Court Opinion

ID: 4364773
Source: CourtListenerOpinion
Date Created: 2019-02-05 18:01:10.319677+00
Date Added: 2024-06-11T13:30:41.237288
License: Public Domain

Case: 18-13258   Date Filed: 02/05/2019   Page: 1 of 12

                                                          [DO NOT PUBLISH]

            IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT
                      ________________________

                             No. 18-13258
                         Non-Argument Calendar
                       ________________________

                  D.C. Docket No. 1:16-cv-02425-LMM

CHRYSTEN WRIGHT, et al.,

                                                                       Plaintiffs,

MONIQUE SIMMS,
SAMMY DAVIS,

                                                         Plaintiffs - Appellants,

                                  versus

SCALES 925 ATLANTA, LLC, et al.,

                                                                     Defendants,

CLIFFORD JOSEPH HARRIS, JR.,
CLIFFORD JOSEPH HARRIS, JR.,
d.b.a. The Royal Group LLC,

                                                        Defendants - Appellees.
               Case: 18-13258       Date Filed: 02/05/2019      Page: 2 of 12

                              ________________________

                      Appeal from the United States District Court
                         for the Northern District of Georgia
                            ________________________

                                     (February 5, 2019)

Before TJOFLAT, JORDAN, and ROSENBAUM, Circuit Judges.

PER CURIAM:

       Plaintiff-Appellants Monique Simms and Sammy Davis appeal the grant of

summary judgment to Defendant-Appellee Clifford Harris, Jr., on their claims

arising out of their employment at Harris’s now-closed restaurant, Scales 925. The

question in this appeal is whether Harris can be held personally liable for these

claims. The district court concluded that Harris was protected against personal

liability by the legal form of a limited liability company (“LLC”), so it granted

summary judgment in his favor. Simms and Davis dispute several aspects of the

court’s reasoning, but they have identified no error, so we affirm.

                                               I.

       In December 2014, defendants Harris and Charles Hughes 1 were approached

about lending celebrity and financial support to Vibe Restaurant and Bar, which

       1
         As we explain in more detail below, Charles Hughes was a defendant in the district-
court proceedings, but he is not implicated in this appeal. Hughes was dismissed in the district
court-proceedings after the claims against him were settled.
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was located on Ivan Allen Boulevard in Atlanta. Harris—a rapper, 2 actor, and

entrepreneur—is also a promoter for various entertainment venues.

      Shortly after Harris and Hughes were approached about Vibe Restaurant and

Bar, the restaurant managers at the time—the Social Life Restaurant Group

(“Social Life”) and the Venue Restaurant Group (“Venue”)—signed a contract

concerning Vibe (“the Vibe Agreement”) with The Encore Group, LLC

(“Encore”), and The Royal Group, LLC (“Royal”). Hughes signed on behalf of

Encore as its sole member. Harris, in turn, signed on behalf of Royal as its sole

member. It is undisputed that Royal was not a validly formed LLC.

      The Vibe Agreement called for the creation of a “joint venture entity” to

take over day-to-day management of restaurant operations. In exchange for taking

over these management responsibilities and making capital improvements, Royal

and Encore were entitled to 75% of all net profits generated each month. The lease

remained in the names of Venue and Social Life.

      Harris and Hughes then enlisted the help of an attorney to form two LLCs—

Scales 925 Atlanta Management, LLC and Scales 925 Atlanta, LLC—and they

renamed the restaurant Scales 925 (“Restaurant”).                These LLCs were validly

formed in January 2015.            The attorney who organized these entities drafted

operating agreements for each of them, though the agreements were never signed.

      2
          Harris is known in the entertainment world as “T.I.”
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The operating agreement for Scales 925 Atlanta Management, LLC, stated that

Royal and Encore would each own a 45% stake, with two other individuals holding

the remaining 10%.      The operating agreement for Scales 925 Atlanta, LLC,

provided that it was to be owned solely by Scales 925 Atlanta Management, LLC.

