Opinion ID: 2514649
Heading Depth: 1
Heading Rank: 3

Heading: The licensing dispute

Text: In November 1998, Allsop approached Midby, the managing partner of Multi-Family Development, about buying the 87.5 percent interests in Walter Homes held by Walter, Kenner, and the Sterns. A year later, in November 1999, the parties entered into an express agreement whereby Multi-Family Development acquired the 87.5 percent interest in Walter Homes as well as management rights in the company. Allsop retained his 12.5 percent ownership interest in Walter Homes. In October 1999, Allsop formed Crestdale Associates, Ltd., for the purpose of developing residential real estate. Although Crestdale Associates became a competitor with Walter Homes, such business activity was not prohibited under the basic Walter Homes Operating Agreement. However, rather than obtain a separate contractor's license for Crestdale Associates, Allsop instead used the Walter Homes license to develop Crestdale Associates properties. In September 2000, Allsop approached Midby with a proposal to purchase, for himself, Multi-Family Development's interest in Walter Homes. Midby expressed interest and Allsop's attorney, Douglas Gerrard, drew up a proposed written purchase agreement. The draft included a provision that released Allsop from liability for his prior use of the Walter Homes contractor's license, which according to Midby, revealed for the first time Allsop's use of the license in connection with other ventures. Having learned that Allsop had used the Walter Homes license for independent projects, Midby refused to continue negotiations. The rights of the members of Walter Homes were set forth in paragraph 6.3 of the Walter Homes Operating Agreement: Nonrestriction of Business Pursuits of Members and Administrative Committee Members. This Operating Agreement shall not preclude or limit in any respect the right of any Member or Administrative Committee Member to engage in or invest in any business activity of any nature or description, including those which may be the same or similar to the Company's business and in direct competition therewith. Any such activity may be engaged in independently or with other Members or Administrative Committee Members. No Member shall have the right, by virtue of the Articles of Organization, this Operating Agreement or the relationship created hereby, to any interest in such other ventures or activities, or to the income or proceeds derived therefrom. The pursuit of such ventures, even if competitive with the business of the Company, shall not be deemed wrongful or improper and any Member or Administrative Committee Member shall have the right to participate in or to recommend to others any investment opportunity. (Emphasis added.) Article 20 of the Agreement further stated that The Articles of Organization and this Operating Agreement contain the entire understanding between and among the Members and supersede any prior understandings and agreements between and among them respecting the subjects of the Articles of Organization and this Operating Agreement. ... Notwithstanding Allsop's right to develop other projects under paragraph 6.3 of the Operating Agreement, Midby, Multi-Family Development, and Walter Homes filed a complaint in the district court against Allsop and Crestdale Associates seeking damages and various forms of relief, based on their claim that, among other things, Allsop and Crestdale Associates converted the Walter Homes contractor's license for their own personal benefits.