Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-00196/USCOURTS-casd-3_13-cv-00196-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332ij Diversity-Injunctive &amp; Declaratory Relief

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CHAMPION SIGNS, a California limited 

liability company,

Plaintiff,

v.

DEE SIGN CO., an Ohio corporation; and 

BRADEN R. HUENEFELD, an 

individual,

Defendant.

Case No.: 13CV0196-BEN-JLB

FINDINGS OF FACT AND 

CONCLUSIONS OF LAW

DEE SIGN CO., an Ohio corporation; and 

BRADEN R. HUENEFELD, an 

individual,

Counterclaimants,

v.

CHAMPION SIGNS, a California limited

liability company,

Counterdefendant.

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The declaratory relief and specific performance claims were tried to the Court.1 

For the reasons set forth below, the Court finds in favor of Defendant Dee Sign Co. (“Dee 

Sign”) and orders specific performance. Plaintiff Champion Signs LLC (“Champion”) 

must sell its Membership Interest in Dee Sign USA, LLC (“the Company”) to Dee Sign 

for $572,598.

FINDINGS OF FACT AND CONCLUSIONS OF LAW2

I. Summary

Champion and Dee Sign are the only two Members of the Company, formed in 

2009. Braden Huenefeld, the Authorized Representative of the Lead Manager, Dee Sign, 

handles day-to-day management of the Company. In 2012, the Company was struggling 

financially and was in need of additional capital from the Members. Huenefeld issued a 

formal Capital Call on November 27, 2012, seeking Additional Capital Contributions 

from the Members. Section 4.2(b) of the Company’s Operating Agreement (“OA”)

allows either Champion or Dee Sign to call on all members to contribute additional 

capital if the funds are needed to meet the Company’s obligations. The OA also details 

the requirements for a Capital Call and the options if a Member does not consent to the 

Capital Call or make its Capital Contribution, including triggering the buy-sell

proceedings Dee Sign invoked here.

Champion seeks a declaration that Dee Sign did not have the right to buy-out 

Champion’s interest. Dee Sign seeks the contrary and specific performance—sale of 

Champion’s interest in the Company to Dee Sign for $572,598. Although addressed in 

detail below, the resolution here is rather simple. Dee Sign followed the OA from its 

issuance of a formal Capital Call to its Buy-Out Notice. Champion did not. Champion 

had the right to withhold its consent to the Capital Call, but doing so had consequences

 

1 The tort claims were tried to a jury. The trial was not bifurcated.

2

In making findings of fact, the Court does not specifically note all of the evidence relied on. Rather, 

the Court notes the evidence the Court found most critical. The parties agree that, pursuant to the OA, 

Ohio law applies.

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under the OA—it allowed Dee Sign to trigger buy-sell proceedings. And then Champion 

refused to follow the buy-sell provisions of the OA to challenge the price proposed by 

Dee Sign in the Buy-Out Notice. Additionally, no equities favor Champion. There is 

nothing unfair about requiring sophisticated business people that enter into an agreement 

to follow that agreement. A failure to do so should not be excused to the detriment of the 

party that did follow the agreement. Because the Court finds Dee Sign complied with the 

OA, Dee Sign is entitled to buy out Champion’s interest for $572,598. 

II. Dee Sign USA, LLC

Champion and Dee Sign formed the Company as an Ohio limited liability 

company with Dee Sign holding a 51% interest and Champion holding a 49% interest. 

Under the OA, Dee Sign is the Lead Manager with control of the day-to-day management 

of the business and Champion is the Co-Manager. Braden Huenefeld is designated as 

Dee Sign’s Authorized Representative and Mark Nicol is designated as Champion’s 

Authorized Representative, although the evidence at trial reflected that Ron Johnson 

primarily handled Champion’s interest in Dee Sign on behalf of Nicol. 

The Court notes that the testimony at trial reflected that Huenefeld, Nicol, and 

Johnson are all experienced business people that made informed decisions with the 

assistance of counsel in the formation of the Company under the OA. The Court was not 

persuaded that anyone was being taken advantage of, or manipulated, or that the terms of 

the OA were unfair to either Member. 

III. Capital Call

“[I]f the Company requires cash to meet its obligations,” Section 4.2(a) of the OA 

allows the Lead Manager or Co-Manager to “make a call for each existing Member to 

make an Additional Capital Contribution (a “Capital Call”)” by written notice.”