      In mid-2015, Simms and Davis were hired as the Restaurant’s general

manager and executive chef, respectively. They executed employment agreements

reflecting, among other things, their salaries and bonus compensation. Simms’s

employment agreement is not in the record, but we assume, as the parties agree,

that it is identical to Davis’s in all respects relevant to this appeal. According to

Davis’s employment agreement, the contract was executed “by and between

SCALES 925 ATLANTA, LLC (the ‘Company’), . . . and Sam Davis.” The

agreement stated that Davis agreed to the supervision of “the Company’s

management, [Harris] and [Hughes].” Hughes signed the agreement on behalf of

Scales 925 Atlanta, LLC as its “managing member.” Harris was not listed as a

party to the agreement and did not sign the agreement.

      Just over a year after the Restaurant opened, several servers at the Restaurant

joined Simms and Davis in a lawsuit against Harris, Hughes, Venue, and the two

Scales LLCs. They alleged claims of breach of contract, failure to pay minimum

and overtime wages, and fraud. The servers eventually settled their claims against

the defendants, and Simms and Davis dismissed their claims with prejudice against

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Hughes, Venue, and the two Scales LLCs. So Simms and Davis are the only

remaining plaintiffs, and Harris is the only remaining defendant.

       Simms and Davis did not allege that Harris personally committed any of the

acts on which their claims were based. The bad actor for each of their claims—for

breach of the employment agreements, failure to pay final paychecks, and

common-law fraud and deceit 3—was identified as Hughes, who was more actively

involved in managing the Restaurant. Nevertheless, Simms and Davis alleged that

the defendants were “all business partners” operating the Restaurant and that, as a

result, Harris was “jointly and severally liable” for actions taken by Hughes “[a]s a

general partner” on behalf of the Restaurant.

       After discovery, the district court granted summary judgment to Harris.

Citing supplemental briefing submitted at the court’s request, the court explained

that Simms and Davis based Harris’s liability for all claims on two main theories:

(1) common-law partnership or joint venture; and (2) piercing the corporate veil.

But if neither of these two theories was viable, the court stated, Harris was shielded

from personal liability under Georgia law applicable to LLCs. See O.C.G.A. § 14-

11-303(a). Then, concluding that the evidence did not support the first theory and

that the second theory was not properly raised, the court determined that Harris

       3
          One other claim, for deceptive business practices, was dismissed by the district court
based on a motion to dismiss. The appellants have abandoned this claim by failing to clearly
raise it on appeal. See Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 680–81 (11th Cir.
2014) (issues not plainly raised on appeal are abandoned).
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was not liable and granted his motion for summary judgment.                    This appeal

followed.

                                             II.

       We review a decision to grant summary judgment de novo, viewing the

evidence and drawing all reasonable inferences in favor of the non-moving party.

Haynes v. McCalla Raymer, LLC, 793 F.3d 1246, 1249 (11th Cir. 2015).

Summary judgment is appropriate if “the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of

law.” Fed. R. Civ. P. 56(a). Georgia law governs our resolution of this matter.

                                            III.

       The central dispute in this case concerns the legal structure under which

Harris and Hughes managed the Restaurant. Simms and Davis maintain that the

Restaurant was operated as a partnership, which would make Harris, as a partner,

“jointly and severally liable for all debts, obligations, and liabilities of the

partnership.”4 O.C.G.A. § 14-8-15. In contrast, Harris contends, and the district

court found, that he and Hughes clearly intended to and did operate the Restaurant

