### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE May 14 , 2004 Ses sion JON E. SHELL, ET AL 

### . v. D. SCOTT KING
Appeal from the Chancery Court for Sevier County No. 02-5-221 Telford E. Forgety, Jr., Chancellor

No. E2003-02124-COA-R3-CV Filed August 5, 2004

Jon and Rebecca

Shell (“Plaintiffs”) sued D. Scott King (“King”) after a limited

liability company formed by t he three of them we

nt out of bu siness. Pla

intiffs so ught dissolution of the company knownas The Big Red

Barn, LLC (“the Company” or “the LL C”). Plaintiffs also claimed King had breached his fiduciary oblig ations to both them and the LL C. The Trial Court refer red this c ase to
a Special Master and after a trial, the Special Master issued a Report concluding King was negligent and had breached his fiduciary obligations and

recommending that Plaintiffs be awarded a judgment whichincluded some, but not all, of Plaintiffs’ attorney f ees andexpert witness fees. The Trial Courtconfirmed the Report of the Special Master

in all respects. We modify the judg ment of the Trial Court and affirm as modified.

Tenn. R. App.P. 3 Appe al as of Right ; Judgme nt of the Chancery Court Affirmed as Modified; Case Remanded

D. M ICHAEL S WINEY , J., delivered the opinion of the court, in which C HARLES D. S USANO , J R ., J., and W IL LI AM H. I

NMAN , S R

. J., joined.

Charl es W. Kite, Sevi ervil le, Te nness ee, for the Ap pella nt D. S cott K ing.

James H. Ripley, Sevierville, Tennessee, f or the Appellees Jon E. Shell and Rebecca Shell.-2- OPINION
Background King has been

inthe landscaping field for severa l years a nd operated

Elite Landscape Management

(“Elite”), a landscaping

business which, among other things, installed and maintained landscapingdesigned by

Ms. Shell. In April of 2000, the parties forme d the Company, which was
a limited liability company formed under the laws of the State of Tennessee. The Compa ny was a plant nursery and ga rden supp ly o

utlet loca ted in Sevi ervill e selling plants an d other ma

terials t o customers of Elite a

nd the g eneral

public. Jon a

nd Rebec ca Shell e ach owne d a 25% int erest in the Company, with King owning the remaining 50%.

The Company closed afte r approximately one y

ear. This litigation began when Plaintiffs sued King

allegi ng the Company

was unsuc cessful

because King breached his obligations to the LL C and Plaintiffs, breached his fiduciary obligation

to Plaintiffs, and

intentionally misused Company fu nd s. Mo re sp ec if

ic al ly, Plaintiffs claimed King: 1) neglected the Compan

y; 2 ) illega

lly issued checks by f

orging the name of Ms. Shel l; 3) neg lected c ustomers; 4) faile d to make pay ments
onCompany indebtedness in a timely manner; and 5) falsely

claimed a Company capital ac count was far in excess of that account’s actual value. Plaintiffs sought immediate dissolution of th e C om pa ny, at least $75,000 in damages, a declaration of the rights and obligation s of the parties, as well as
reasona ble attorney fe es, costs and expenses pursuant to Tenn. Cod e Ann. § 48- 245-903. King answered the compl aint ge

nerally deny ing any wrongd oing or l iabilit

y to P laintiffs, although he agreed dissolution of the Company was appropriate.

InJune of 2002, t he T rial Court entered an Agreed Order dissolving the LLC and reserving the remainingissues “pending winding up of the affairs of this limited liability company .” AnAgreed Order of Ref erence was enter

ed b y the Trial Court ref erring this matter to a Special Master, and a t

w o day trial bef

ore the Special Master took place in April of 2003. The Special Master later issued a detailed Report resolving the numerous

issues pr esented by t he parti es, most of which are not at

issue onappeal. The issue s on appe al cente r around whether King sho uld be hel d responsi ble for missing Company funds and whether Plaintiffs are entitled t o their fu ll attorne y f ees, ex pertwitness fee s, and co sts. We will l imit our dis cussion of the fac ts as they

pertain to these issues.

