Court Opinion

ID: 9945587
Source: CourtListenerOpinion
Date Created: 2024-02-27 21:19:14.736766+00
Date Added: 2024-06-11T14:25:33.147852
License: Public Domain

Vermont Superior Court
                                                                                                   Filed 01 31 24
                                                                                                    Lamo' e nit

                                    STATE OF VERMONT

SUPERIOR COURT                                                               CIVIL DIVISION
Lamoille Unit

GARRET HIRCHAK,                                                     Docket No. 118-12-20 Lecv

                                                    ))))))))
       Plaintiff

       V.

TYLER HIRCHAK, THOMAS HIRCHAK IH,
and HIRCHAK BROTHERS LLC,
       Defendants

MANUFACTURING SOLUTIONS, INC. and                                      Docket No. 21-CV-1922

                                                    ))))))))
SUNRISE DEVELOPMENT LLC ,
       Plaintiffs

       V.

HIRCHAK BROTHERS LLC,
       Defendant

TYLER HIRCHAK and                                                       Docket No. 23-CV-1511
                                                    )))))))))))))

THOMAS HIRCHAK HI,
       Plaintiffs

       V.

GARRET HIRCHAK,
       Defendant/Third Party Plaintiff

       V.

HIRCHAK GROUP LLC
       Third Party Defendant

                                DECISION ON THE MERITS
       A court trial was held on three consolidated cases involving related persons and entities.
The three persons are Garret, Tyler, and Thomas (hereinafter “Toby”) Hirchak, who are brothers
who took over the business of their father Thomas Hirchak (hereinafter “Tom”) when he retired.
To do so they formed two LLCs: Hirchak Brothers LLC, which owns and operates the business,
and Hirchak Group LLC, which owns related real estate that it leases to Hirchak Brothers LLC.
Garret is also the sole owner of two separate businesses, Manufacturing Solutions, Inc. (MSI)
and Sunrise Development LLC (Sunrise), which are also parties and have provided services to
Hirchak Brothers LLC.
        In 118-12-20 Lecv, Garret initially sought dissolution and winding up of the LLCs, but
has revised his request for relief. He no longer seeks dissolution. His preferred outcome is for his
brothers to acquire his one-third share in Hirchak Brothers LLC, and for him to acquire their
two-thirds share in Hirchak Group LLC. His alternate preference is for his brothers to buy out his
shares in the LLCs. He also claims reimbursement for cash advanced to Hirchak Brothers LLC. 1

           In 21-CV-1922, MSI and Sunrise seek to collect on invoices billed to Brothers LLC.
       In 23-CV-1511, Tyler and Toby seek to dissociate Garret from both LLCs, and seek
disgorgement of profits on a claim of unjust enrichment.
       The trial took place on December 5-8, 2023, with proposed findings of fact and legal
memos and responses filed thereafter. Garret, MSI, and Sunrise are represented by Attorney
Christopher D. Roy. Tyler and Toby and the two LLCs are represented by Attorneys Kevin M.
Henry and Angélina L. Debeaupuis.
      Based on the credible evidence, the court makes the following Findings of Fact and
Conclusions of Law.
                                                Findings of Fact
         Thomas Hirchak (“Tom”) started an auctioneering business on Cadys Falls Road in
Morrisville in the mid-1970s. His three sons, who are the individual parties to these cases, all
worked actively in the business from an early age, working after school and on weekends and in
summers, assisting at personal property and real estate auctions both at the business site in
Morrisville and throughout the state. After graduating from high school in the 1980’s, Tyler and
Toby continued to work full time in the business, and they have never worked elsewhere. Garret
left the family business after high school and went out on his own. He has been quite successful
and now owns businesses including MSI, a manufacturing production company which he
founded 27 years ago and now has 225 employees, and Sunrise, which he owns with his wife and
which owns approximately 30 commercial and industrial real estate properties. He also owns
MSI Realty LLC, a company started in 2020 for sales of real estate.
        Tom’s business, hereinafter THCo, was also successful, and grew to include auto
auctions. It acquired a site in Williston which it used for weekly auto actions while continuing to
use its Morrisville site as well, and it conducted auctions statewide. Tom worked 60-70 hours a
week in all phases of the business as sole owner. Tyler and Toby also worked 50-60 hours a
week, doing whatever needed to be done despite being salaried workers. They had a reasonable
expectation of running the business themselves one day, although terms were not discussed.

1
    Hereinafter the LLCs are referred to as Brothers LLC and Group LLC.

                                                         2
       Tom maintained tight control over business planning and finances. He did not share
accounting, administrative, or expense information with Tyler and Toby. They never had
knowledge of the ups and downs or overall condition of the business, although they had the
general impression that it was successful. Bookkeeping was done by an in-house employee in the
Morrisville office on Cadys Falls Road. Terry Owen first worked in the business as a
bookkeeper. She gradually assumed more and more responsibilities for management and
oversight of business finances in addition to selling real estate and managing auto auctions. In
2012 she married Tom, and in the later years of Tom’s ownership, Terry had become general
manager of the business. She supervised the bookkeeping and managed payroll and insurance
and had upper level accounting oversight.
        After several years of having no involvement in the family business, Garret began
occasionally meeting with Tom to discuss issues of business strategy, but he did not work for or
in the business. No specific steps were ever taken by Tom to involve Tyler or Toby in business or
financial management. They acquired multiple auctioneering licenses and worked hard doing the
work of the business but had no knowledge of its financial condition or expenses. The business
grew and Tom acquired additional real estate holdings, all of which were held in his own name.
No specific plans were ever discussed about business succession or estate planning until 2018.
        The business developed three spheres of auctioneering activity: real estate, commercial,
automobile. Tyler became more involved in real estate and Toby in commercial, and both worked
the auto auctions. They also helped out as needed in all divisions. The three divisions
complemented each other in terms of overall business functioning, as each division helped to
generate business for the others, and there were phases when one was less active and another
more active. They were apparently not managed as separate profit centers. Tom had a real estate
broker’s license so that he could sell properties that did not sell at auction, which also expanded
their business. Tyler acquired an agent’s license and worked under Tom’s broker’s license.
        In 2015, Tom acquired a piece of real estate for $600,000 that was ideal for auctions and
had the potential to expand and improve the business. The Bridge Street property had an
abandoned skating rink and building on it and was zoned for recreational use. To be useful to
THCo, it would need to be rezoned for commercial use and cleared. Tyler and Toby worked hard
to make the property suitable for THCo use. Toby was extremely active in promoting community
support for the needed zoning change by collecting signatures and attending many town
meetings. Tyler and Toby removed concrete walls, cleaned out the building, and groomed and
landscaped the property. The zoning change was successful. Tyler and Toby moved equipment
into the building in anticipation of use of the property for auctions.
        Then in 2017 Tom told them to move the THCo equipment out of the building. He had
sold the property to Garret for $2.7 million. Tyler and Toby later learned from Garret that Tom
wanted Tyler and Toby to receive the sum of 10% of the sale price, $270,000, apparently in
recognition for their work, but Tom did not want to pay it to them directly. Garret said that he
would be paying them each $135,000 over a 20 year period. Tyler and Toby were deeply
disappointed in the loss of this business opportunity on which they had worked so hard. All of

                                                3
this preceded the acquisition of the business by the brothers, and was entirely within the
prerogative of both Tom and Garret, however disappointing to Tyler and Toby.
       In 2017, Tom had the business valued in preparation for future financial planning and
possibly sale of the business. He calculated that he would like to receive an income stream of
$15,000 monthly from the business.
2018
        In 2018, Garret instigated action on the part of Tom on the one hand and Tyler and Toby
on the other toward future planning for the business. Garret essentially engaged in negotiations
with Tom on behalf of all three brothers. Plans took shape for Tom to sell the business and the
real estate to the three brothers. All three were excited about the opportunity to acquire and
continue the family business. Tyler and Toby knew that Garret was a successful businessman and
was financially knowledgeable.
        In July, Garret filed papers to create two LLCs: Hirchak Brothers LLC and Hirchak
Group LLC. Also in July, Garret made a payment of $100,000, apparently to Tom, that later
became part of a down payment on the purchase of the real estate. It is unknown whether Tyler
and Toby knew about this initial payment made by Garret. That same month Garret gave them a
schedule of the annual payments that they would receive from the Bridge Street property over 20
years from 2017, starting in 2019 and ending in 2036. (Exhibit DDD). Garret then made the first
payment to them in the amount of $15,000, a year earlier than specified on the schedule.
        In September of 2018, the brothers agreed on the following general terms:
             •   They would be equal member owners of each of the two LLCs
             •   Brothers LLC would own and run the business, and Group LLC would own the
                 business real estate and lease it to Brothers LLC
             •   None of them would receive distributions simply for being a member, but would
                 only receive compensation for working on behalf of Brothers LLC
             •   Within Brothers LLC, each would be primarily responsible for one of the three
                 divisions: Tyler for real estate, Toby for commercial, and Garret for auto
             •   Each would have equal overall management responsibility.
             •   Each would receive equal compensation. This was important to Garret. Tyler and
                 Toby expected that each of the three would spend comparable time running the
                 division for which he was responsible. Tyler asked Garret how he would manage
                 to devote equal attention to Brothers LLC auto division when he owned and ran
                 two other businesses of his own. He assured Toby that his other businesses were
                 self-sufficient and that he would be able to work for Brothers LLC on an equal
                 basis.2