3

 The 

Notice must be given at least 15 days before the Capital Call due date, identify the total 

 

3 The Court notes that “Additional” distinguishes contributions made pursuant to a capital call after 

formation of the Company from “Initial” capital contributions made under Section 4.1 concurrent with 

the execution of the OA and formation of the Company. 

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additional capital needed, and specify each Member’s individual capital contribution 

amount based on the member’s interest. 

During the time period at issue, despite prior cost-cutting measures, the Company 

was struggling financially as a result of decreased demand for its products. The 

Company manufactures real estate signs. The Company needed $150,000 to meet its 

financial obligations. Dee Sign gave the required written notice more than 15 days 

before the due date. The November 27, 2012 Capital Call Notice identified the total 

amount needed and each Member’s contribution amount based on its interest—$76,500 

from Dee Sign and $73,500 from Champion. The original December 14, 2012 due date 

was extended once to December 21, 2012.

A. Capital Call Due Date

Champion suggested at trial that it was misled into believing the Capital Call 

deadline was extended or otherwise not a factor because of lease negotiations and 

discussions about utilizing shareholder loans instead of capital contributions. Johnson 

was pushing Huenefeld to lower the rent for the Allen Road property that housed the bulk 

of the Company’s operations.4 The implied extension or elimination of the deadline was 

a basis for Champion’s fraud and negligent misrepresentation claims tried to the jury. 

However, the Capital Call deadline is significant for purposes of the validity of the 

Capital Call as well because Champion unsuccessfully attempted to make a $73,500 

payment a week after the December 21, 2012 deadline.5 

The Court finds that the Capital Call deadline was not extended beyond December 

21, 2012. The parties were negotiating lease terms up to the deadline, but for a number 

 

4 The lease for the Allen Road property was negotiated and assumed by the Company as part of the 

Company’s formation. The property was leased from Hotel Burnet and Huenefeld owned Hotel Burnet. 

This was known to all involved. The claims tried to the jury largely focused on whether Huenefeld 

breached any duties to Champion by not reducing the rent on the Allen Road property as demanded by 

Champion. The jury found that Huenefeld did not breach a fiduciary duty to Champion. 

5

It is not entirely clear if Champion is advancing this same argument as to the declaratory relief, 

however, the Court finds it prudent address it. The deadline is important in assessing compliance with 

the OA.

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of reasons, it is evident that no additional extensions were given or even implied. 

First, Dee Sign reminded Champion of the December 21, 2012 deadline in an 

email on December 21, 2012. Champion claimed this reminder, shortly after 1:00 p.m., 

was an attempt to reestablish the December 21, 2012 deadline at a time when Champion 

could not comply with it (Champion argued it was too late in the day to wire the money). 

But, when Johnson responds to this email on behalf of Champion a few hours later, he 

does not protest that he thought the deadline had been extended or otherwise suggest that 

December 21, 2012 was not the deadline. Instead, in his first response he comments that 

it is unfortunate they could not reach a resolution and wishes Huenefeld a good weekend. 

Then, that evening, he sends another email reiterating again that Champion does not 

consent to the Capital Call and attaching a letter that itself acknowledges the initial and 

extended December 21, 2012 deadline. The idea that the deadline had somehow been 

impliedly extended or was no longer applicable seemed to occur later as a basis for the 

fraud and negligent misrepresentation claims. 

Second, none of the communications between the parties suggest the deadline was 

being extended. On the contrary, the parties’ email communications, including 

references to “final” offers on December 21, 2012, reflect that the parties’ negotiations 

were concluding. The parties were settling into their respective final positions in 

anticipation of the deadline. Viewing all the evidence concerning the lease negotiations, 

it is apparent that Champion was attempting to get the Allen Road lease rate reduced as a 

condition of Champion paying its share of the capital needed by the Company and sought 

through the Capital Call. In essence, Champion was using its Capital Contribution to the 

Company and the Company’s need for money to force Huenefeld to lower the rent on the 

Allen Road facility. During the December 19, 2012 conference call, there is speculation 

about whether the Bank6 would authorize shareholder loans instead of capital 

 

6 The Company had a line of credit and a note with Fifth Third Bank. The Company’s terms with the 

Bank precluded the Company from making any distributions of capital to the Members without express 

written consent from the Bank. 