Inhis factual findings, the Special Master noted that pursuant to the LL C’s Operating Agree ment, King wa s the Compa ny’ s Chief Ma

nager , and it

was stipulated at trial that King was the Chief Manager throughout the Company ’s existence. The Special Master observed that King had operated Elite for many

ye ars prior to the formation of the Compan

y a nd had be en involve d in

the1 The Special M aster also found that M r. Shell, a p racticing dentist, ha d no prac tical or fo rmal e xpe rience in

lands cap ing.

2 Throughout t

he Special Master’s Report, t he Company was ref

erred to interc hang eab ly as “the LL C,” “B RB ,” or “the nurser y.”
-3- landscapingbusiness for over a decade. Ms. Shell was a certified arborist with a horticulturist degree who had ma

ny horticultu

ral or nu rsery certifi cations. 1

The Special Master found the testimony a t trial “conflicting and irreco nc ilable” as to whether King an d Ms. Shell wer e to devote an equal amount of time to the operation of the Co mp an y, butconclude d that both of them we

re involv ed extensi

vely in setting up the Company and preparing it for retail operation. According to the Special Master, Ms. Shell wa s more inv olved in the daily operati on of the C ompany once it was “up and running.” The Special Master also discussed
anagree ment by the part ies wher eby employ ees of El ite w ould work

for the Company

on an asneeded basis. More specifically, the Special Master stated:

When the parties org ani ze d t he LLC 2 , they agree d to use the ir
ownlabor and l aborers from Elite on an as-needed ba sis. By using this arrangement, th e LLC avoid ed the necess ity of obt ainin g a separa te workers compensation insurance policy and avoided the diffi culty of s eparat e payroll accoun ting.

When Mr. King

paid his e

mploy ees, a portion of their time based upon time card records was allocated to B RB. For each hour that an Elite employee indica ted he/she h ad worked

for BRB , BRB
was then bille d $15.00 pe r hour plu s a

pproxim ately

20% of thi s amount for “overhead”, for a

billed total of $18.00 per hour for labor. This per-hour billing rate was applied across the board rega rdless of the actual p er-hour

employ ee cost, which wa s substant i ally lower t

han $15.00 per hour. Mr. King stated thi s charge was ag

reed upon by the parties and disclosed to Mr. and Mrs. Shell. Mr. and Mrs. Shell deny that any such mar

kup was e

ver disc losed or agreed upon, and that they had only

discovered the mark-up in trial preparation.

* * * *

When BRB was organ

ized, it shared office space with Elite and Mr. King employed a bookke eper named Le slie Gibbs who worked out of this combined Elite/BRB office. Ms. Gibbs prepared da i ly sal es reports , made BRB deposits and prepared pay roll summaries stating the amount of hours and funds which the nursery was charged for Elite employee time.-4- There is no dispute between the parties t hat Elite e

mploy ees fre quently

worked for the Company and, in turn, the Company was bille d on a per

hour basi s for thes e servic es. Ther e also is no dispute

that L eslie Gibbs (“Gibbs”) was an Elite employee who pr

ovided bookkeeping services to the Company and the Company was charged for ea

ch hour of services so provided. W hile th e parties disputed whether Plaintiffs were aware of the markup for each hour an Elite employ ee worked f or the Comp any , this dispu te was re solved against King and is not c

halleng ed on app eal.

Ms. Shell testified that at the end of each business day, she and K

ing would count the cash an d receipts and

reconcile any

discrepancies. The cash and rec eipts were then placed into a bank bag an d given to King, who took it across the street to his house and office. The n, according to King’s brief on appeal, either he “ or one of his employees at Elite L andscaping would pick up the receip ts and make the deposit on behalf of t he LLC .... The person who normally picked up the receipts and deposited them was the bookkeeper f or Elite Landscaping , namely, Leslie Gibbs.”