2
 The LLC Operating Agreement subsequently signed by the brothers provides as follows:
“Other Business by Members: Each member shall agree not to own an interest in, manage or work for another
business, enterprise or endeavor, if such ownership or activities would compete with this LLC’s goals, mission,

                                                         4
             •   Garret told Tyler and Toby that it would be less expensive for the business for his
                 share of compensation to be paid to MSI under an independent contract, rather
                 than paying him personally as a W-2 employee, so that payroll tax could be
                 avoided, and they agreed.
Other than these general parameters, no specific agreements were discussed or made about what
work each was expected to do in exchange for compensation, nor was there discussion about
how financial management would be handled. Tyler and Toby knew almost nothing about the
financial condition of the business, but they had numerous auctioneering licenses and together
approximately 75 years of auctioneering experience. It is unknown what Garret knew about the
THCo business. He was, however, CEO of his own business, MSI, and had considerable
experience in business management. They did not divide responsibilities that way, however.
They planned to work as equal members, each responsible for one of the three divisions.
        On September 14, 2018, the brothers signed identical Operating Agreements for the two
LLCs. On the same day, Garret paid an additional $200,000 toward the real estate and signed a
Purchase and Sales Agreement on behalf of Hirchak Group LLC to buy the real estate from Tom
for $300,000 down plus $2.2 million. Tyler and Toby wanted to contribute their share toward the
$300,000 down payment. While they were not as well off as Garret, they wanted to make equal
investments as equal owners and they knew that they had over $100,000 coming to each of them
from Garret as a result of the Bridge Street matter. They offered to use that toward the down
payment so each would have made equal contributions, but Garret ignored their offer and paid
the whole amount himself. He claims that they did not offer to contribute, but the court finds
credible the testimony of Tyler and Toby that they offered and Garret ignored their offer and
simply went ahead and made the payment on his own.
       There was no discussion of how the $300,000 put in by Garret was to be treated. There
was no agreement or documentation of it as a capital contribution to Group LLC3 and there was
no agreement that it was a loan. Aside from the $300,000, the purchase of the real estate was to
be bank financed. Garret testified at trial that he assumed that he would be repaid for his upfront
contribution, but the evidence is clear that there was no discussion or agreement between the
brothers about this.
        THCo was selling assets only and not business accounts. Moreover, THCo’s bookkeeper
was retiring at the same time as THCo assets were to be sold to Brothers LLC, so there was a
need to set up a whole new set of books and financial systems for Brothers LLC. The brothers
had only a limited period of time in which they had access to THCo’s financial records in
preparation for running the business themselves.

profitability or productivity, or would diminish or impair the member’s ability to provide maximum effort and
performance in managing the business of the LLC.” Exhibits A and 13, Section II (9).
3
  The Operating Agreement provides: “Additional Contributions by Members: The members may agree, from time
to time by unanimous vote, to require the payment of additional capital contributions by the members, on or by a
mutually agreeable date.” Exhibits B and 12, Section IV (2). There was no agreement to require any capital
contributions, and no documentation of an additional capital contribution on the part of Garret.

                                                         5
         Garret proposed that bookkeeping, accounting, human resources, and information
technology (IT) functions for the new business all be done by his company MSI, which would
bill for its services ‘a la carte’ as needed. Similarly, his real estate company, Sunrise, had staff
that could provide ‘a la carte’ property maintenance services. He told the brothers that it would
be more economical to pay for specific services by having each task separately invoiced from his
companies rather than hire employees of Brothers LLC. Tyler and Toby relied on Garret’s
business knowledge and experience and accepted this recommendation.
        MSI does this for other business companies as well. When it does, it presents a specific
written proposal describing exactly what services it will provide, and the rate and basis for
payment for each type of service. Exhibit 28 is a multi-page example that was prepared for a
company that uses MSI services. Nothing like this was prepared for Brothers LLC. Garret claims
that he showed Tyler and Toby Exhibit 17, although Tyler does not remember seeing it. It is a
highly simplified and generalized projection on one-third of a page of how charges might be
calculated and not a proposed schedule of costs for services. Whether or not the document was
shown to them, there was no discussion of rates for services or whether the amounts billed would
include contributions toward MSI’s overhead or profit or simply be the base cost of the expense
of the employee. There was also no comparison of what the cost of ‘a la carte’ services was
likely to be compared to projected costs of hiring employees or obtaining services from other
companies. Tyler and Toby trusted Garret and accepted his representation that it would be less
expensive for Brothers LLC to use ‘a la carte’ services from MSI and Sunrise rather than hire its
own employees or use independent service companies.
       In September of 2018, Brothers LLC purchased the business assets from THCo for
$2,716,909 with no down payment. Brothers LLC executed a note that called for monthly
payments of $15,000, and each of the brothers guaranteed the payments, which were to be made
to Tom’s renamed corporation. Terry Owen continued to work with the brothers for
approximately a year after the transition but she was no longer in charge of financial
management.
        There is no evidence that there was ever a discussion or agreement among the brothers as
to responsibility for financial management. Garret simply took that role. He worked with
Melanie Clark, an employee of his at MSI who provided CFO/executive level services to MSI
customers, to determine what to charge Brothers for various services that would be performed by
MSI and Sunrise employees. Her time was billed to Brothers LLC at her CFO rate, and time for
other MSI employees was billed at various rates for bookkeeping, accounting, IT, and human
resources. These rates included a markup. Whether it was for overhead or profit or a combination
is unclear. There was no review of the rates with Tyler and Toby.
        Melanie Clark, acting as CFO for Brothers LLC, set up the books for the LLC on
Quickbooks and MSI personnel set up related IT for bookkeeping and accounting functions. The
files were on the MSI server in the MSI office. Tyler and Toby did not have access to log in
themselves to look at the financials. MSI functioned as the business manager for Brothers LLC.
Everything was done at MSI offices and not at the Brothers LLC office on Cadys Falls Road.
Garret controlled the checkbook of Brothers LLC, which was also kept at the MSI office. Garret

                                                 6
and Melanie developed the hourly rates to charge for each MSI employee who worked on
Brothers LLC matters. They included a markup over the amount paid to the employee by MSI.
       MSI prepared invoices to be paid by Brothers LLC to MSI and Sunrise, and Garret paid
them or directed that they be paid. Tyler and Toby received cash flow and profit and loss reports.
They had no access to supporting documents to show what was being billed for and at what cost
without physically going to the MSI office during business hours, which was not realistic as they
were working long hours in the field. They were told they could ask questions and get answers.
While cash flow reports were sent to them, they did not know how to read and understand them.
While there were invoices for the amounts billed, the reports they received did not include
descriptions of the work performed. Garret did not offer to explain financial reports to them.
Garret essentially took on sole responsibility for all financial matters without sharing information
with Tyler and Toby, who let this happen but trusted that his interest was the same as theirs.
     At some point in 2018, Brothers LLC made a $10,000 distribution to each of the
members, separate from their regular compensation. How this came about is unknown.
        In December of 2018, there was a shortfall of cash in the business. Garret put in $20,000
to cover it. There is no evidence that he discussed this with Tyler and Toby. There was no
agreement as to how this infusion of money would be treated. That is, there is no documentation
treating it as an additional capital contribution, and no terms were agreed upon to treat it as a
loan, with or without interest or on what terms.
2019
        Garret set up a line of credit through his company Sunrise to help out with periodic
shortages of cash in Brothers LLC. When Brothers LLC was short of cash, Sunrise obtained it
from its line of credit, and then Brothers LLC repaid the advances when cash was available. It is
unknown whether Tyler and Toby knew about this at the time. (It ended in July of 2020.)
       Group LLC closed on the purchase of the business real estate in February. The $300,000
down payment had come from Garret, with the balance financed through bank and VEDA loans.
The real estate consisted of the original Cadys Falls Road business property in Morrisville where
the main office and commercial buildings were located and two properties in Williston that were
used for the weekly auto auctions as well as other auctions.
       Throughout 2019 there were cash flow shortages, although business activity was steady
and comparable to prior years. Melanie Clark decided when to pay what bills, and Garret decided
when to advance cash to Brothers LLC. Garret put in periodic cash infusions totaling $110,000,
again with no agreement with Tyler and Toby as to how they would be handled. 4 Some was paid
back from Brothers LLC funds, leaving $75,430 unreimbursed. Repayments were for the amount
advanced only, without interest.