       4
           Simms and Davis also present arguments relating to their “joint venture” theory of
liability. See Kissun v. Humana, Inc., 479 S.E.2d 751, 752 (Ga. 1997); Boatman v. George
Hyman Constr. Co., 276 S.E.2d 272, 274–75 (Ga. Ct. App. 1981). But as the court explained, a
joint-venture agreement, like a partnership agreement, depends on the intent of the parties
involved. See Aaron Rents, Inc. v. Fourteenth St. Venture, L.P., 533 S.E.2d 759, 762 (Ga. Ct.
App. 2000). Because we conclude that the evidence is clear that Harris and Hughes intended to
operate the Restaurant as an LLC, the joint-venture theory fails for the same reasons as the
partnership theory.
                                             6
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as an LLC, and that he is shielded from liability by that legal form. See id. § 14-

11-303 (stating that a “member, manager, agent, or employee of a limited liability

company is not liable,” solely by reason of that status, for the obligations of the

LLC or “for the acts or omissions of any other member, manager, agent, or

employee of the limited liability company, whether arising in contract, tort, or

otherwise”). Harris also notes that he did not sign the employment agreements at

issue, and so he asserts he cannot be held liable for breach of contract.

      A partnership under Georgia law is “an association of two or more persons

to carry on as co-owners a business for profit.” Id. § 14-8-6(1). Courts generally

look to several factors to determine the existence of a partnership, including “a

common enterprise, the sharing of risk, the sharing of expenses, the sharing of

profits and losses, a joint right of control over the business, and a joint ownership

of capital.” Aaron Rents, Inc. v. Fourteenth St. Venture, L.P., 533 S.E.2d 759,

747–48 (Ct. App. Ga. 2000). “But the intention of the parties is the true test of

whether there is partnership.” Id.

      Here, we agree with the district court that Harris and Hughes clearly

intended to and did operate the Restaurant as an LLC, not a partnership. After

entering into the Vibe Agreement, they formed two valid LLCs for the purpose of

managing restaurant functions, and these two LLCs were, as the court stated,

“consistently utilized to run the Scales 925 restaurant.”             The plaintiffs’

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employment agreements clearly state that they were executed by and between

“Scales 925 Atlanta, LLC,” an existing LLC, and the plaintiffs, and Hughes signed

the contract on behalf of the LLC as its “managing member,” not in his individual

or some other capacity. In addition, Scales 925 Atlanta, LLC, was listed as the

employer on each plaintiff’s W-2 and paystubs, and the checks in the record that

were signed by Harris personally were all paid out of a “Scales 925 Atlanta, LLC”

bank account. Thus, the evidence clearly reflects that Harris and Hughes intended

for the duties of employer—and the actions out of which Simms and Davis’s

claims arise—to be undertaken, legally speaking, by Scales 925 Atlanta, LLC,

even if Hughes was the one who in fact undertook those duties on its behalf.

        Simms and Davis argue that a common-law partnership existed because

Harris identified Hughes as his “partner” on Instagram and in a discussion with

Davis. But “the use of the label . . . does not by itself demonstrate the existence of

a legal ‘partnership’ and all the rights and obligations engendered thereby,” Jerry

Dickerson Presents, Inc. v. Concert S. Chastain Promotions, 579 S.E.2d 761, 768

(Ga. Ct. App. 2003), particularly when that label is used colloquially, as it was

here.

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       Simms and Davis next contend that Harris is not a member of either of the

Scales LLCs. 5       The district court rejected this argument based on the LLCs’

operating agreements, which the court found were binding under Georgia law even

though unsigned. See O.C.G.A. § 14-11-101(18) (“A limited liability company is

not required to execute its operating agreement, and, except as otherwise provided

in the operating agreement, is bound by its operating agreement whether or not the

limited liability company executes the operating agreement.”). According to these

agreements, Scales 925 Atlanta, LLC, was wholly owned by Scales 925

Management, LLC, which, in turn, was jointly owned by Encore, Royal, and two

individuals. The court, noting that Royal was never a valid LLC, reasoned that any

ownership interest in Royal’s name belonged to Harris, the only alleged member of

Royal. The court therefore concluded that Harris was a member of Scales 925

Atlanta, LLC, through his membership—in place of Royal—in Scales 925

Management, LLC.