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contributions and lengthy discussions of the lease. But, there is no suggestion in any of 

these negotiations that the Capital Call deadline might change. 

Third, the prior extension from December 14, 2012 to December 21, 2012 was for 

a specified new date. On December 12, 2012, as a result of Champion’s request to 

postpone the shareholder meeting, Huenefeld extended the deadline from December 14, 

2012 to December 21, 2012 in an email to Nicol, Johnson, and Joe Kolks, the Company’s 

Chief Financial Officer. It would be odd to conclude a deadline was impliedly extended 

indefinitely when the prior extension was explicitly given to a specific date.

The Court finds that the deadline for the Capital Call was December 21, 2012.

B. Champion Did Not Consent to the Capital Call

Champion did not consent to the Capital Call. This is significant because, under 

the OA, when Super Majority Consent to a Capital Call is not obtained, as it could not be 

without Champion’s 49% interest consenting, Section 4.2(b) applied.

7

 Although there 

was a great deal of testimony about lease negotiations leading up to the Capital Call

deadline, Johnson testified that Champion never consented to the Capital Call. Champion 

reiterated its lack of consent numerous times verbally and in writing, including on the 

Capital Call due date. The Court finds that Champion did not consent to the Capital Call. 

Accordingly, Section 4.2(b) applied.

IV. Section 4.2(b)

Section 4.2(b)8 provides two ways that a Member can proceed when the other 

Member does not consent to the Capital Call:9(1) loan the Company the non-consenting 

 

7 Section 4.2(a) provided that “[i]f the Members do not give Super Majority Consent to a Capital Call, 

then Section 4.2(b) will apply.”

8 The Court finds Section 4.2(b) applied. It outlines in detail the procedures to follow for a Capital Call, 

including the requirements if Super Majority Consent is lacking. However, to the extent that Section 7.4 

applied, Champion did not follow that provision either. Under Section 7.4, when Major Decisions 

cannot be resolved through good faith negotiations, a Member can request mediation. Champion did not 

make this request. 

9

If the Member elects not to pursue either option, then the Company must return that Member’s Capital 

Contribution.

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member’s (“Non-Advancing Member”) contribution amount; or (2) trigger buy-sell 

proceedings. However, before pursuing either option, the Member that consents (the 

“Advancing Member”) must make its own capital contribution. The Advancing Member 

must “make[] the Additional Capital Call” before proceeding to a loan or triggering the 

buy-sell. 10 

A. Dee Sign’s Capital Contribution

While there is no dispute that Dee Sign made a $76,500 payment to the Company 

on December 10, 2012—shortly before the December 14, 2012 deadline that had not yet 

been extended—there was conflicting evidence as to whether the payment was a capital 

contribution or a shareholder loan. It is Champion’s position that Dee Sign’s $76,500 

payment was a shareholder loan. Champion argues that because it was recorded

internally as a shareholder loan and the parties discussed the possibility of shareholder 

loans, it was a shareholder loan. Dee Sign argues it was a capital contribution and only 

mistakenly recorded as a shareholder loan. 

Champion relies primarily on the classification of the payment as a shareholder 

loan in internal financial records, internal communications about its classification, and 

discussions between Johnson and Dee Sign about the possibility of shareholder loans in 

lieu of capital contributions. 

The Court heard testimony that the parties discussed the advantages of shareholder 

loans over capital contributions and there were advantages. A member loaning money to 

the Company was more likely to get the money back and get it back more quickly than a 

member would with a capital contribution. Johnson testified that shareholder loans had 

been made in the past in lieu of capital contributions for this reason. This is consistent 

with references during the December 19, 2012 conference call to both members’ prior 

loans to the Company for the purchase of equipment. Those loans were being repaid. 

 

10 The parties agree that Dee Sign making its Capital Contribution was a condition precedent to Dee 

Sign’s right to issue the Buy-Out Notice. (Def.’s Post Trial Supplemental Brief [Docket No. 94] at 13-

14; Pl.’s Supplemental Brief [Docket No. 95] at 1.) 