4
 The advances came from MSI funds. The parties have agreed to characterize them all as having been made by
Garret.

                                                       7
        Tyler and Toby continued to receive profit and loss reports but did not know how to
interpret them. They also saw some MSI invoices and Toby thought the cost was high, but
Garret had said it was cheaper than other ways of getting services and Toby did not question the
impact on the bottom line.
        In March of 2019, Garret and Melanie Clark reviewed the amounts MSI and Sunrise were
billing Brothers LLC, and decided to reduce their billing rates. They made the changes
retroactive to January 1, 2019. Tyler and Toby were not involved in this process. They learned
about it in July, after it happened.
       Overall, Garret and Melanie Clark were managing the funds of MSI, Sunrise, and
Brothers LLC without input from Tyler and Toby.
        Toby and Tyler were each working full time as they always had, each working
approximately 50-60 hours per week. They each used a vehicle provided by the business. Garret
was responsible for the auto auctions and traveled to Williston for the weekly auctions plus 1 or
2 other times per week. An MSI employee was managing the auto auction under an independent
contract that was billed to Brothers LLC. (There had been an auto auction manager working
under Tom when he owned the business.)
        In addition to MSI billing Brothers LLC for Garret’s compensation, Garret had MSI bill
Brothers LLC for a fixed weekly amount for an automobile allowance for his travel to and from
Williston. He considered that this was comparable to the benefit that Toby and Tyler were
receiving by driving company cars. The allowance was determined by Garret based on an
estimate of travel to Williston three times per week. There is no evidence that Toby and Tyler
agreed to this. If it had been discussed, they might have agreed to that arrangement or another
one for the purpose, such as a business vehicle for Garret on the same terms as Tyler and Toby
each had.
        In June-July, Toby requested specific contract labor reports from MSI, and asked that it
be “as granular as possible.” He saw that Brothers LLC was paying a significant amount for
accounting services from MSI. He knew that under his father, bookkeeping for the business had
been done by an in-house employee who did the work in less than 40 hours per week.
        In August or September, Tyler heard that there was a money problem. He was asked to
put in money, and wanted to know how much to put in. He did not have access to the financial
software. Although he could have gone to MSI to log in, he had no time to do that during MSI
business hours. He was concerned about MSI invoices but was assured that they were cheaper
than hiring employees.
       In October, Garret suspended paying MSI invoices billed to Brothers LLC due to cash
flow problems. There is no evidence that he notified Tyler and Toby when he did this. Some
invoices were later paid.
        Terry Owen left working with Brothers LLC toward the end of 2019, having been there a
year after the turnover, and Toby or Tyler suggested that since they would be taking on her role
and the business would not have the expense of her salary, Toby and Tyler’s compensation be

                                                8
increased by sharing what she had been paid. There is no evidence that Garret brought to their
attention that Brothers LLC had unpaid bills to MSI, and that an alternative would be to use the
money previously spent on Terry Owen’s salary to become current on unpaid bills and/or
replenish cash. There was no thoughtful analysis or conversation among the brothers about the
wisdom of increasing their compensation at this time when there were cash flow problems and
invoices were unpaid. Tyler did not understand how bad it was. Garret’s response to the proposal
was to say that he would take the same amount as the others, which is what happened. This
increase in compensation to all three did not help the financial condition of Brothers LLC.
        Toby was surprised to learn from Garret that the business was losing money and that
there was no cash. He began asking questions about financial matters and the condition of the
business. He did not get much information from Garret. At one point when Toby was trying with
difficulty to understand a report, Garret simply said, “you should go find someone to help you.”
        Tyler wanted to understand why the business was in financial trouble, which surprised
him based on the work he knew they were doing. Garret told Tyler and Toby that they were free
to ask questions of MSI staff at any time, but he did not engage in discussion with them or
provide help in understanding the content or meaning of the financial reports that were
distributed.
2020
        In early 2020, Toby and Tyler were asking more questions about the state of finances and
not getting answers. Then the Covid pandemic hit and paralyzed the auction business, as people
could not attend events where others congregated. This was a setback for the business, which
survived it. They shifted to holding auctions that included remote participation and have
continued that practice to the present, which has resulted in increased numbers of participants.
        At some point Tyler and Toby questioned whether Garret was pulling his weight. They
observed that he attended meetings on Monday with them and auto auction meetings on Tuesday
in Williston and attended the weekly auctions on Friday or Saturday but did not know if he spent
additional time on behalf of the business. He operated out of his office at MSI. Brothers LLC
was being billed by MSI for an auto manager in Williston. While there had also been a paid auto
manager employee in their father’s time, Tom had been very hands-on himself. They questioned
whether the MSI employee was the one actually doing the work that their father had done and
that they had expected Garret would do. The trial evidence does not resolve this issue one way or
another. At some unknown time during Garret’s period of responsibility for the auto division,
Garret, working with the auto manager and Tyler and Toby, modified the method for
commissions from auto auctions, resulting in increased commissions which was a financial
benefit to the business. The level of impact is unknown, but the business continues to use this
method.
         Tyler, who had a real estate agent’s license but not a broker’s license, was looking for a
broker with whom to associate for real estate sales. Having a broker in the business would allow
it to sell real estate properties that did not sell at auction. Tom had been the broker for THCo but
was not willing to serve as the broker for Brothers LLC. Garret said that an MSI employee

                                                 9
named Conrad was considering getting his broker’s license. Thus they made what Tyler thought
was a plan that when Conrad got his license he would work for Brothers LLC. Then Garret’s
attorney notified Tyler that Garret was going to start a new real estate business himself called
MSI Realty, and that Conrad would be working for it rather than for Brothers LLC. Tyler was
surprised that Garret would start a business that might be in competition with the real estate
division of Brothers LLC and employ Conrad in it. He no longer trusted Garret.
        The evidence is clear that up to this point, Garret had been solely in charge of all
financial matters and decisions. He was acting in the role of CEO without input from Tyler and
Toby, and using his MSI staff for Brothers LLC work, specifically having Melanie Clark
function as CFO. MSI was billing Brothers LLC for such services. Tyler and Toby had raised no
objections and allowed this to happen. They were receiving financial summaries with limited
information and told that they could ask questions of MSI staff. Because of their inexperience in
management and financial responsibility, they had difficulty understanding the reports and
knowing what questions to ask or what information to seek. This contributed to their
acquiescence in allowing Garret to function as a CEO, but they also trusted that his interests
were aligned with theirs. They essentially ceded that role to him and it was a comfortable and
familiar role for him as he was CEO of his own business. In such a role, it is not uncommon for
compensation to not be measured by time spent but by impact on the organization. Garret and
Melanie Clark were providing CEO and CFO services to Brothers LLC, without specific
agreement from Tyler and Toby on the decisions they made. This continued until early 2020.
        In March, Tyler and Toby, having begun to want more information about the financial
condition of the business, wanted to move the financial records kept at the MSI office to the
Cadys Falls Road office, as provided for in the Operating Agreement. Garret resisted. Garret’s
response was that Tyler and Toby should come up with a financial plan. When Toby provided
one, Garret said he needed more details and continued to retain the records. In May, without
having provided access to the financial records, Garret proposed that the others buy him out for
$650,000. The three brothers had discussions about ending their arrangement, but Toby and Tyler
did not have an understanding about the health or value or financial operations of the business
and wanted to see the detailed records. Garret still would not provide financial records, claiming
again that first they needed to present a plan.
        In June, Tyler and Toby wanted a face-to-face discussion of finances. Garret wanted a
written explanation of what they believed the problems were before he would agree to meet.
Tyler and Toby made a formal resolution for a members’ meeting. Garret said he would not
attend because he had not had enough time to review the agenda. Tyler and Toby postponed the
meeting to allow additional time. Garret said he could not attend. They postponed it again so that
he could. Garret sent an email saying that he would not attend and that he was going to involve
his lawyer.
       There was insufficient money to make the $15,000 loan payment to Tom in July, and
Garret caused MSI to make it. In late July, Garret made another proposal to be bought out, still
not providing the financial records. At about the same time, Garret purchased a parcel in

