Appeal from the District Court of Fremont County The Honorable Norman E. Young, Judge.
The opinion of the court was delivered by: Kite, Justice.
Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.
[¶1] After E. Michael Lieberman withdrew as a member of Wyoming.com LLC (Wyoming.com), Wyoming.com filed a petition for declaratory judgment seeking a determination of its rights and Mr. Lieberman filed a complaint for dissolution of the company and the return of his share of its value. Three district court determinations and three appeals to this Court followed during which it was established that Mr. Lieberman's withdrawal did not result in dissolution of the company, he was entitled to the return of his $20,000 capital contribution and he retained an equity interest in the company. Those determinations having been made, the declaratory judgment action was dismissed.
[¶2] Mr. Lieberman then filed a complaint against the owners of Wyoming.com, who in the meantime had merged the limited liability company into a corporation. He alleged claims for termination of an implied trust, breach of fiduciary duty-bad faith, and conversion. The district court granted partial summary judgment for Mr. Lieberman on his conversion claim and set for trial the determination of the value of his equity interest and his entitlement to other damages, if any. After trial, the district court entered judgment on the conversion claim for Mr. Lieberman in the amount of $958,475.44. The district court found for the Mossbrooks on Mr. Lieberman's remaining claims.
[¶3] In his appeal from the district court judgment, Mr. Lieberman claims the district court did not follow the law established in Lieberman v. Wyoming.com, LLC, 2004 WY 1, 82 P.3d 274 (Wyo. 2004) (Lieberman II), which he alleges entitled him to the return of his ownership interest in the LLC and his share of additional distributions and other benefits the shareholders received from the corporation, plus prejudgment interest. In their appeal, the owners of Wyoming.com contend Mr. Lieberman's conversion claim was barred by the statute of limitations; the district court miscalculated Mr. Lieberman's damages; the judgment finding them individually and jointly and severally liable was clearly erroneous; Michael James Ford was not a proper defendant; and the district court erred in imposing discovery sanctions. We affirm in part and reverse in part.
[¶4] We re-phrase the issues the parties presented as follows:
1. Whether Mr. Lieberman's claim for conversion was barred by the statute of limitations.
2. Whether the district court correctly applied the law established in Lieberman I, II and III.
3. Whether the district court correctly calculated the value of Mr. Lieberman's equity interest.
4. Whether substantial evidence supported the district court's finding for the Mossbrooks on the claim for breach of fiduciary duty-bad faith.
5. Whether the members of Wyoming.com are individually liable for payment of Mr. Lieberman's equity interest.
6. Whether the district court properly imposed discovery sanctions.
[¶5] Mr. Lieberman, Steven Mossbrook and Sandra Mossbrook created Wyoming.com in 1994. In accordance with the company's operating agreement, each member received a membership certificate reflecting his or her ownership interest. The membership certificate issued to Mr. Lieberman in 1994 reflected that he was vested with a $20,000 capital contribution in Wyoming.com representing a 40% ownership interest. It further stated that his capital contribution and proportionate equity interest were subject to change and were reflected in the company's books and records.
[¶6] Riverton Orthopedic Clinic Pension Plan and Riverton Orthopedic Clinic Profit Sharing Plan (together, Riverton Orthopedic) became members of Wyoming.com in 1996 or 1997 and Forrest R. "Frostie" Sprout became a member in 1998. The minutes of a February 6, 1998, meeting of the members reflected the members' ownership interests at that time as follows:
Clinic (Ford) Profit Sharing 2 1/2%
Clinic (Ford) Pension Plan 2 1/2%
[¶7] In February of 1998, difficulties arose between Mr. Lieberman and other members and employees of Wyoming.com. On February 27, 1998, Mr. Mossbrook determined that it was in the company's best interest to terminate Mr. Lieberman's employment with the company and remove him from his position as vice president. On March 13, 1998, Mr. Lieberman served on Wyoming.com a notice of withdrawal and demand for return of his capital contribution. In the notice, he demanded the immediate return of "his share of the current value of the company, in cash" and asserted that the value of his interest was $400,000 plus interest from that date until paid.