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Johnson, Huenefeld, and Kolks, in particular, were cognizant of the distinction because 

Johnson had been advocating for shareholder loans over capital contributions. Johnson 

never commits to making the payment because he is trying to leverage a rent reduction on 

the Allen Road facility, but he does indicate that any contributions of additional cash 

should made through loans rather than capital contributions if it is possible. However, 

Johnson’s conditioning Champion’s payment on this approach and advocacy for this 

approach for Dee Sign’s contribution does not unilaterally convert a payment that had 

already been made in response to a formal Capital Call into a shareholder loan. At no 

time does Huenefeld indicate Dee Sign’s Capital Contribution will be treated as a 

shareholder loan. In fact, Huenefeld is very skeptical that the Bank would approve 

shareholder loans. Additionally, the Court heard testimony from Kolks that capital 

contributions were better for the Company because capital contributions create more 

equity while loans are a liability on the Company’s balance sheet. 

The only persuasive evidence that the $76,500 was a shareholder loan was its 

classification as such in the Company’s internal financial records. The classification was

adjusted to a capital contribution by the Company’s outside auditor, VonLehman & 

Company, Inc. The Company’s audited financial statements for 2012 reflect that it was a

capital contribution. The correction is consistent with Dee Sign’s Capital Contribution 

being mistakenly classified as a shareholder loan. The Court was not persuaded that the 

change was prompted by Dee Sign, as suggested by Champion. Deposition testimony 

from Nick Shipley, the Manager for the audit, reflected that the classification was 

changed to a capital contribution after reviewing the OA, communications among the 

Members, and through consultation with others at VonLehman.11 Additionally, Kolks 

testified that the payment was misclassified as a shareholder loan by Dennis Gruber in 

 

11 There was little evidence to suggest that VonLehman was improperly influenced by Dee Sign to 

change the classification as Champion has argued. Huenefeld testified that he minimized his 

communications with the auditors about the payment to avoid any accusation of impropriety and Shipley 

testified that while the auditors communicated with Huenefeld and Kolks, the auditors independently 

determined the transaction was intended to be a capital contribution. 

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accounting and changed to a capital contribution by the Company’s outside auditor.12

There was also significant evidence that the $76,500 payment was Dee Sign’s 

Capital Contribution. First, there is the obvious. A formal Capital Call was made on 

November 27, 2012. Dee Sign’s identified portion was $76,500. On December 10, 2012, 

four days before the original deadline, still in place at the time, Dee Sign paid $76,500 to 

the Company. It stands to reason that this was its Capital Contribution, made as 

requested in the formal Capital Call, prior to the deadline. Additionally, Huenefeld and 

Kolks testified at trial that the $76,500 payment was Dee Sign’s Capital Contribution. 

The $76,500 payment was also described as a Capital Contribution numerous times

both before and after the Capital Call deadline. Early in a December 19, 2012 conference 

call, Huenefeld explains that as of that date the Company only had $100,000 in cash after 

Dee Sign’s capital call contribution. Johnson verifies that this contribution has already 

been put into the Company. Then, after the deadline, Kolks responds to an email from 

Johnson inquiring about when Dee Sign funded its capital contribution, and indicates that

Huenefeld funded the Capital Call on December 10, 2012 in the amount of $76,500. 

Contrary to Champion’s argument, email communications about the payment do not 

indicate it is a shareholder loan. Rather, in response to inquiries from Johnson and Nick 

Pharo, one of the outside auditors, about where Dee Sign’s Capital Contribution was 

recorded, Kolks and Gruber indicate the payment is booked in shareholder loans. This 

only reinforces the undisputed fact that it was classified as a shareholder loan for a period 

of time. It certainly does not mean that Kolks, who had identified it as Dee Sign’s 

Capital Contribution numerous times, believed it was actually a shareholder loan. 

Champion’s own theory of this case, or at least part of it, also favors the payment 

being a capital contribution. Champion argued that Huenefeld was displeased with

Champion and was perpetrating a fraud on Johnson to try to take back his family

 

12 Kolks explained that Gruber started with the Company’s bank statements and classified the 

transactions listed on the statements in the Company’s internal records. 

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business, that Huenefeld duped Johnson into thinking there was no deadline for the 

Capital Call to prevent Champion from meeting the deadline. Why would Huenefeld go 

to such lengths to mislead Champion and then preclude himself from a buy-out by 

making a loan instead of a capital contribution? Although, the Court was not convinced 

that Huenefeld intended to perpetrate a fraud on Johnson, the evidence did suggest that 

Huenefeld was trying to follow the OA and at least have the option to trigger the buy-sell 

if Champion failed to make its Capital Contribution. Even before the formal Capital Call 

Notice was given, Johnson expressed Champion’s opposition to putting any additional 

money into the Company. It stands to reason that Huenefeld would anticipate that 

position might not change. Huenefeld also sought out a valuation of the Company that 

was necessary for the buy-out notice before the Capital Call deadline.13 This further 

suggests he was aware of the next steps if Champion failed to make its Capital 

Contribution. The Court finds it unlikely that Huenefeld would risk the opportunity to 

buy-out Champion, for the possibility that he might be repaid sooner, particularly given 

the reservations he expressed about the Bank approving repayment of shareholder loans.