                                                10
Williston that adjoined the Group LLC auction property. A few days later he proposed to acquire
the auto division of Brothers LLC and the Williston real estate of Group LLC.
        Garret testified that he intended all the cash advances he made to Brothers LLC to be
loans, but he acknowledges that there was no documentation establishing a loan agreement or
interest obligation in connection with them. There is no evidence that Tyler and Toby even knew
about many of these advances, or the need for them, until mid or late 2020, nor were they asked
to participate in making them. There were no loan agreements or agreements about how the
advances would be handled. Some were repaid partially or fully, and without interest. At some
point when Garret told Tyler and Toby that they had to put money into the business, they put in
$125,000, again with no discussion or arrangements as to how it would be treated, just as was the
case with Garret’s advances. Tyler and Toby have been reimbursed, apparently without interest.
In August, Garret made the last of his periodic infusions of cash into Brothers LLC.
       In August, Tyler and Toby, having tried unsuccessfully since March to get the financial
records, filed suit through counsel to have the books moved to the office of the company on
Cadys Falls Road as called for in the Operating Agreement.
        The brothers stipulated to a settlement of the lawsuit: the books were to be moved to the
Cadys Falls Road office and the brothers agreed to have a third party inspection done of the
books, as Garret wanted a ’clean bill of health’ over the status of the records that had been solely
in his hands. The stipulation stated that Garret would continue to be an independent contractor,
but was silent as to a contract amount or any definition of the work for which compensation
would be paid. Garret interpreted this to mean that his equal compensation would continue, and
MSI continued to bill Brothers LLC for Garret’s compensation.
        At the end of August, before the books were moved to Cadys Falls Road, Garret made
another proposal to end their relationship. Tyler and Toby still did not have enough information
to evaluate any financial proposal.
        In September the books were transferred to the Cadys Falls Road office. Toby, his wife
Jen, and Terry worked on understanding the content of the financial records. Tyler and Toby
began to make new arrangements for services previously done by MSI and Sunrise. They hired
an in-house bookkeeper. The first one they hired turned out not to be up to the task. They had
invited Garret to participate in the interview, but he had refused. In October they stopped using
services from MSI and Sunrise. MSI continued to send invoices for compensation and an
automobile allowance for Garret.
        Tyler and Toby suspected that Garret’s priority was his own company and not Brothers
LLC, and that he had been having his MSI employees do his work and billing Brothers LLC for
it in addition to billing for equal compensation. They decided that each should keep track of their
hours worked and that the compensation each received for work should be at an hourly rate.
They proposed this, and Garret refused. Tyler and Toby began keeping track of hours worked.
Garret did not.

                                                 11
        In December, Garret filed the first of the three lawsuits before the court, seeking
dissolution and winding up of Brothers LLC. (He has since withdrawn that request.)
2021
        In January, Tyler and Toby removed Garret as an employee of Brothers LLC. He
continued as a member and was welcome to attend members’ meetings, which he did for a while.
As of the end of January 2021, the total amount of unpaid invoices from MSI for Garret’s
compensation, suspended since October 2019 by Garret, was $213,591.84.
        Tyler and Toby assumed overall management of the business. Garret continued to cause
MSI to send invoices for equal compensation. Tyler and Toby did not consider them justified as
he was no longer working in the business, and they have not paid them. Terry Owen came back
for a period of time to organize financial practices and to help Tyler and Toby as they took over
all functions.
        In April, the parties received the report prepared by MSI’s accountant. He concluded that
Garret’s compensation was in line with Tyler and Toby’s, and that Garret’s automobile allowance
was comparable in value to the vehicle benefits received by Tyler and Toby. He also concluded
that the rates charged by MSI and Sunrise for their personnel were reasonably in line with market
rates for similar services, although he could not evaluate whether the number of hours spent on
various tasks was reasonable. In testimony, the accountant acknowledged that with respect to
rates, he did not know ‘who had made agreements to anything.’
        Tyler and Toby ask the court to disregard the accountant’s conclusion as lacking
credibility because (1) the preparer did not research source data showing what the personnel who
performed the services were actually paid even though the firm had the data since it is MSI’s
accountant, and (2) while charges were supported by invoices, the specific work done was not
identified in the invoices. Tyler and Toby apparently believe that the report is insufficient to
provide Garret with a ‘clean bill of health.’ They note that it was prepared by the accounting firm
that Garret uses, suggesting that it reflects bias.
        There is insufficient evidence to show that the billings are inflated. There is no evidence
that services were not performed, and the bills may well represent what some businesses are
willing to pay for such services in the market. That does not mean that the functions could not be
done at less cost to Brothers LLC. Later, under Tyler and Toby, they were done at much less cost.
         The problem with the bills is that the member/managers of Brothers LLC, i.e. the three
brothers acting on behalf of the LLC, never agreed to the rates. Garret and his MSI staff set the
rates, created the bills, and paid them from the Brothers LLC funds which they controlled in-
house at MSI, all to the financial benefit of MSI. While Tyler and Toby apparently ceded the
authority for this to happen during the first year and a half, by March 2020 they no longer did.
They justifiably sought access to the books so they could review the expenses to address chronic
cash shortfalls, and were denied that access by Garret, the very person who was setting the rates,
creating the bills, and causing them to be paid into his own company.

                                                 12
2021-2023
        Tyler and Toby have exercised full responsibility for the business since taking over in
January of 2021. They supervise an employee manager of the auto division and conduct the auto
auctions themselves. Management expenses are considerably less than when MSI managed the
business. They have an in-house bookkeeper, Laura, who does bookkeeping, human relations,
real estate, and general office work within a 40 hour work week. Jen, Toby’s wife, works 20-30
hours per week on an hourly basis overseeing Laura and doing payroll, taxes, 401(k)
administrative work, and general financial oversight. Bookkeeping costs $50,000 per year less
than it did when it was done by MSI.
        Brothers LLC has 12 regular employees, including Tyler and Toby, and employs several
people part-time in the commercial and auto aspects of the business. In sum, Tyler and Toby have
returned to their father’s model of running the business with full and part-time employees rather
than purchasing services. The business has healthy cash flow, but with no payments being made
on the unpaid and disputed amounts of Garret’s cash advances and MSI and Sunrise invoices.
        Garret has not made any payments to Tyler and Toby arising from the Bridge Street
matter since the first one paid in 2018. It is unknown whether Tyler and Toby have any
enforceable legal right to that money. They do not seem to be aware of any documentation other
than the schedule they were given. Garret acknowledges that he has not made any payments
since the first one. He does not deny the obligation.
Value of Brothers LLC
        The business was valued by experts on behalf of both Garret and Tyler and Toby. Both
valued it as of December 31, 2022 because reliable 2023 year-end figures were not available to
value it closer to trial. Both experts valued it at “fair value” as opposed to fair market value in
order to value it as a going concern that generates income for the owners rather than as a
business to be liquidated or placed in the marketplace for sale. Both agreed that the appropriate
method of valuation is thus the income approach. The asset approach is inapplicable since the
business’s debt exceeds its assets. The market approach is also inapplicable, because since it is
being operated by owners for their own income benefit, there is no need to consider adjustments
for circumstances such as a partial interest, lack of control, and lack of marketability or liquidity.
       Although they agree on many aspects of valuation methodology using the income
approach, they arrived at different opinions of value. Garret’s expert, Mr. Beliveau, valued the
business at $950,000, with Garret’s share as $316,000. Tyler and Toby’s expert, Mr. Small,
valued it at $147,000 with Garret’s share at $50,000.
        The primary difference between the two is that Mr. Beliveau adjusted owners’ actual
compensation downward to a level of compensation that is based on Bureau of Labor Statistics
data indicating that the average compensation in the auction house industry is 4% of revenues.
This data derives from companies all across the country and of varying sizes. Mr. Small
considered such an adjustment unwarranted because in his opinion the actual unadjusted

