Opinion ID: 4562750
Heading Depth: 2
Heading Rank: 1

Heading: Dissolution of LLC and Transfer of Assets

Text: Most broadly, the Parkers argue that the trial court should have amended the verdict by adding approximately $5 million in damages, to reflect the stipulated 13 value of the assets the bank transferred out of the LLC. We disagree. We assume for the sake of this argument that the jury was required to include in its damages award the consequences that flowed from the bank’s actions in dissolving the LLC and transferring its assets without compensation to the LLC or its members. Even so, it is not clear that the proper measure of those damages would be the entire stipulated value of the transferred assets. To flag one of a number of possible complexities, if the bank had instead sold Mr. Bealer’s interest in the LLC to the Parkers, the Parkers seemingly would have had to compensate the bank (as the representative of Mr. Bealer’s estate). Specifically, the operating agreement (drafted in contemplation of there being three members of the LLC) provided that the remaining members would be required to pay one third of the assessed value of the LLC, less ten percent. The trial court therefore correctly declined to amend the verdict by simply adding the entire stipulated value of the transferred assets to the damages award.
In the alternative, the Parkers contend more narrowly that they are entitled to a new trial on the issue of the bank’s responsibility for damages relating to the 14 dissolution of the LLC and the transfer of the LLC’s assets. We agree with that contention. As previously noted, the trial court precluded the Parkers from contending at trial that the bank acted wrongfully in dissolving the LLC and transferring the LLC’s assets. If that ruling was incorrect, then the Parkers were unfairly hobbled in attempting to persuade the jury to hold the bank liable for those actions, whether as damages for the breach-of-contact claim or on the separate count of conversion. We conclude that the trial court’s ruling was incorrect. The trial court at various points gave three reasons for precluding the Parkers from trying to prove to the jury that the bank acted unlawfully in dissolving the LLC and transferring the LLC’s assets: (1) the operating agreement gave the bank the authority to transfer the properties to itself; (2) the bank was operating under a valid trial-court order that empowered the bank to take actions necessary to dissolve the LLC; and (3) the Parkers did not timely raise claims resting on the illegality of the dissolution of the LLC and the transfer of the LLC’s assets. We conclude to the contrary that the Parkers were entitled to try to prove to the jury that the bank acted unlawfully in dissolving the LLC and transferring the LLC’s assets. 15 First, the operating agreement did not make the bank a member of the LLC, see supra Part II, nor did the agreement otherwise grant the bank the authority to dissolve the LLC or transfer the LLC’s assets without compensation. Second, the trial court’s orders in this case did not immunize the bank from liability for dissolving the LLC and transferring the LLC’s assets without compensation. The trial-court order on which the bank presumably relied did not authorize the bank to unilaterally transfer the LLC’s assets to itself without compensation. Rather, the order stated that the LLC “shall be terminated in accordance with paragraph 15 of the company’s Operating Agreement.” Paragraph 15 did not give the bank the authority to transfer the LLC’s assets to itself, let alone without compensation. More fundamentally, the trial court’s order was reversed by this court on appeal. Parker, 30 A.3d at 150-55. “It has long been well established that the reversal of a lower court’s decision sets aside that decision, leaves it without any validity, force, or effect, and requires that it be treated thereafter as though it never existed.” Khadr v. United States, 529 F.3d 1112, 1116 (D.C. Cir. 2008) (internal quotation marks omitted); see also, e.g., CGB Occupational Therapy, Inc. v. RHA Health Servs., Inc., 499 F.3d 184, 190 n.2 (3d Cir. 2007) (“[T]he effect of a reversal 16 of a judgment ‘is to nullify it completely and to leave the case standing as if such judgment had never been rendered, except as restricted by the opinion of the appellate court.’”) (quoting 5 C.J.S. Appeal and Error § 1106 (2007)). This general principle has narrow exceptions. See, e.g., United States v. United Mine Workers of Am., 330 U.S. 258, 293-94 (1947) (in certain circumstances, party may be held in contempt for violating order later reversed on appeal). We see no basis for such an exception here, however. To the contrary, a party that acts in reliance upon a favorable trial-court