Having considered and weighed the evidence, the Court finds Dee Sign’s $76,500 

payment was its Capital Contribution. 

B. Buy-Sell Proceedings

Once the Capital Call deadline passed without a Capital Contribution from 

Champion,14 Dee Sign had the option to trigger the buy-sell proceedings or loan the 

 

13 This too was not as malicious as Champion suggest. As discussed more fully below, Section 4.2(b) 

requires the Advancing Member to act—make a loan or trigger the buy-sell proceedings—within 30 

days of the Capital Call. A buy-out notice must include an amount the Advancing Member offers to pay 

to buy-out the Non-Advancing Member’s interest. It is unlikely that Huenefeld could have obtained any 

kind of valuation of the Company within the week between the extended Capital Call deadline and 30 

days after the Capital Call Notice, particularly given, as Champion emphasized for other reasons, the 

Christmas holiday fell in this time period.

14 The absence of a payment was not what triggered Section 4.2(b). Section 4.2(b) was implicated 

because Champion did not consent to the Capital Call. Even if the Court construed the payment as some 

sort of implied consent to the Capital Call, it was not given until after Dee Sign has triggered the buysell proceedings. It was too late. 

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Company the amount of Champion’s Capital Contribution. Dee Sign opted to trigger the 

buy-sell proceedings. Under 4.2(b), the Advancing Member may “trigger the buy-sell 

proceedings under Section 9.3(b)-(d) (except as modified below) . . . by written notice to 

the Non-Advancing Member (the “Buy-Out Notice”).” 

The Buy-Out Notice must include a price the Advancing Member will pay to 

purchase the Non-Advancing Member’s interest in the Company. The Non-Advancing 

Member can accept the price or propose a different price. If the parties cannot agree on a 

price within thirty days after the Buy-Out Notice is received by the Non-Advancing 

Member, the parties shall agree on two third-party firms to value the Company and then 

follow the procedures in Section 9.3(b)-(d) to establish a purchase price. Section 9.3 

covers transfers of Members’ interests. Section 9.3(b)-(d) also provides for obtaining 

third-party valuations if the parties do not agree on a price. Section 9.3(b) goes on to 

provide that the two third-party valuations shall be averaged to arrive at the Appraised 

Value. This is how the parties agreed to resolve a dispute about the purchase price for a 

member’s interest if buy-out proceedings were triggered under Section 4.2(b). 

Here, Dee Sign properly triggered the buy-sell proceedings under Section 4.2(b). 

The December 26, 2012 Buy-Out Notice proposed that Dee Sign would purchase 

Champion’s interest for $572,598 on January 25, 2013. On January 14, 2013, having not 

received a different price, Dee Sign even prompted Champion to propose a different price 

if Champion was not willing to accept Dee Sign’s proposed price to allow the parties to 

move on with the appraisal process. Champion did not propose a different price and has 

failed to sell its Membership interest to Dee Sign for the price proposed in the Buy-Out 

Notice.

15

 

 

15 Champion argued that it could not propose a different price or move forward with the appraisal 

process without conceding the Capital Call and Buy-Out proceedings were proper. However, Champion 

could not explain why it could not follow those steps while reserving it objections to the propriety of the 

Capital Call and Buy-Out proceedings. 

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When presented with the Buy-Out Notice, Champion had only two options under 

the OA—“accept the stated purchase price or . . . propose a different purchase price.” 