Plaint iffs’ called a s an exper t witness V an T. Elki

ns (“Elki ns”), a c ertifie d public
accoun tant. Elkins testified

that his analysis and audit of the Company ’s records revealed $26,209 incash taken in by the

Company but never de

posited into the Company’s bank acc ountor otherwis e accounted

for. The Special Master credited Elkins’ testimony and concluded

there wa s $26,209 i

n missing funds, a finding which likewise is not challenged on a ppeal. King testified he fired Gibbs in June of 2002 andbrough t crimina l charg es aga

inst her for embezzling $38,800 in funds from Elite. King dis covere d this alle ged emb ezzlement a t Elite approximately one y

ear after the Company

closed. King testified that he had no di rect kn owled ge of Gibbs’ embezzling from the Company. The Special Master noted that King did not state whether any charges had been brought ag ai ns t G ib bs re la ti ve to th e m is si ng fu nd s b el on gi ng to th e C om pa ny.
The Special Master concluded that because King was the Chief Manager o f the L LC, he held fiduciary

duties to the LLC a

nd Plaintiffs. The Special Master then stated:

The Special Master note s that Mr. King was not only the chief manager of this bus iness but w as also th e member entruste d with

the maintenance o f the com

pany books and

accoun ts, a res ponsibility which he then dele gated t

o Les lie Gibbs. Apparently, Mr. K ing did notdiscover

any embezzleme

nt f rom BRB and nowhe

re in his testimony has he indicated any

attempts to identify any

em bezzl ement
or to recover any

funds. The Special Master finds and holds that Mr. King was entr

usted with

cash funds from the operation of the LL C’s businessand was responsible for their safekeeping

. The Spe cial Master f urther f inds that Mr . King w as neg ligent in entrusting these funds to another

party and then f

ailing to proper

ly r eview re cords to verify the entrusted funds were a ctually deposited. Mr. King was the recipient of the daily sales totals showing the amount of cash sales as wellas the ba

nk acco unts and w as the sol e mem ber of t he LLC with-5- any ability to control the safeke eping of cash and to verify its proper deposit when the bank statements were rece ived or through depo si t receipts.

The Special M aster fi

nds that th e sum o f $26,209 .00 in company cash is missing and that such funds are missing as a direct result of Mr. King ’ s negligence or brea ch of fiduciary

duties to the LL C.

After concluding there was a total of $26,209 in missing funds re sulting from King’s negligence

and negligent entrustment of these funds to G ibbs, the Special M aster se t about to determine ho w t he se fu nd s w ou ld ha ve be en di st ri bu te d d ur in g d is so lu ti on if th ey had not be en miss ing. The Special Master concluded that these funds would have been divided on a pro- rata ba sis inaccord ance wi th the L LC mem bers’ c apital co

ntribution s. Accor

din g to the Special Master, P laintiff s’ capital c ontributions totaled 80.06% of

the total c apital contribution s to the L LC. Therefore, Plaintiffs were entitled to 80.06% of $26,209, or $20,982.92.

As no te d p re vi ou sl y, Plaintiff s sought a n award of attorney

fees, expert witne ss fees, and costs

. The Special Master noted that he had the equitable power to award these expenses and fees pursuant to Tenn. Code Ann. § 48-230-105. The Special Master then reviewed the pr oof, such
as King’s arbitrarily

billing the Company $15.00 per hour for work performed

by E lite employe es, regar dless of what the Elite employe e act ually wa s paid. Th e Specia l Master a

lso took into consideration

other factors, such as King’s ref usal to turnover some

of Plaintif

fs’ persona

l proper ty which, in effect, left

Plaintiffs “little choice but to bring this action for dissolution and liquidation.” Inaddition, the Special Master stated that King’s control over the accoun ting and financi al records, self- deali ng, and failure to keep proper records contributed substantially to the cost of the litigation. Th e Special M aster c oncluded that King

should be held resp onsible f or one-half of El

kin s’ tota l expertwitness fees of $14,810. The Special Master also concluded King should be responsible for
one -half of Plaintiffs’ attorney f

ees incurred while assisting Elkins. The total amount of attorn e y fees incurred by