[¶8] After receiving notice of Mr. Lieberman's withdrawal, four of the five remaining members met and voted to continue the company, accept Mr. Lieberman's withdrawal and return his $20,000 capital contribution. By letter dated March 19, 1998, Wyoming.com informed Mr. Lieberman of the members' action. On April 16, 1998, Wyoming.com sent Mr. Lieberman a check in the amount of $20,000 along with a letter informing him that "this concludes the relationship between you and Wyoming.com." On the same date, Wyoming.com cancelled Mr. Lieberman's membership certificate.
[¶9] Mr. Lieberman, through his attorney, advised the company that the $20,000 payment was not acceptable and renewed his demand for $400,000. Mr. Lieberman retained the check for $20,000 but did not negotiate it. His attorney subsequently misplaced the check and asked Wyoming.com to cancel it. Wyoming.com voided the check and issued another one for $20,000. At that point, however, Wyoming.com was under an order to pay the $20,000 to the district court in a garnishment action filed against Mr. Lieberman. Wyoming.com accordingly paid the $20,000 to the district court.
[¶10] In September of 1999, Wyoming.com sent another check to Mr. Lieberman for $7,965.00 reflecting his share of the profits up to March 13, 1998, the date of his withdrawal. Mr. Lieberman negotiated this check. The company books were amended on December 29, 1998, to reflect Mr. Lieberman's withdrawal as a member and the remaining members' equity interest as follows:
Clinic (Ford) Profit Sharing 4%
Clinic (Ford) Pension Plan 4%
Three years later, on December 31, 2001, Wyoming.com was merged into a corporation and the members' interests were converted to shares as follows:
Steven A. Mossbrook 801,430 shares
Sandra S. Mossbrook 78,580 shares
Forrest R. Sprout 41,430 shares
Michael James Ford Trust*fn1 78,580 shares
[¶11] Meanwhile, in June of 1998, Wyoming.com had filed a petition for declaratory judgment in district court asking for a determination of the parties' rights and obligations upon Mr. Lieberman's withdrawal. At about the same time, Mr. Lieberman filed a separate action requesting dissolution of the company and the return of his interest in Wyoming.com. The district court consolidated the actions and the parties filed cross motions for summary judgment. The district court granted summary judgment for Wyoming.com, ruling that Mr. Lieberman's withdrawal did not result in dissolution of the company and he was entitled to return of his $20,000 capital contribution.
[¶12] Mr. Lieberman appealed claiming that his interest in Wyoming.com was greater than the amount of his capital contribution. In Lieberman v. Wyoming.com LLC, 11 P.3d 353 (Wyo. 2000) (Lieberman I), this Court upheld the district court's ruling that his withdrawal did not result in dissolution of the company and he was entitled to the return of his capital contribution. We held, however, that questions remained for the district court's determination concerning what became of Mr. Lieberman's equity interest. On remand, Wyoming.com filed a motion for partial summary judgment seeking a determination that Mr. Lieberman's interest should be valued at the time he withdrew in accordance with the operating agreement. In ruling on the motion, the district court resolved the entire matter by holding that the operating agreement entitled Mr. Lieberman only to liquidation of his equity interest at its capital account value.
[¶13] Mr. Lieberman again appealed to this Court and, in Lieberman II, 2004 WY 1, 82 P.3d 274, we reversed the district court's determination, finding that neither Wyoming.com's operating agreement nor Wyoming's Limited Liability Act, Wyo. Stat. Ann. § 17-15-101, et seq. (LexisNexis 2007), provided for liquidation of a withdrawing member's equity interest; the record contained no other evidence (specifically, the membership certificate) reflecting how the parties intended to address Mr. Lieberman's interest; therefore, Mr. Lieberman retained his equity interest in the company. We remanded the case to the district court for a declaration of the parties' rights consistent with our holding.
[¶14] The district court entered an order declaring that Mr. Lieberman retained his equity interest in Wyoming.com. Mr. Lieberman filed a motion seeking discovery not only from Wyoming.com but from the corporation into which it had merged. Wyoming.com filed a motion pursuant to W.R.C.P. 59 to amend the judgment to reflect that the action was dismissed. When the district court denied the motion, Wyoming.com appealed to this Court.
[¶15] In Wyoming.com, LLC v. Lieberman, 2005 WY 42, 109 P.3d 883 (Wyo. 2005) (Lieberman III), we held that the district court's order did not fully comply with our mandate in Lieberman II because it did not dismiss the declaratory judgment action. We remanded the case to the district court with instructions to dismiss the action. The district court entered an ...