                                                  13
compensation is a reasonable amount for the size and type of business in Vermont, regardless of
what the statistics are for auctioneering businesses nationally with a wide range of sizes.
        There are other less significant differences in their respective applications of the income
approach. Each treated debt differently, although the impact of that difference is minor. Mr.
Beliveau disregarded the experience of 2019 and 2020 because: those were the start up years,
there were then three owners rather than two, and many functions were outsourced to MSI and
Sunrise rather than being done by employees as they are now. Mr. Small did not disregard those
early years as he considered that business operations were not all that different then, although he
gave them less weight than 2021 and 2022 when Tyler and Toby were operating the business
without outsourcing. Mr. Beliveau assumed growth of the business, whereas Mr. Small did not.
        The court finds persuasive Mr. Small’s opinion that it is unnecessary to make a
downward adjustment in actual owner compensation just because Bureau of Labor statistics
show a different level of compensation over a large number of auctioneering businesses of
different sizes and in different locales throughout the country. The court finds Mr. Small’s
opinion that the level of compensation paid to Tyler and Toby ($154,500) is reasonable for small
business owners in Vermont based on his review of salary data for Vermont maintained by the
Vermont Department of Labor. Mr. Beliveau’s April report on MSI and Sunrise invoices also
supports this level of compensation for business managers.
        Mr. Small’s testimony, which the court finds credible, was that both experts used
essentially the same valuation method, and that (a) without the downward adjustment for
compensation that Mr. Beliveau applied, Mr. Beliveau’s overall business value would have been
$298,000 and (b) that the two values thus frame a range of $298,000 to $147,000 which
represents an acceptable and reasonable range for defining the value of the business. The court
finds this opinion testimony is grounded in credible evidence. Accordingly, the court finds that
the value of Brothers LLC for purposes of this case is $222,500, which is both the mean and
average of values within that range. Garret’s equity interest is thus rounded to $75,000.
Value of Group LLC
        The parties agree that the value of Garret’s one-third interest in Group LLC is $300,000.
They do not agree on the effect of Garret’s initial $300,000 cash payment. Garret seeks
reimbursement of the full amount, plus interest at the legal 12% rate. Toby and Tyler asked in
testimony for the court to determine the status of that $300,000 and consequences for the parties.
In their post-hearing filings, their attorney has argued that it should be treated as capital.
        Garret acknowledges that the $300,000 Garret paid to Tom that was the downpayment on
the real estate was not agreed upon by the members to be a capital contribution. He testified that
he made it with the expectation that he would be repaid, but while that may have been in his own
mind, it was not communicated to the others and the evidence shows that no agreements were
made that it was a loan. This was a one-time downpayment toward the real estate to be purchased
by brothers from their father, made at the time of the contract to purchase the real estate, unlike
the cash advances made periodically by all three members of Brothers LLC to address cash flow
shortages during business operations.

                                                14
        The court finds that it was neither a capital contribution nor a loan. It was simply money
paid by Garret unilaterally. It is comparable to money paid by a family member for a child or
sibling’s downpayment on a house or car or business or educational opportunity without any
agreement to treat it as a either a gift or loan: money simply paid voluntarily with no agreement
to a legally enforceable right to reimbursement or other consequences.
                                       Conclusions of Law
Garret’s claims vs Brothers LLC
        Garret claims oppression on the part of Tyler and Toby in that they withheld
compensation to him, denied payment of invoices to his companies, declined to reimburse him
for cash advances, and terminated his employment. He claims that the agreement that he would
receive equal compensation, albeit in the form of independent contract payments, was central to
his decision to enter into the Brothers LLC business with them, and that they have taken
advantage of his minority position in an oppressive manner pursuant to 11 V.S.A. § 4101 (a)(5).
Garret does not seek dissolution, but seeks reimbursement of funds advanced, payment of
compensation and invoices, and an equitable remedy of either being bought out of Brothers LLC
and acquiring Group LLC, or being bought out of both LLCs. He argues that Brothers LLC is
only able to have current stability because of the unpaid debts to him and his companies, and that
he would never have agreed to be a member but for the representation that he would receive
equal compensation.
       Claim for Compensation
       Garret himself suspended payments to MSI for his contract compensation and automobile
allowance in October of 2019. He seeks payment plus interest on unpaid invoices. Any recovery
on these claims would be payable to MSI (not Garret personally) based on the independent
contract arrangement between the parties. Nonetheless, whether MSI/Garret is entitled to these
payments is dependent on the agreement between the members as to compensation.

        The brothers agreed in organizing Brothers LLC that no member would be paid for
simply being a member (i.e., attending meetings and doing general oversight over the entity), but
that each would be responsible for one of the three divisions of business activity and paid equal
compensation. They did not become any more specific than that, and each had different
expectations about what that meant.
        Tyler and Toby believed it meant that each would put in roughly equivalent working
hours. This is demonstrated by Tyler asking Garret whether he would have the time to devote to
Brothers LLC while he was running two separate significant businesses. Garret assured him that
he would. Garret, on the other hand, appears to have believed that his equal compensation was
based on him exercising responsibility for the division and was not dependent on hours worked,
and that furthermore the level was guaranteed based on the fact that he would not have entered
the business at all unless he was assured that he would be paid equally. There is no evidence that
the parties ever agreed to either the Tyler/Toby or the Garret expectation.
        Tyler and Toby believe that Garret did not live up to his bargain because he did not put in
the same amount of time as they did and he used the business to feather his own nest. The
evidence shows that up until January of 2021, Garret was exercising his role in the business as
the person responsible for the auto division, and that he filled the need for financial management
                                                15
as well, especially during the first year and a half during which time Tyler and Toby voluntarily
left all management decisions up to him. Nonetheless, there was no agreement, written or
otherwise, that the pattern of equal compensation would be permanent or would survive changes
in business practices, organization, and responsibilities over time. The agreement was clearly that
payment was to be compensation for work performed, and not for member status or exercise of
membership functions. In January of 2021, work roles and the terms of compensation changed.
The court concludes that Garret earned the contract amount of compensation payable to MSI and
unpaid from October 2019 through January 2021. The issue of whether interest is due on unpaid
invoices is addressed in the section below on MSI’s claims against Brothers LLC.
       Garret also claims reimbursement for the MSI bills for an automobile allowance that are
unpaid. Again, if allowed, these would be payable to MSI, but because they relate to his
employment status, the issue is addressed here. There is no evidence that Garret ever raised with
Tyler and Toby whether he should receive an automobile allowance to equalize the benefit of
company vehicles they were driving. The evidence does not show that the issue was ever
discussed or any agreement made. It appears that Garret unilaterally determined that he should
have such an allowance, determined what he thought it should be based on his own calculations,
and caused MSI to bill Brothers LLC for it. Since he was controlling the books of Brothers LLC
and the periodic reports did not have all invoices attached, Tyler and Toby apparently did not
become aware of it. In short, while it might have been a reasonable thing to agree upon, there is
no evidence that the members ever agreed to that expense. Garret’s claim that MSI is entitled to
unpaid invoices for an automobile allowance for Garret is denied.
        Cash advances
        Garret claims that he (individually or through MSI) is entitled to reimbursement for cash
advances made by MSI or him to Brothers LLC. He claims that they should be treated as loans
and furthermore he claims interest at the legal rate of 12%.
      The evidence supports the conclusion that Garret used MSI funds within his control to
advance the following amounts to Brothers LLC to meet cash needs:5
        12/7/18           $20,000
        3/12/19            40,000
        7/3/19             50,000
        7/26/19            20,000
                          130,000           Unrepaid portion:          95,430
        1/10/20           $20,000                 “                    20,000
        2/10/20           100,000                 “                   100,000
        7/15/20            15,000                 “                    15,000 (monthly payment due Tom)
        8/14/20            30,000                 “                    30,000

        Total unrepaid cash advances                                 $260,430

       This was part of a pattern in which there were other occasions when Garret advanced
funds to cover cash needs, and Brothers LLC repaid the advances without interest. As the

5
  Garret also claims roughly $12,000 in reimbursement for business expenses charged to credit cards, but although
they are listed on Exhibit 15, there was insufficient evidence to support those expenses as Brothers LLC expenses.

                                                        16
findings show, it is not known whether Tyler and Toby knew that this was happening in the early
months. They became aware of it at some point, and advanced funds themselves to cover cash
needs, and were repaid. The evidence shows that when cash advances were made by any of the
members, there was no calculation or payment of interest upon repayment.6 There is no evidence
that there was ever any agreement between the brothers to treat these as interest bearing loans.
The evidence supports a tacit mutual agreement to waive interest.

        There is also no evidence that these advances were ever intended to be capital
investments on the part of Garret. There is no documentation to support such a contention, and it
is inconsistent with the pattern of treatment of periodic advances of cash from not only Garret
but Tyler and Toby. The court concludes that they were neither recognized by the members as
interest bearing loans, nor capital contributions. They were treated as temporary loans from a
member to be repaid, with interest waived, at time of availability of cash resources as part of the
ebb and flow of availability of cash in the LLC.