Champion did not propose a different price and refused to sell its Membership Interest to 

Dee Sign for the stated purchase price. Champion was obligated under the OA to sell its 

Membership interest in the Company to Dee Sign on January 25, 2013. Champion failed 

to fulfill its obligations under the OA. Section 9.7(b) of the OA specifically provides that 

“Members shall be entitled to obtain specific performance of the obligations of other

Member(s) under this Article IX.” Article IX includes Section 9.3(b)-(d) that Section 

4.2(b) invokes for the buy-sell proceedings. The Court finds that Dee Sign is entitled to 

Champion’s specific performance — sale of its interest in the Company for $572,598 —

based on Section 9.7(b).16 

Additionally, Champion waived any right to challenge the purchase price by 

failing to offer a different price. “Waiver . . . is a voluntary relinquishment of known 

rights.” Norfolk So. Ry. Co. v. Jacobs, 549 F. Supp. 2d 990, 1002 (N.D. Ohio 2008) 

(citing Automated Solutions Corp. v. Paragon Data Sys., 167 Ohio App. 3d 685, 695 

(2006)). Waiver may be express or constructive. Id. (citing McMillen v. Willys Sales 

Corp., 118 Ohio App. 20, 27 (1962)). The Company’s OA provided the only way to 

obtain a different purchase price and Champion knowingly refused to follow it. There 

was no evidence that Champion was unaware of its rights and obligations under the OA.

17

 

The Buy-Out Notice cited Section 4.2(b) as authority for the Buy-Out and Dee Sign 

specifically asked for a different price pursuant to the OA on January 14, 2013. 

 

16 The Court notes that absent this provision, Dee Sign would still be entitled to specific performance. 

An award of specific performance is based on equitable principles. Green, Inc. v. Smith, 40 Ohio App. 

2d 30, 39 (1974). As discussed more fully below, the equities favor Dee Sign and there is nothing 

unfair, unconscionable, or oppressive about requiring Champion to fulfill its obligations under the OA.

17 Champion knew how the OA worked. Johnson told Kolks his initial attempt as a capital call, the

informal email capital call, did not comply with the OA. This prompted the formal November 27, 2012 

Capital Call Notice. It is hard to believe Champion was not aware of the potential consequences of 

failing to make its Capital Contribution by the deadline when it had relied on the procedures in Section 

4.2(b) to require a formal Capital Call.

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Champion knew it had a right to propose a different price and did not. Any right to 

challenge the purchase price was waived. 

V. Equitable Issues

In addition to the challenges above, Champion asserts a number of arguments that 

implicate equity principles. Although these issues are intertwined with the arguments 

above, the Court addresses them separately. 

A. Forfeiture

Champion argues that it should not be required to sell its interest because Dee Sign 

has not established its entitlement to forfeiture. The Court is not convinced that requiring 

Champion to sell its interest for $572,598 pursuant to the OA constitutes a forfeiture. 

However, assuming it does constitute a forfeiture, Dee Sign is still entitled to specific 

performance. 

Champion argues that it would be inequitable to force it to sell its interest because 

Dee Sign’s Capital Contribution was classified as a loan, Champion eventually made its 

Capital Contribution, the Company used that late payment, the Company sought Nicol’s 

personal guarantee to a bank after Dee Sign attempted to buy out Champion’s interest, 

and Champion was allocated tax liability as a Member following the Buy-Out Notice.

1. Misclassification of Dee Sign’s Capital Contribution

Champion argues that because Section 4.2(b) is a forfeiture provision Dee Sign had 

to strictly comply with it and did not because Dee Sign’s payment was initially recorded 

as a shareholder loan, not a Capital Contribution. Essentially, Champion argues that Dee 

Sign is not entitled to buy-out Champion’s interest because Dee Sign did not perfectly 

comply with the OA. As noted above, the Court is not convinced Section 4.2(b) is a 

forfeiture provision, however, assuming it is, the Court finds Dee Sign strictly complied 

with it. As explained above, the Court was persuaded by the evidence that Dee Sign’s 

payment was simply recorded in the internal records of the Company incorrectly until the 

outside auditors corrected it. It was contributed in response to a formal and proper 

Capital Call, it was consistently identified as Dee Sign’s Capital Contribution both before 

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and after the Buy-Out Notice was given, and there was no evidence, other than the 

inaccurate classification itself, to support the idea it was a loan. As noted above, 

Johnson’s advocacy for loans over capital contributions could not unilaterally convert a 

Capital Contribution into a loan. Dee Sign strictly complied with Section 4.2(b). 

2. Champion’s Payment

Champion also argues that it would be inequitable to excuse the misclassification 

of Dee Sign’s payment while not excusing Champions belated attempt to make its Capital 

Contribution. The Court finds the two are starkly different. The Company incorrectly 

recorded Dee Sign’s Capital Contribution as a shareholder loan. As discussed more fully 

above, the evidence reflects it was a clerical mistake. On the other hand, Champion 

refused to make its Capital Contribution. Champion was even reminded of the deadline, 

but did not comply with it.