       Simms and Davis respond with two arguments. First, they assert that Royal

could not have passed its interest to Harris because it was never capable of owning

       5
          Simms and Davis do not explain how this argument helps them. They did not allege
any specific wrongdoing by Harris, and he was not listed as a party to the employment
agreements and did not sign the agreements in any capacity. So without more, he cannot be held
personally liable. Kaesemeyer v. Angiogenix, 629 S.E.2d 22, 25 (Ga. Ct. App. 2006) (“It is
axiomatic that a person who is not a party to a contract is not bound by its terms.”). In any event,
it appears that this argument is in service of their overall argument that Harris’s relationship with
the Restaurant was “either a partnership or joint venture.” We assume without deciding that it
would be helpful to them and so address the merits of the court’s ruling on this issue.
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an interest.    Fair enough.    But under Georgia law, “[a]n undertaking by an

individual in a fictitious or trade name is the obligation of the individual.” Nat’l

Cash Register Co. v. Sikes, 94 S.E.2d 391, 392 (Ga. Ct. App. 1956); see Hawkins

v. Turner, 303 S.E.2d 164, 166 (Ga. Ct. App. 1983). Because Royal was not a

valid LLC, we agree with the district court that this general rule, as applied here,

means that any ownership interest in Royal’s name belonged to Harris. No interest

was “passed” from Royal.        Rather, Harris, as Royal’s sole alleged member,

personally held Royal’s purported interest from the outset.

      Second, without disputing the validity of the operating agreements, Simms

and Davis argue that Harris never became a member because he did not sign the

operating agreements. We disagree. The operating agreement for Scales 925

Management, LLC, did not require Harris to sign the agreement to become a

member. The agreement expressly designated certain members, including Royal

(Harris) and Encore (of which Hughes was the sole member), and then included a

provision for admitting new members. Simms and Davis cite language from this

provision in support of their claim that Harris was required to sign the operating

agreement, but we agree with the district court that the cited language “applies

only to admitting new members” not already designated in the agreement.

      Simms and Davis next argue that the district court should have permitted

them to proceed against Harris under a veil-piercing theory. See Christopher v.

                                         10
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Sinyard, 723 S.E.2d 866, 867 (Ga. Ct. App. 2012) (“The concept of piercing the

corporate veil is applied in Georgia to remedy injustices which arise where a party

has overextended his privilege in the use of a corporate entity in order to defeat

justice, perpetrate fraud or to evade contractual or tort responsibility.”). They

contend that the defendants had fair notice of that theory because they alleged

fraud and deceit, which are legal grounds to pierce the corporate veil.

       Simms and Davis have not shown that the district court erred by refusing to

consider this theory at summary judgment.        The claim of “fraud and deceit”

alleged in the complaint had nothing to do with the legal structure of the

Restaurant or how it was being operated by Harris and Hughes. Rather, it was

about Hughes’s alleged false statements to employees that they would be paid for

working the Restaurant’s grand opening and a New Year’s celebration. And

Harris’s liability for the fraud claim, like his liability for the other claims, was

based solely on a partnership theory of liability. There is nothing about these

allegations that would have put the defendants on notice of a veil-piercing theory

of individual liability.

       Finally, Simms and Davis argue that their employment agreements are

unenforceable and that they can prove that they had a contract with Harris

personally. Not only is this argument inconsistent with the breach-of-contract

claim in their complaint, which was based solely on the written employment

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agreements, but it was raised on appeal only in the reply brief. We decline to

consider it. See Timson v. Sampson, 518 F.3d 870, 874 (11th Cir. 2008) (“[W]e do

not address arguments raised for the first time in a . . . litigant’s reply brief.”).

                                           IV.

       For the reasons stated, we affirm the grant of summary judgment against

Simms and Davis.

       AFFIRMED.

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