Plaintiffs was $11,426. Of this amount, the Special Master attributed $6,000 to trial and other assistance provided to Elkins, thereby re sulting in King being responsible for one-ha lf of the $6,00 0, or $3,0 00. Thus, of the total $26,236 in expert witness fees and attorney fees incurred by Plaintiffs, the Special Master h eld King liable only for $10,405. The Special Master’s Report ended with the recommendation that the costs, including the fee of the Spec ial Master, be assessed one-half to Plaintiffs and one-half to King.3 King fi led a moti on for summary judgmen t and statement of undisput ed material fact s approximately one

mon th after t

he tri al was completed. The Special M aster’s R epo rt was issue d ap pro ximate ly five wee ks later. P laintiffs responded to the motion for summary judgment rely ing heavily on the Special Master’s Report. When the T rial Court confir med the Sp ecial M aster’s Report, it als o denied King’s motion for summary judgment. King does not appeal the den ial of this mo tion.
-6-

Alth ough Plain

tiffs and King filed objections to the Special Master’s Report, on August 7, 2003, th e Trial Co

urt conf irmed the Special M aster’s

Report in a

ll respec ts. 3 Plaintiffs and King appeal raising several issues. King argues the Trial Court err ed when it held him liable under the doctrine

of respondeat sup erior for embezzle me nt comm itted by Gibbs. King also a rgues the Trial Court err

ed when i t held him liable “as a result of

ne gl ig en ce fo r e mb ez zl em en t c om mi tt ed by” Gib bs

. Plaintiff

s claim the

y should be awarded their entir e attorney fees an d expert wi

tness fe es. They further argue that King should be r

esponsibl e for all the costs, including the Special Master’s fee. Pla intiffs a lso reque st their a

ttorney fees inc urred on this appe al.

Discussion

Withrespect to legal issues, our review is conducted “unde r a pure de novo standard of review, according no def erence to the conclusions of law made by the lower courts.” Southern Constructo rs, Inc. v. Loudon County Bd. Of Educ. , 58 S.W.3d 706, 710 (Tenn. 2001). As to factual issues, concurrent findings of fact by the Special Master and Trial Court are "conc lusive on appeal, except where the finding is on

an issue n

ot appropriate for refe

rral, where it isbased on an error of law or a mixed question of fact and law, or where the fac tual finding is not bas ed on ma terial evidence." Pendola v. Butler , No. M2002 -00131-C OA-R3-CV , 2003 Ten n. App. L EXIS 5 35, a t **11-12 (Tenn. Ct. App. July 31, 2003), no appl. perm. appeal filed (quot ing Aussenbe

rg v. Kramer

, 944 S.W.2d 367, 370 (Tenn. Ct. App. 1996)). See also Tenn. Code Ann. § 27-1-113 (20 00) . If the record contains any mater

ial evidence to sup por t the concurrent findings of fact by the Special Master and the Trial Court, these findings of fact must be affirmed. Pendola , 2003 Tenn. App. LEXI S 535, at * 12.

We f irst will address King’s argument that the Trial Court er red when it hel d hi m liableunder the doctrine of respondeat superior for the em bezzlement

c om mi tt ed b y Gib bs. In Johnson v. LeBonheur Children’s Medical Center , 74 S.W.3d 338 (Tenn. 2002), our Supreme Court discusse d the doct

rine of r esponde at super

ior as fo llows:

When an agency

relationship exists, the pr incipal may be bound by the acts of the agent performed on the principal's behalf and withi n the actual or apparent scope of the ag ency. White , 33 S.W.3d at 724. InTenness ee, the d

octrine of respondeat sup erior pe rmits th e master/principal to be hel d li able for the neg ligent a

ctions of his servant /agent

. Smith v. Henson , 214 Tenn. 541, 551, 381 S.W.2d 892, 897 (1964 ). To hold the maste

r/princi pal vica riously liable, " it i s enoug h that the

servant or age nt was acting in th e busines s of his-7- superior. " White , 33 S .W.3 d at 72 5 (quo ting Kinnard v. Rock City Const. Co. , 39 Tenn. App. 547, 551, 286 S.W.2d 352, 354 (1955)).