        Brothers LLC would be unjustly enriched if these advances were not repaid up through
February 2020. There is no evidence that these funds were not needed, and the evidence shows
that they benefited the business by keeping it afloat. The advances were made during the first
year when there were one-time startup costs (setting up Quickbooks and accounting and related
IT), and during early 2020 when the business was dealing with the inability to conduct auctions
due to Covid. Thus, Garret is entitled to repayment of these sums from Brothers LLC.

        However, the situation changed significantly after March 2020. Tyler and Toby sought to
have the books and records located at the business office at Cady Falls Road in Morrisville. The
Operating Agreement provided that is where they were to be kept. Garret was keeping them
instead at his office at MSI, and actively refused to move them to Cady Falls Road. He was
keeping them in his own office in a separate business in which Toby and Tyler had no interest,
and he was exercising unilateral control over them. Tyler and Toby had no access to them, and
thus no ability to analyze the expenses in order to address the cash shortfall problem. At this
point, Garret’s refusal to return the records frustrated the ability of the members to understand
the finances of the business in order to manage it responsibly. Despite multiple requests and
accommodations to his schedule, Garret refused to return the records and refused to meet or
attend a members’ meeting to address the financial condition of Brothers LLC.

        In July, he made the monthly $15,000 to Tom, apparently because of a shortfall of cash.
There is no evidence that he asked Tyler and Toby to advance $5,000 each so that Brothers LLC
could make this payment. Garret, like Tyler and Toby, was obligated to make the payment
personally under the guaranty each had signed to pay Tom if Brothers LLC did not do so. In
August Garret made a cash infusion of $30,000. At that point he had refused to provide the
books for a period of 5 months, and he had made several offers to be bought out without
allowing Tyler and Toby access to the books so that they could determine if his offers were
reasonable. The evidence does not support his claim to repayment of the total of $45,000 paid by
Garret in July and August of 2020, as he apparently did not provide them the opportunity to
advance cash, and certainly had denied them the opportunity to see the books so they could

6
    In contrast, when the Sunrise line of credit was used, interest was charged and paid to Union Bank.

                                                            17
determine if they could trim expenses, many of which were being paid to Garret’s personal
company.

       As to interest, there was no agreement that interest would accrue, and no reasonable
expectation at the time the advances were made that they would accrue interest. While 11 V.S.A.
§ 4060 (d) treats advancements as a loan subject to the accrual of interest, the financial records of
Brothers LLC do not show that interest was charged despite the legal right to do so. There is no
evidence of any agreement as to an interest rate. The course of dealing between the three
members was that members were reimbursed for advancements when and to the extent that cash
was available to do so and interest was waived. Therefore, as to the pre-March 2020 cash
advances, the request for interest from the date of the advancements is denied.

       Thus, Garret is entitled to $215,430, which is the amount he had advanced up until the
time he obstructed the ability of Brothers LLC to conduct business by denying access to its
books and by failing to attend properly noticed members’ meetings.

        Termination of Employment
        The members did not agree on a duration for the compensation terms they initially agreed
upon. It is predictable that adjustments would need to be made over time in the operations of a
new small business. With no specific agreed-upon terms in place, Garret had no reasonable basis
for expecting that his employment status and compensation would continue indefinitely. Tyler
and Toby followed appropriate procedure under the Operating Agreement in terminating his
employment. Once his employment was terminated, there was no basis for continuing
compensation to Garret. Therefore he is not entitled to compensation after January of 2021.

        Oppression and Claim for Equitable Relief
        Garret has not proved his claim for equitable relief on grounds of oppression. He claims
that he was “frozen out” of the business by Tyler and Toby, but it was he who refused to attend
member meetings to discuss the operation of the business and refused to provide access to the
financial records to the other members. While he is entitled to compensation through January
2021 and repayment for cash advances until March of 2020, oppressive conduct toward him on
the part of Tyler and Toby, the other members, has not been shown. He had no reasonable
expectation to continue to receive compensation in the same amount as Tyler and Toby
indefinitely as there was no agreement to long-term employment and it was a new business,
which might reasonably be expected to require adjustments from initial plans.

        While it may have been in his mind that equal compensation was the reason he was
willing to join Brothers LLC, the reality was that the only actual agreement between the
members was that compensation was payable for work performed. The LLC had the authority to
make changes in work allocation under the Operating Agreement and thus in compensation. The
fact that it did so does not constitute oppression. Moreover, he was not terminated until after he
himself had sued to dissolve the LLC.

       Thus, Garret’s claim for restructuring of the LLCs on the basis of oppression is denied.

                                                 18
Tyler & Toby’s claims against Garret for Dissociation
        Tyler and Toby seek dissociation of Garret from both LLCs on grounds of breach of
fiduciary duty. Accordingly, they seek the right to buy out Garret’s interests in both LLCs.

Brothers LLC Claim of Breach of Fiduciary Duty
       Tyler and Toby claim that Garret breached his fiduciary duty when he usurped the
opportunity of the auction business to acquire the Bridge Street property. At that time, the
auction business was still fully in the hands of Tom. Brothers LLC was not yet even in the
process of being formed. At that time Garret did not owe any fiduciary duties to Tyler and Toby.
        Once Brothers LLC was formed, each of the brothers had fiduciary duties as required by
statute and the terms of their Operating Agreement. Relevant to this case are the following:
11 V.S.A. Chapter 25, “Limited Liability Companies,”
       §4059: General standards of member’s and manager’s conduct
       (a) The only fiduciary duties a member owes to a member-managed limited
       liability company and its other members are the duty of loyalty and the duty of
       care imposed by subsections (b) and (c) of this section.
       (b) A member's duty of loyalty to a member-managed limited liability company
       and its other members is limited to the following:
                (1) to account to the company and to hold as trustee for it any property,
       profit, or benefit derived by the member in the conduct or winding up of the
       company's business or derived from a use by the member of the company's
       property, including the appropriation of the company's opportunity;
                (2) to refrain from dealing with the company in the conduct or winding up
       of the company's business as or on behalf of a party having an interest adverse to
       the company; and
                (3) to refrain from competing with the company in the conduct of the
       company's business before the dissolution of the company.
       (c) A member's duty of care to a member-managed limited liability company and
       its other members in the conduct of and winding up of the company's business is
       limited to refrain from engaging in grossly negligent or reckless conduct, or a
       knowing violation of the law.
       (d) A member shall discharge the duties to a member-managed limited liability
       company and its other members under this chapter or under the operating
       agreement and exercise any rights consistently with the obligation of good faith
       and fair dealing.
       (e) A member of a member-managed limited liability company does not violate a
       duty or obligation under this chapter or under the operating agreement merely
       because the member's conduct furthers the member's own interest.

                                               19
       §4058: Information rights
       (a) In a member-managed limited liability company, each member has the right,
       subject to such reasonable standards, including standards governing what
       information and documents are to be furnished and at what time and location, as
       may be set forth in the articles of organization, an operating agreement, or
       otherwise established by the members to obtain from the company from time to
       time and upon reasonable demand for any purpose reasonably related to the
       member's interest as a member of the limited liability company during the period
       in which he or she was a member:
               (1) information concerning the company's business or affairs reasonably
       required for the proper exercise of the member's rights and duties under the
       operating agreement or this chapter; and
               (2) other information concerning the company's business or affairs, except
       to the extent the demand or the information demanded is unreasonable or
       otherwise improper under the circumstances.

Operating Agreement, Hirchak Brothers LLC (Exhibits A and 13)
      II. Membership Provisions
      (9) Other Business by Members: Each member shall agree not to own an
      interest in, manage or work for another business, enterprise or endeavor, if
      such ownership or activities would compete with this LLC’s business
      goals, mission, profitability or productivity, or would diminish or impair
      the member’s ability to provide maximum effort and performance in
      managing the business of this LLC.
      VII. General Provisions
      (2) Records: The LLC shall keep at its principal business address a copy of all
      proceedings of membership meetings, as well as books of account of the LLC’s
      financial transactions.

         Vermont case law regarding small business corporations is pertinent to LLCs: “The
relationship of a director-stockholder to his corporation binds him to use the utmost good faith
and loyalty for the furtherance and advancement of the interest of that corporation. He is not
permitted to make profit for himself in the transaction of the business of the corporation, against
its interest.” Lash v. Lash Furniture Co. of Barre, 130 Vt. 517, 522, (1972) (citation omitted);
J.A. Morrissey, Inc. v. Smejkal, 2010 VT 66 ¶ 11.