18

 There was no credible evidence Champion’s failure to pay 

its Capital Contribution by the deadline was anything but intentional. It is also clear that 

Champion’s attempt at a late Capital Contribution was not prompted by an unexpected 

Capital Call deadline. It was prompted by receipt of the Buy-Out Notice. It would not be 

equitable to allow Champion to refuse to makes its Capital Contribution, wait and see 

how Dee Sign proceeds (loan the Company Champion’s unpaid share, trigger the BuyOut, or take back its Capital Contribution) and then try to undo it all when faced with a 

proper Buy-Out. 

Additionally, as to the Buy-Out, Champion refused to propose a different price or 

pursue the appraisal process despite Dee Sign’s prompting, and refused to sell its interest. 

This was also intentional. Dee Sign upheld its obligations under the OA and followed the 

OA. Champion ignored its obligations under the OA and refused to follow the OA at 

every turn. The Company’s misclassification of Dee Sign’s Capital Contribution cannot 

excuse Champion’s refusal to timely make its Capital Contribution. Champion 

 

18 As explained above, the Court finds there was no reason to believe the deadline had been extended. 

This appears to have been an afterthought. 

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essentially asks the Court, based on equity, to treat it as if it did everything it intentionally 

did not do. That would be inequitable. 

The handling of the $73,500 payment also does not favor Champion. The $73,500 

payment was bounced back and forth until counsel for both parties agreed it would be 

held without prejudice to either parties’ position. Champion’s attempt to use the 

Company’s holding of these funds against Dee Sign, given the agreement to do the 

opposite, is not well taken. After Champion refused to accept a wire transfer sending its 

late payment back and refused a check from the Company sending the payment back, the 

parties agreed, at Champion’s suggestion, that the funds could be held by one of the 

parties without it prejudicing eithers’ position in this case. The Company did just that, 

however, Champion argues this Court should hold it against Dee Sign that the funds 

remained on the Company’s books even though those funds were segregated. Even if the 

Court considered the funds remaining on the Company’s books “use” of the funds, its 

impact on the equities would be negligible and certainly not justify excusing Champion’s 

refusal to sell its interest under the OA.

3. Personal Guarantee and Taxes

The Company’s request for a personal guarantee from Nicol does not weigh 

against Dee Sign. The request came from a bank19 to the Members. Given Champion 

had refused to sell its membership interest, conveying that request did not constitute any 

kind of waiver of the buy-out. Although it had violated the terms of the OA to do it, 

Champion still held a Membership interest in the Company. Similarly, the allocation of 

taxable income to each Member holding an interest, as Champion did, is not a waiver of 

the Buy-Out by Dee Sign. The Company’s allocation of taxable income to Champion 

based on an interest it held, wrongful as it was, does not impact Dee Sign’s right to buy 

out Champion. It makes no sense to allow Champion to avoid the Buy-Out because it 

wrongfully refused to sell its interest and then excuse that violation because it was 

 

19 Huenefeld’s testimony indicates the personal guarantee was requested by Chase.

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required to fulfill its tax obligations based on an interest it wrongfully held.20

VI. Attorneys’ Fees

Section 11.14 of the OA provides that “[i]n the event of any litigation or legal 

proceeding as a result of any claim or dispute hereunder, except as provided otherwise 

herein, the prevailing party shall be entitled to recover from the other party the costs and 

expenses of such litigation or proceeding, including, without limitation, attorneys’ fees 

and expenses at trial and upon appeal.” Dee Sign is the prevailing party and is entitled to 

reasonable attorneys’ fees and costs.

CONCLUSION

The Court finds in favor of Dee Sign and orders specific performance. Champion 

shall sell is Membership interest in the Company to Dee Sign for $572,598. The Clerk 

shall enter judgment in favor of Dee Sign in accordance with this order and the jury’s 

May 28, 2015 verdict.

IT IS SO ORDERED.

Dated: September 30, 2015

 

20 In reaching this conclusion, the Court does not address what obligations the parties may have to 

correct this allocation. The Court only finds it does not constitute a waiver of the Buy-Out or weigh 

against Dee Sign in consideration of the equities.

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