Johnson , 74 S.W.3d at 343.

King argue s that Gibbs was acting outside the scope of her employ ment when she embezzledthe money and, ther efore, respondeat superior does not apply . Plaintiff s disagree for several reasons

. First, relying on King’s testimony that he had no direct knowledge that Gibbs had embezzledfrom the Company, Plaintiffs claim the proof does not support a conclusion that Gibbs actually stole the money or

was acting outside the scope of her employment. Plaintiffs furthe r argue that even if Gibbs did steal the money , King still is responsible under respondeat superior

because King gave Gibbs express authority to handle the cash deposits.

Gibbs is not a party to this lawsuit and w as not called as a witness at trial and, therefore, we do not have the benefit of her version of what happened to the missing funds, assuming she has an explanation. Furthermore, while King testified that he brought criminal charg es aga inst Gibbs for embezzling from Elite, we do not know the ou tcom e of those proceedings. Gibbs may ha ve been found n ot-guilty, assuming the matter went to trial. Even if Gibbs was found guilty of embezzling from Elite , that wou ld not ipso factomean she embezzled from the C ompany . With all theseunanswered questions, we do not believe the present litiga tion is the proper

forum for a judicial determination

of wheth er Gibbs s tole the mi ssing fu nds. Havi

ng said t hat, it see ms clear to us that the Trial Cour

t never f ound that Gibbs embe zzled the mis sing fun ds or that King was vica

riously liablefor her

conduct. Inste ad, th e Trial Cou rt found t hat “$26, 209.00 in c ompany cash [was ] missing and that such funds [were] missing as a direct result of Mr. King’s negligence or bre ach of fiduciary duties to the LLC.”

This is not a

finding that King is vicari ously

liable for Gibbs’ c onduct, butrather a f

inding of li ability based on King ’s own independent negligence . As found by the Special Master and confirmed by the Trial Court, “ King wa s th e recip ient of the daily sales tota ls showing the amoun

t of cash sales as well as th e bank a

ccounts and was t he sole mem ber of t he LLC with any ability

to control the safekeeping of cash a nd to verify its proper de posit when t he bank statemen ts were rece ived or through deposit receipts.” The rec ord certainly contains material evidence to support these concurrent findings of fact. Accordingly , we conclude King’s first issue
onappeal i s without me

rit beca use the Tr

ial Court f

ound King

li able not und er the doctrine of respondeat

superior for Gibbs’ alleged embezzlement, but rather be cause of his own indep ende nt negligence and bre ach of fiduciary duty. King’s secon d i ssue is whe ther the Trial Cour

t erred when it he ld him liabl e “as a result of negligence for e

mbezzlement committed by” Gibbs. We again empha size the re was no finding by the Trial Court that Gibbs actua lly embezzled the money . What the Tr ial Cour t did conclude was that King had fiduciary duties to the LLC a

nd Plaintiffs because he was the Company ’s Chief Manager. King al so was the member e

ntrusted with maintenance of the company books and
accoun ts, as wel l as the daily ca sh funds from the operation of the business. King deleg ated all of these responsibilities to Gibbs. The finding of liability on the pa rt of King resulted

from the Trial-8-

Court’s conclusion that he “was negligent in entrusting these funds to another party

and then failing to properly re

view records to verify

the entrusted funds were actually deposited.”

Under certain circumstances, a manag er of an LL C is permitt

ed to delegate his or her duties. Te

nn. Code A

nn. § 48-2 41-110 pr

ovides as follows:
Delegat ion. – Unless prohibited by the article s, the operating agreement, or by

a resolution: (1) Adopted by the

affirmative vote of the governo rs prese nt at a duly held meeting

of a board-managed liability company; or (2) Appro ve d b y the affirmative vote of a majority of the membershi p interest entitled to vote at a duly he ld meeting of t h e members o f a membe

r-mana ged L LC;

a manager el ec ted or ap pointed ma

y, w ithout fur ther approval, delega te some or

all of the duties and powers of an office to other persons. A manager who delegates the duties or powers of an office remains subject to

the standa rd of condu ct for a man ager with respect to the discharge of all dut ies and powers so delegated. (emphasis added).

