarles, Jr. United States District Judge

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