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Baird v. L.A.D. Holdings, LLC

Court of Appeals of Ohio, First District, Hamilton

May 24, 2017

SUZANNE D. BAIRD, Plaintiff-Appellee,
v.
L.A.D. HOLDINGS, LLC, Individually and derivatively on behalf of NEWPORT PAVILION, LLC, Intervening Defendant-Appellant, and 9549 MONTGOMERY ROAD, LLC, et al., Defendants.

         Civil Appeals From: Hamilton County Court of Common Pleas TRIAL NO. A-1201593

          Buechner Haffer Meyers & Koenig Co., LPA, Brian R. Redden and David W. Burleigh, for Plaintiff-Appellee.

          Bruns, Connell, Vollmar & Armstrong, LLC, and Thomas B. Bruns, for Intervening Defendant-Appellant.

          OPINION

          MOCK, PRESIDING JUDGE.

         {¶1} Intervening defendant-appellant L.A.D. Holdings, LLC, ("LAD") on behalf of itself, and derivatively on behalf of defendant Newport Pavilion, LLC, appeals the trial court's judgment releasing funds held in escrow to plaintiff-appellee Suzanne Baird in the appeal numbered C-160265. In the appeal numbered C-160409, LAD appeals the trial court's judgment denying its motion for leave to amend its cross-claim against defendant Timothy S. Baird in order to add a counterclaim against Suzanne Baird and to assert a constructive trust over the released escrow funds. We have consolidated these appeals for review. Because the appeals are moot, we dismiss them.

         Facts and Procedure

         {¶2} In August 2011, Suzanne Baird obtained a judgment from the domestic relations court in the amount of $2, 000, 000 against her ex-husband Tim Baird after he defaulted on a promissory note that he had executed in her favor as part of their separation agreement. In an effort to collect on this judgment, Suzanne Baird also obtained a charging order permitting her to charge Tim Baird's membership in numerous limited liability companies with payment on her judgment. But given that Tim Baird was one of the majority owners and comanaged almost all of the companies, the distributions to members stopped and Suzanne Baird was unable to collect on her judgment. Tim Baird's companies acquired, developed and sold commercial real estate, namely shopping centers.

         {¶3} Because the charging orders were ineffective, in February 2012, Suzanne Baird filed a declaratory judgment action against Tim Baird and all of the companies ("the LLCs") in which he was a member, asking the court to declare that she is authorized to take control of Tim Baird's memberships in the LLCs. She also alleged claims for conversion and fraudulent transfer of assets, and sought injunctive relief prohibiting Tim Baird from diverting funds in the LLCs that were subject to the charging order.

         {¶4} In November 2013, Suzanne obtained another judgment against Tim Baird in the amount of $3, 000, 000 after he failed to make the second payment under the promissory note he had executed in her favor. During the course of this litigation, she also obtained a charging order from the domestic relations court with respect to this judgment.

         {¶5} A month later, the trial court granted Suzanne's motion to remove Tim Baird from management of the defendant LLCs, and appointed George Fels, a certified public accountant, "to manage, operate, and govern each of the LLCs subject to the Charging Order." Fels and Matthew Daniels, the comanager of most of the defendant LLCs, then began to lease and sell the shopping centers owned by the LLCs.

         {¶6} During the extensive discovery in this case, Suzanne Baird learned that Tim Baird carried a "profits interest" in an asset-a shopping center complex-owned by NP Acquisition II, LLC, ("NP Acquisition"). This shopping center was previously owned by defendant Newport Pavilion, LLC, ("Newport") which had sold it to NP Acquisition prior to the commencement of this lawsuit. The majority owners of Newport at the time of the sale were Tim Baird and Daniels. (Daniels, who is LAD's manager, later transferred his interest in Newport to LAD.) In negotiating the sale of the shopping center on behalf of Newport, Tim Baird was to receive a $70, 000 yearly consulting fee to help manage/develop the shopping center on behalf of NP Acquisition, and was to receive money if NP Acquisition sold the shopping center ("profits interest"). Daniels received a payment for his interest at the time of the sale. At the time of the sale, Daniels was not privy to the fact that Tim Baird had negotiated to retain a profits interest in the shopping center as both Daniels and Tim Baird had negotiated confidential agreements with NP Acquisition.

         {¶7} Upon learning that NP Acquisition was selling the shopping center, Suzanne Baird filed a fourth amended complaint asserting a creditor's bill and seeking an injunction ordering that any monies payable to Tim Baird from NP Acquisition due to the sale of the shopping center be subject to a creditor's bill. On September 2, 2014, the trial court entered upon its journal an agreed order that "any monies that are or will be due and payable to [Tim Baird] from [NP Acquisition] on account of the sale of the [shopping center] shall be subject to a creditor's bill ("the agreed order")." The agreed order required the money to be deposited into an escrow account.

         {¶8} A month later, Newport moved the court to modify the agreed order to direct that any money deposited in the escrow account not be disbursed, because Newport believed it had a claim to those funds. Specifically, Newport thought that consideration for its interest in the sale of the shopping center, which would have thereafter been distributed to the members of Newport, was instead improperly paid to Tim Baird as a "profits interest" or carried interest. In essence, Newport believed Tim Baird, in negotiating the deal with NP Acquisition breached his fiduciary duty to the other members of Newport by keeping a profits interest for himself.

         {¶9} In May 2015, Suzanne Baird moved the court for an initial distribution of the escrow funds in the amount of $800, 000, which the trial court granted over Tim Baird's ...


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