The standar

ds gove rning the conduct of a manager o f an L LC a re a ddressed in the next statutory section, Tenn. Code Ann. § 48-241-111, which pr ovides in r

elevant part as f ollows:

Standard of conduct. – (a) GENERAL. A manager shall disch arge the duti es of an office in good faith, in a manner the manager
reasona bly believes to be in the b est i nterests of the L LC, a nd with the care an ordinarily

prudent person in a

like position would exer

cise under similar circumstances.... (b) REL

IAN CE PERMI TTED. I n disc harg ing such duties, a manager is entitled to rely on information, opinions, reports, or statemen ts, including

financi al statements and other financialdata, if pr ep ar ed or pr es en te d b y:
* * * (2) Legal counsel, public accountants, or other pe rsons as t o mat te rs the of

ficer r eason ably beli eves ar e with in th e perso n's professional or expert competence.4 King doe s not p oint us to any test imony or other proof in the record sett ing forth Gibbs’ profess ional or expert

competence. Be cause King hired h er and gave h er the title o f “boo kkee per” hard ly would seem suffici ent. Without such testimo ny or p roo f, we can not d eterm ine whe ther K ing’s relian ce on Gib bs wa s reaso nab le.
-9- (c) WHERE RELI

ANCE N OT PE RMITTED. A manag er is not actin g in good f

aith who h as knowle dge concernin g the ma tte r i n question that make s r eliance otherwise permitted by subsection (b) unwarranted. (d) LI MITATI ON ON LI

ABIL ITY. A manager is not liable for any actiontaken as a manager, or any fa ilure to take any a

ction, if the manager perfor med the dutie s of the of

fice in c omplianc e with this section. (e) EFFECT OF DEL

EGATION. A person exercising the principal functions of an office or to whom some or all of the duties and powers of an off

ice ar e deleg ated pursuant to § 4 8-241-11 0 is considered a manager f

or purposes of this section. King argues that his delegation of re sponsibilities to Gibbs, including the responsibilities for handling cash and maintaining the Company books and account s , was done in good faith. King further argue s that pursuant to Tenn. Code Ann. § 48-241-111(b )(2), h e was entitled to rely on the financi al acco unts mainta

ined by Gibbs, an

d, there fore, he

cannot be

held liable under Tenn. Code Ann. § 48-241-111(d).

For present purposes only , we will a ssume that King was entitled to rely on financial data prepared by

Gibbs and § 48-241-1 11(b)(2 ) applie s. 4 The issue then becomes whether an L LC’s Chief Manager can dele gate in

a wholesale manner all responsibility for handling cash and preparing financial reports, etc., and never have any duty to inspect the reports or otherwise take any

action to verify their accuracy . In his brief on

appeal, King asserts that he has had no tra ining as a bookkeeper
or accountant and “[t]o expect [him] to discern the existence of a proble m is unreasonable and not supported by a ny e vidence .” We disa

gree f or two re asons. First, whether King had the exper tise to discern a problem

cannot be answered because he never tried. Second, it is undisputed that at the end of each day , K ing knew ex actly how much c ash had been taken in and should have been deposited. All he had to do was , from time to time, check the deposit receipts to verify that the money had bee

n deposited. This is as basic as it gets with a bank account and har dly requires a

ny specialized training or expertise.

We do not believe § 48-241-111(b )(2) authorizes a Chief Manager, who is re spo nsibl e for maintaini

ng the c ompany

books, ac counts, a

nd handlin

g cash to completely

delega te all of t his responsibility and never ta ke anysteps to verify

that the person to whom

this sign ificant a uthority has be en de le ga te d i s d oi ng th ei r j ob co rr ec tl y. W e a ls o n ot e, no t s ur pr is in gl y, that King failed to produce any proof tha

t either depositing funds into a bank account or looking at a deposit slip to see-10-

if the amoun

t given t o be depo sited equ

aled th e amount actually deposited r equire any

particular “professional or expert competence” as required by § 48-241-111(b)(2). Therefore, we hold there is material evidence to support the Tria l Court’s c onclusion

that King was negligent a

nd violate d his fiduciary obligations to the LL C and Plaintiffs. We affirm the judgment of the Trial Court on this issue and need not decide the issue of wheth er the Tr ial Court properly

found Kin

g had ne glige

ntly entrusted the cash to Gibbs.