order that is subject to appeal does so at its peril, because the party may be held liable if the appellate court reverses the trial-court order and renders the party’s actions unlawful. See, e.g., Moreland v. Campagni, 103 F. App’x 193, 194 (9th Cir. 2004) (although appellant was entitled to act on basis of unstayed trial-court decision, appellant was liable for damages after trial court’s decision was reversed on appeal); Caspar v. Snyder, 77 F. Supp. 3d 616, 630 (E.D. Mich. 2015) (“[A] reversal of a judgment will nullify the judgment as to the parties to the appeal in that litigation . . . .”); Hasse v. Fraternal Order of Eagles #2421, 658 N.W.2d 410, 413 (S.D. 2003) (“[T]he prevailing party at trial incurs liability for restitution to the opposing party if the former executes on a judgment that is reversed on appeal.”); Dixie Cty. Sheriff’s Dep’t v. Forfeiture of 1987 Ford Van, 592 So. 2d 748, 749 (Fla. Dist. Ct. App. 1992) (sheriff’s department that sold 17 van subject to trial-court forfeiture order “sold the van at its own risk while the prior appeal was pending,” and was required to compensate owner for loss of property); Ne. Bank of Lewiston & Auburn v. Murphy, 512 A.2d 344, 349 (Me. 1986) (appellee “acted entirely at his own peril in relying upon” decision of intermediate appellate court while decision was “still subject to appeal”); 36 C.J.S. Federal Courts § 739 (2020) (“A lower court decree which is reversed generally does not protect parties acting pursuant to such decree prior to reversal.”). Third, the Parkers did not act belatedly to challenge the dissolution of the LLC and the transfer of the LLC’s assets. The bank dissolved the LLC and transferred the LLC’s assets to itself in late 2008 and early 2009. At that point, the case was on appeal in this court. Parker, 30 A.3d at 147. After we reversed the trial court’s ruling and remanded for further proceedings in 2011, the Parkers promptly filed another lawsuit against the bank to challenge its actions in dissolving the LLC and transferring the LLC’s assets to itself, including a claim for conversion. Once the trial court dismissed that case without prejudice (concluding that the matter was “simply not ripe for adjudication” based on the unresolved issues in this lawsuit), the Parkers promptly moved to amend. Moreover, the trial court granted that motion. 18 Finally, we note that we are not persuaded by the bank’s passing contention that the Parkers waived this issue by failing to challenge the trial court’s ruling precluding the Parkers from trying to establish the unlawfulness of the bank’s actions in dissolving the LLC and transferring the LLC’s assets. The Parkers fully briefed the issue in this court, the Parkers’ notice of appeal specifically designated the trialcourt orders at issue, and in any event a notice of appeal from a final judgment generally brings up the trial court’s earlier rulings for review. See, e.g., Flax v. Schertler, 935 A.2d 1091, 1099 (D.C. 2007) (“[A]n appeal of a final judgment draws into question all prior non-final rulings and orders.”) (internal quotation marks omitted). In sum, we hold that the Parkers are entitled on remand (1) with respect to their breach-of-contract claim, to seek to prove up additional damages arising from the bank’s termination of the LLC and transfer of the LLC’s assets; and (2) to submit to the jury their claim of unlawful conversion. Although the Parkers also raised claims of breach of fiduciary duty and trespass to personal property in the amended complaint, they have not sought relief as to those claims in this court, so we do not grant relief with respect to those claims. See, e.g., Bartel v. Bank of Am. Corp., 128 A.3d 1043, 1048 (D.C. 2015) (“[P]oints not raised on appeal are treated as abandoned.”) (internal quotation marks omitted). The Parkers do raise on appeal the 19 trial court’s order denying them leave to further amend the complaint with respect to their request for an accounting. It is not clear, however, whether the Parkers will wish to pursue that request in light of the disposition of this appeal. We leave that matter to be addressed if necessary on remand, noting only that our ruling in this appeal undermines at least some of the trial court’s reasons for denying leave to amend. For example, for the reasons we have explained in this opinion, leave to amend should not be denied on the ground that the Parkers are foreclosed from challenging the bank’s actions in terminating the LLC and transferring the LLC’s assets. The bank argues that certain evidence introduced in the first trial should be excluded at any retrial, under D.C. Code § 14-302(a) (2012 Repl.) (in civil action against representative of deceased person, judgment may not be rendered in favor of plaintiff based on plaintiff’s uncorroborated testimony). Because it is unclear what evidence would be admitted at a new trial, we decline to address that issue at this time. See, e.g., DC Appleseed Ctr. for Law & Justice, Inc. v. District of Columbia Dep’t of Ins., Secs. & Banking, 214 A.3d 978, 996 (D.C. 2019) (court “declin[es] to reach issues that may or may not arise again on remand”) (internal quotation marks omitted). 20