        Tyler and Toby claim that Garret breached his fiduciary duty to the LLC by taking
advantage of their trust in him in connection with billings from MSI and Sunrise. They claim that
he controlled the profit his personal businesses would make by providing services to Brothers
LLC in which he imposed higher costs on the LLC than could be justified. They claim that his
actions, such as agreeing to a member distribution to all at the end of 2019 when the LLC had
cash flow problems, purchasing adjoining property in Williston personally, refusing to turn over
the books, and continuing to put cash into the business to build up debt to himself show that he
was working to acquire leverage over Tyler and Toby by putting the LLC in a debt position they
could not afford so that he could acquire the auction business and Williston real estate for
himself. For his part, Garret claims that Tyler and Toby were never provided with misleading
                                                20
information and that information was always available to them but they chose to be “willfully
ignorant” and not become educated about the finances of the business for which they were
responsible.
      The court finds that Garret violated his fiduciary duty to Brothers LLC in the following
two ways.
         (1) Garret’s conduct regarding Brothers LLC vis-à-vis MSI/Sunrise
        There appears to be no per se violation of the duty of loyalty and good faith and fair
dealing in Garret’s initial suggestion that the new LLC obtain ‘a la carte’ services from MSI and
Sunrise rather than hiring in-house employees for certain functions. For a totally new business
organization, it would make sense to have start-up organizational work, such as setting up
accounting books and financial records, done by experienced, competent personnel. The fact that
the LLC might purchase services from Garret’s businesses does not, by itself, constitute a
violation, as §4059 (e) does not prohibit all conduct that might involve a benefit to a member.
However, Tyler and Toby’s initial acceptance of Garret’s suggestion does not absolve Garret of
all responsibility under his duty of loyalty. The proposal was made on the basis of the highly
generalized representation that it would be cheaper for the LLC. Tyler and Toby did not give
Garret carte blanche to then set terms, without clear agreement, that benefited his businesses.
         Garret’s duty of loyalty required him to be absolutely transparent in financial transactions
between the new LLC and MSI and Sunrise. His duty required him to provide the type of full
disclosure of proposed rates and services to Tyler and Toby that he did to his independent
customers. Exhibit 28 is a multi-page document laying out specific terms for work to be
performed at specific rates. If Garret or MSI had prepared such a proposal it would have enabled
the brothers to make an informed decision up front about whether to pay such rates. They might
even have included a component for profit. It also would have allowed them to evaluate on an
ongoing basis whether the LLC could afford the services at the rates charged or whether there
were other ways of satisfying the functions at less cost, as they ultimately did. Instead, Garret
claims he showed them a projection of what rates might look like. If he did it was not specific
and was not actually used as the basis for an agreement as to services and rates. He then took
over full control of establishing rates, generating billings from MSI and Sunrise, and paying the
bills from LLC funds over which he maintained sole control.
         Tyler and Toby claim that the rates are inflated, and that Garret should not have included
a component for overhead or profit. If the LLC members, including Tyler and Toby, had
negotiated specific explicit contracts with MSI and Sunrise, the issue of overhead or profit could
have been sorted out.7 Overall, Tyler and Toby have not proved that the rates were inflated
compared to rates charged in the marketplace, but neither has Garret proved that they are not.
The rates might simply have been at an expense level higher than the LLC needed. However,
Garret’s failure to make an explicit agreement as to rates and his lack of transparency to Tyler
and Toby about the basis for billings and his subsequent complete control over the amounts
billed to and paid by the LLC to his personal corporations constitute self-dealing and a violation
of his fiduciary duty of loyalty to the LLC as well as a lack of good faith and fair dealing.
Garret’s conduct led to a complete loss of trust on the part of Tyler and Toby in Garret’s loyalty

7
 As one of the brother’s testified, a profit component could have been acceptable if the overall result was that the
cost to the LLC was less than hiring employees.

                                                          21
to Brothers LLC and makes it impossible for the three of them to continue the business of the
LLC together.
       (2) Garret’s conduct relating to financial records
        The Operating Agreement is explicit that the financial records of the LLC were required
to be kept at the LLC’s principal place of business, which was the office at Cadys Falls Road. 11
V.S.A. §4058 is explicit that members of member-run LLCs have a right to access to the
financial books and records.
        For the first year and a half, Tyler and Toby acquiesced in the location of the books and
records at Garret’s office at MSI and their lack of direct access. However, once they sought
more detailed information than periodic reports provided, and sought access to all the financial
records to which they were entitled, Garret actively prevented them from having access to this
information, which was fundamental to the running of the business. Starting in March of 2020,
he continued to refuse access to the records for 6 months, such that they were forced to file suit,
incurring unnecessary expense to do so, in order to finally obtain a fundamental member’s right.
They lost 6 months of the ability to examine the books and records during a period when the
LLC was experiencing cash flow problems. Analyzing the financial books, including all
supporting documents related to expenses for services, is step one in being able to address a cash
flow problem.
       The court concludes that this was a clear violation of Garret’s duty of loyalty to the LLC
and a violation of the obligation of good faith and fair dealing. It was a violation of the Operating
Agreement and led to a six month delay in the ability of the LLC to evaluate its expense and cash
flow problems and reorganize for successful operation.
       Other claim regarding Garret’s conduct
        Toby and Tyler suggest that Garret violated his duty of loyalty to Brothers LLC by
organizing and creating a real estate sales business, MSI Realty LLC, when Brothers LLC
engages in real estate sales, and furthermore employing Conrad as its broker when the plan was
that Conrad would become Brothers LLC’s broker once he obtained his license. Proof of
violation on this ground is insufficient for two reasons. First, there is a lack of evidence as to
whether the idea of Conrad working for Brothers LLC was an actual agreed-upon plan, or
whether it was merely floated as an idea. Second, it is not clear that MSI Realty LLC is actually
in competition with Brothers LLC with respect to real estate sales. Brothers LLC engages in real
estate sales for properties that do not sell at auction. While Tyler testified that Brothers LLC
occasionally participates in pre-auction sales, the evidence does not establish that competition
with real estate sales companies in general is a regular part of its business. There is no evidence
that MSI Realty’s business involves auction related sales. While the conduct of Garret in creating
MSI Realty and employing Conrad as its broker reasonably raises understandable suspicions
about his loyalty to Brothers LLC, the evidence is not sufficiently strong to prove a third
violation of Garret’s duty of loyalty to Brothers LLC as a basis for dissociation.

                                                 22
         Summary as to Brothers LLC:
         11 V.S.A. § 4081(5) provides :
         A person is dissociated from a limited liability company upon the occurrence of
         any of the following events: . . .
         (5) on application by the company or another member, the member's expulsion by
         judicial determination because the member:
                 (A) . . .
                 (B) willfully or persistently committed a material breach of the operating
         agreement or of a duty owed to the company or the other members under section
         4059 of this title; or
                 (C) engaged in conduct relating to the company's business which makes it
         not reasonably practicable to carry on the business with the person as a member.

        Both Garret’s self-dealing for the benefit of his own businesses without clear
agreement with Tyler and Toby on contract terms, and his withholding of the financial
records for six months until compelled to provide them in a lawsuit show violations of his
fiduciary duty to Brothers LLC under (B) above. As a result, he created a lack of trust on
the part of his fellow members, which was understandable and reasonable under the
circumstances, and that makes it impossible for Brothers LLC to continue with Garret as
a member. This constitutes a basis for dissociation under (C) above.

         Brothers LLC is entitled to dissociate Garret pursuant to the two provisions cited
above.

Group LLC Claim of Breach of Fiduciary Duty:
        Tyler and Toby seek to dissociate Garret from Group LLC as well as Brothers LLC. They
argue that control of the real estate is integral to the operation of the three types of auctions
conducted by the business. The issue is whether grounds for dissociation pursuant to statute have
been shown as to Group LLC.
        Although the parties agree on the equity value of Group LLC, there is a significant
controversy between the parties with respect to the payment of $300,000 that Garret made at the
time of the agreement to buy the real estate from Tom. The findings of fact show that it was
neither a loan that should be repaid with interest, as argued by Garret, nor a capital contribution
on which no interest is payable, as argued by Tyler and Toby.
        Garret’s conduct created this controversy. He ignored Tyler and Toby’s request to
contribute equally to the initial payment, which they wanted to do as they were to be equal
owners of the LLC. They specifically offered to contribute their interest in the proceeds of the
Bridge Street property sale. Garret rejected their proposal and simply went ahead and made the
payment on his own without seeking agreement on terms. There was no agreement that it was a
capital contribution.