Plaintiffs argue that the Trial Court erred by not holding King

responsible for all of their expert wit

ness fee s, attorney

fees, a nd allof the costs, including the fee of the Special Master. Tenn. Code Ann. § 48-245-903 discusses the procedure for dissolution of an L LC. Subsection (d) of that sta tutory section provides a s follows:

BOND AND EXP ENS ES . In a proce ed in g f or di ss ol ut io n b y a member, the petiti oner sha ll execute and file inthe p roceed ing a bond, with sufficient surety, to cove r the defenda

nt's pro bable co sts, including reasonable attorney fees, in defendi ng the petition. The court shall determine the amount of the bond and may award to any party its reasonable co sts, includ ing attorney

fees, if it finds for such party in t he pro ceedin g. Tenn. Code Ann. § 48-245-903(d).

The Trial Court further noted that an award of attorney fees and other

expenses a

lso was authorized by

Tenn. Cod

e Ann. § 48 -230-105 which pr ovides: Equitable

remedies. – If an L

LC or a manage

r or governor of the LL C violates

a provisi on of cha

pters 201 -248 of th

is title, acourt in t his state may, in an ac

tion brought by a me

mber of the LL C, grant any equitabl e relief

it conside

rs just a

nd re asonable in the circumstances and award expenses, incl uding counsel fees and disbursements, to the member.

Becau se an award of attorney fees, etc., under these statutes is discretionary , we review the Trial Court’s judgment on this issue u

nder the abuse of discreti on standa

rd. As set forth pr ev io us ly, the Tria

l Court fou

nd King had arbit

rarily and impro

perly billed the

Co mp an y $15.00 per hour for work

performed

by E lite employe es. King also ref used to tur

n over some of Plain

tiffs’ personal property lea

ving Plaintiffs “little choice but to bring this ac ti on for dissolution and liquidation.” The Trial Court further stated that King’s control over the ac counting and financial record s, self-dealing, and failure to keep pr oper records contributed

substantia

lly t o the cost of the litigation. On top of a

ll of this, we have affirmed the Trial Court’s finding that King was neglig ent
an d breached

his fiduciary oblig ations to the LLC a nd Plaintiffs. In light of these findings, we believe the Tr ial C ourt e rred wh en it c onclu ded Ki ng s hould be re sponsible only for one-ha lf of Elkins’ expert witness fees and one-half of Plaintiffs’ attorney fe es incurred while assisting Elkins.-11-

We modify the Judgment to hold King re sponsible for the entire $14,810 expert witness fee as well as the en tire $6,0 00 in

attorney fees attributable to assistance provided to Elkins. We also modify the Judgment to hold King responsible for all costs, including the fees of the Spec ial Master. With regard to Plaintif

fs’ rema ining at torney fees in curred prior to this appeal, since other issues were presented at trial as to which King ha d so me succe ss, we do n ot believ e the Tri al Court e rred in holding Plaintiff

s respons ible for t

he rema inder of their att orney fees. I n all oth er resp ects, the judgment of the Tr ial Court is

affirmed. We also believe it appropriate under the statut e to exerc ise
our discreti on to award Pl aintiffs their expe

nses, including

counsel f ees, inc urred in this appe al with this amount to be determined by the Tr ial Court on remand.

Conclusion

The judgment of the Trial Court is affirmed as modified, and this cause is remanded to the Trial Court for further proceeding s consistent with this Opinion and for collecti on of the c osts below. Costs on appeal are assessed aga inst the Appellant D. Scott King and his surety

.

___________________________________ D. MICHAEL

SWINEY, JUDGE