Finally, the Parkers argue that the trial court erred in denying their motion for prejudgment interest on the jury’s award. The parties appear to agree that we review that ruling de novo. We therefore proceed on that assumption without deciding the issue. Mazor v. Farrell, 186 A.3d 829, 832 (D.C. 2018). We remand for further proceedings on the issue of prejudgment interest. Prejudgment interest “operates in part to compensate prevailing plaintiffs for the loss of the use of money that was wrongfully withheld by the defendant.” Mazor, 186 A.3d at 832. “Statutes providing for prejudgment interest are thus remedial and should be generously construed so that the wronged party can be made whole.” Id. (internal quotation marks omitted). The Parkers rely on D.C. Code § 15-108 (2012 Repl.), which provides for prejudgment interest in actions “to recover a liquidated debt on which interest is payable by contract or law or usage.” “A liquidated debt is one which at the time it arose was an easily ascertainable sum certain.” Mazor, 186 A.3d at 832 (internal quotation marks omitted). The Parkers argue that the amount distributed by the LLC each year was easily ascertainable, because the LLC’s annual statements reflected the amount for each 21 year, and the parties stipulated to the overall figure of a little over $1.3 million. The bank observes, however, that the ultimate amount that would eventually be distributed was not easily ascertainable in 2003, when in the bank’s view the Parkers’ claim accrued. Although we agree with the bank’s observation, the issue is not when the Parkers’ claim accrued, but rather when the bank’s “debt arose.” Mazor, 186 A.3d at 832; see also D.C. Code § 15-108 (prejudgment interest is to be paid from time when debt “was due and payable”). On the latter point, the Parkers in essence appear to argue that the bank’s debt arose each year, when the bank failed to distribute to the Parkers the income reflected in the LLC’s annual statement for that year. The Parkers further argue that those amounts for each year were easily ascertainable, which is demonstrated by the fact that the parties stipulated to the overall amount. We agree with the Parkers on those points, which the bank does not appear to dispute. We therefore hold that the amount of damages attributable to the bank’s withholding of the LLC’s distributions was easily ascertainable at the time those damages arose. The trial court also appeared to suggest that the Parkers’ claim for prejudgment interest should have been brought under D.C. Code § 15-109 (2012 Repl.), which permits a plaintiff to seek to prove an entitlement of prejudgment interest during trial, as an element of damages. Section 15-109 does not state that it 22 is an exclusive remedy, however, and we conclude that the Parkers therefore were free to choose to seek prejudgment interest instead under § 15-108. Although we vacate the trial court’s order denying prejudgment interest, we do not direct an award of prejudgment interest. As the bank points out, § 15-108 also requires that prejudgment interest “be payable by contract or law or usage.” The trial court did not address that requirement, and we leave that issue for the trial court to determine in the first instance on remand. See, e.g., Velcoff v. MedStar Health, Inc., 186 A.3d 823, 829 (D.C. 2018) (remanding for trial court to consider issue in first instance). Finally, we note that proceedings on remand may (or may not) result in an additional award of damages. We express no view as to whether prejudgment interest would or would not be available with respect to any such damages. For the foregoing reasons, we affirm the jury’s award of damages to the Parkers, vacate the judgment of the Superior Court in part, and remand for further proceedings. Specifically, the trial court on remand should (1) determine whether prejudgment interest on the jury’s award of a little over $1.3 million is payable by contract or law or usage; (2) rule on any renewed motion to amend the complaint 23 with respect to the request for an accounting; and (3) hold a trial at which the Parkers are permitted to try to prove that the Bank’s termination of the LLC and transfer of the LLC’s property attempt (a) warranted an award of additional damages for their claim of breach of contract and (b) constituted conversion. So ordered.