                                                 23
        As to Garret’s claim that it was a loan, it is not uncommon in family financial
circumstances for one family member to contribute funds that benefit another without
establishing any agreements as to the terms on which the money is contributed. The subject is
treated in a leading treatise on contracts. In situations in which the response to an offer or
provision of services is silence, the issue presented is whether silence amounts to acceptance of a
possible agreement. The situation is treated differently when it occurs among family members.
       A very important factor is whether the services are rendered within a family
       relationship. Where the services are rendered within the family relationship the
       offeree ordinarily has no reason to conclude that compensation is expected. . . .If
       services are rendered within the family relationship there is a presumption that
       they were rendered without expectation of compensation. On the other hand, if
       there is not a family relationship the presumption is that compensation is
       expected. In either case, the presumption may be rebutted.
J. Calamari & J. Perillo, Contracts § 2-18, pp. 86-87 (3rd ed.).
        In this case, Garret claims that he had an expectation of being repaid, but the
evidence shows that the subject was not discussed and that any such expectation was
only in his mind. The presumption is that the act was undertaken without expectation of
compensation, and Garret thus has the burden to rebut the presumption. Garret
introduced no evidence to rebut such a presumption. Therefore, he is not entitled to
compensation on the grounds that the payment was a loan.
        By refusing to let Tyler and Toby contribute their equal shares for the down
payment for the purchase of LLC real estate in 2018, and then claiming five years later,
during which time he made no payments of the Bridge Street money, that he is entitled
to compensation not only for the full amount but with interest at the high legal rate of
12% per year, Garret has not observed his duty of loyalty to the LLC to observe the
obligation of good faith and fair dealing as required by 11 V.S.A. § 4059 (d). As a
consequence, he has violated a duty owed to other members under 11 V.S.A. § 4081
(5)(B), which is grounds for dissociation.
        In addition, Brothers LLC has an intertwined contractual lease relationship with
Group LLC because of the necessity of the use of the real estate in the business of
Brothers LLC. It is unknown what the current terms of the lease are, but future
negotiations could be required. As a result of his conduct that caused him to be
dissociated from Brothers LLC, it is not reasonably practicable for Group LLC to carry
on its business with Garret as a continuing member. Tyler and Toby have shown
grounds for dissociation under 11 V.S.A. § 4081(5) (C).
MSI Claim for unpaid invoices
        Garret’s MSI contract compensation for responsibility for the auto division. MSI is
entitled to payment of the unpaid invoices for Garret’s compensation pursuant to contract
through January of 2021, during which time he was responsible for the auto division. After that
he was no longer employed by Brothers LLC. The unpaid total is $213,591.84. There is no

                                                24
evidence that there was an agreement that MSI would be paid interest on unpaid balances. Garret
himself suspended payments of these invoices beginning in October 2019 without obtaining
agreement from Tyler and Toby that interest would accrue on unpaid balances. There is no
evidence that any MSI invoices ever showed a claim for interest on any suspended amounts.

        Garret’s claimed automobile allowance. For the reasons described above, MSI is not
entitled to payment of invoices it generated on its own, without agreement with the members of
Brothers LLC, for an automobile allowance for Garret.
       Invoices for work performed by other MSI staff. MSI seeks payment for unpaid
invoices for the period from October 31, 2019 to November 13, 2020 in the amount of
$119,765.83 for CFO level services and services for auto auction management, human resources,
accounting, and information technology. MSI also seeks interest at the legal 12% rate in the
amount of $54.144.05 for a total of $173, 909.88. Tyler and Toby claim that there was never any
agreement as to the specific terms of payment for services, and that many of the services were
provided during the period when Garret as MSI’s owner kept Brothers LLC financial records at
MSI’s office and refused to provide required access to them.
        While the court has concluded that the failure of Garret to ensure that there was an
explicit transparent agreement between Brothers LLC and MSI (with Tyler and Toby’s
involvement) was a violation of his duty of loyalty to Brothers LLC, there are other factors. One
is that MSI provided services of value to Brothers LLC that it accepted. Another is that Tyler and
Toby knew that the services were being provided and raised no objections until March of 2020,
when they sought detailed information about the level of billings and were denied access. A fair
allocation is that Brothers LLC is responsible for all billings through March of 2020 because
there was acquiescence to those bills, but is not responsible for bills generated wholly within
MSI during the period that the majority members of Brothers LLC were denied access to the
financial information related to the bills. The total of bills dating from October 13, 2019 through
March 31, 2020 is $71,537.64.
        With respect to MSI’s claim for interest, as with MSI’s claim for payment for invoices for
Garret’s compensation, there is no evidence that there was an agreement that MSI would be paid
interest on unpaid balances. Garret himself suspended payments of these invoices beginning in
October 2019 without obtaining agreement from Tyler and Toby that interest would accrue on
unpaid balances. There is no evidence that any MSI invoices ever showed a claim for interest on
any suspended amounts.
        Therefore the request for interest is denied.
Sunrise Claim for unpaid invoices.
       Sunrise seeks payment for unpaid invoices for the period from October 31, 2019 to
November 13, 2020 in the amount of $57,073.12 for property maintenance services requested by
Brothers LLC and provided to it. Sunrise also seeks interest at the legal 12% rate in the amount
$26,763.30 for a total of $83, 836.42. Again, Tyler and Toby claim that there was never any
agreement as to the specific terms of payment for services, and that many of the services were
provided during the period when Garret as Sunrise’s owner kept Brothers LLC financial records
at MSI’s office and refused to provide required access to them.

                                                 25
         As with the MSI bills, a fair allocation is that Brothers LLC is responsible for all billings
through March of 2020 because services were provided and there was acquiescence to those
bills, but is not responsible for bills generated wholly within Sunrise during the period that the
majority members of Brothers LLC were denied access to the financial information on which the
bills were generated. The total of bills dating from October 13, 2019 through March 31, 2020 is
$50,214.57. No interest is payable for the same reason as set forth above with respect to MSI.
Brothers LLC Claim for Disgorgement based on Unjust Enrichment
       Tyler and Toby seek disgorgement of alleged profits made by MSI and Sunrise in 2018
and 2019. Specifically, they seek $28,489 for 2018 and $24,175 for 2019 based on Mr.
Beliveau’s calculation of amounts billed over costs for those years. (Exhibit 32A, at 8.) The
evidence was not clear that the billed amounts for those years, which have been paid, included a
component for profit over and above overhead costs. Moreover, during that period Tyler and
Toby acquiesced in the billings made by MSI and Sunrise to Brothers LLC. The court concludes
that Brothers LLC has not proved its claim by a preponderance of the evidence.
Brothers LLC request for attorneys’ fees
        Brothers LLC requests attorneys’ fees in reliance on a provision in the Operating
Agreement that the parties may seek to resolve disputes through arbitration, and if they do, the
prevailing party is entitled to attorneys’ fees. This request is denied for several reasons. First, this
is not an arbitration proceeding. Second, as the findings and conclusions above show, while
Brothers LLC prevailed on its claims for dissociation, it did not prevail on many of the claims of
Garret, MSI, and Sunrise for financial compensation. Moreover, Garret did not oppose the
remedy that the LLCs would be restructured so that his interest in each LLC would be bought out
by the LLC. Therefore, the request for attorneys’ fees is denied.

                                     SUMMARY and ORDER
118-12-20 Lecv
Garret has withdrawn his claim for dissolution of Brothers LLC. Defendants’ cross claim for
unjust enrichment is denied.
Attorney Roy shall prepare a proposed judgment for review pursuant to V.R.C.P. 58 (d).

21-CV-1922
MSI is entitled to a judgment against Brothers LLC for $285,129.48 ($213,591.84 for Garret’s
contract compensation + 71,537.64 for MSI staff compensation = $285,129.48). Interest shall
begin to accrue on any unpaid balance at the legal rate beginning 120 days after judgment.
Sunrise is entitled to a judgment against Brothers LLC for $50,214.57. Interest shall begin to
accrue on any unpaid balance at the legal rate beginning 120 days after judgment.
Attorney Roy shall prepare a proposed judgment for review pursuant to V.R.C.P. 58 (d).
                                                  26
23-CV-1511
Garret shall be dissociated from Brothers LLC and Group LLC.
Brothers LLC shall pay Garret $75,000 for his equity interest in Brothers LLC within 120 days.
Group LLC shall pay Garret $300,000 for his equity interest in Group LLC within 120 days.
Garret is entitled to a judgment against Brothers LLC for $215,430.00 for cash advances.
Interest shall begin to accrue on any unpaid balance at the legal rate beginning 30 days after
judgment.
Attorney Henry shall prepare a proposed judgment for review pursuant to V.R.C.P. 58 (d).

Electronically signed January 30, 2024 pursuant to V.R.E.F. 9 (d).

Mary Miles Teachout
Superior Judge (Ret.), Specially Assigned

                                                27