Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Kraft v. Limestone Partners, LLC

Court of Appeals of Arkansas, Division III

May 17, 2017

MIKE KRAFT, APPELLANT
v.
LIMESTONE PARTNERS, LLC, APPELLEE

         APPEAL FROM THE FAULKNER COUNTY CIRCUIT COURT [NO. 23CV-13-135] HONORABLE MIKE MURPHY, JUDGE

          Lax, Vaughan, Fortson, Rowe & Threet, P.A., by: Grant E. Fortson, for appellant.

          Adkisson & Wilcox, LLP, by: William C. Adkisson, for appellee.

          N. MARK KLAPPENBACH, Judge

         Appellant Mike Kraft filed suit against appellee Limestone Partners, LLC (Limestone), of which he is a member, for breach of contract. Kraft alleged that Limestone had breached its operating agreement by failing to make guaranteed payments and provide promised benefits to him. The Faulkner County Circuit Court granted summary judgment to Limestone and dismissed Kraft's complaint. Kraft now appeals, and we reverse and remand.

         Limestone was formed in 2004 by Kraft and Mike Coats for the purpose of opening a new restaurant. The operating agreement executed by the members in 2004 reflected that Coats owned a 39.5 percent interest, Kraft owned a 25.5 percent interest, and four other members owned smaller interests.[1] Section 6.11 of the operating agreement provides as follows:

6.11. Guaranteed Payments to Members Participating in Management. At least initially, Mike Coats and Mike Kraft shall be the only Members actively participating in management of the Company. Mike Coats shall be paid a guaranteed annual payment, paid in equal monthly installments, of $95, 000.00, and Mike Kraft shall be paid a guaranteed annual payment, paid in equal monthly installments, of $85, 000.00. These guaranteed payments shall not be changed except upon unanimous consent of all of the Members, and shall be paid in accordance with the Company's payroll practices for its other employees. These Members participating in management shall also be provided with employee benefits made available by the Company to other employees. Additionally, Mike Coats and Mike Kraft shall also receive a combined monthly automobile allowance of $850.00 per month.

         Kraft received guaranteed payments under this section until October 2012. The amount of the payments had changed multiple times, but every change was made with unanimous consent.[2] On October 1, 2012, Kraft was informed by Coats and two other members that he was being "terminated" from Limestone and would no longer receive guaranteed payments. Kraft refused to sign termination and severance agreements, as well as a voluntary disassociation and share-surrender agreement. He subsequently filed suit alleging that the cessation of his payments without his consent was a breach of the agreement.

         Kraft moved for summary judgment, arguing that the unambiguous language of the operating agreement included no exceptions to the requirement of unanimous consent for any change to his guaranteed payments. In his attached affidavit, Kraft attested that he had participated in the management of Limestone from its formation until October 1, 2012, but he had never been an employee of Limestone or its managing member. In his deposition, Coats said that Kraft was terminated from management because he had become unproductive. Coats said that both he and Kraft met with the attorney who drafted the operating agreement, and although Coats did not remember discussing the lines of section 6.11 with the attorney, the purpose of that provision was to protect him and Kraft because they were the ones behind the concept.

         Limestone responded and filed a cross-motion for summary judgment, arguing that the guaranteed salary was available to Kraft only so long as he was "participating in management, " as set forth in section 6.11, and that he was no longer participating in management because he had been terminated from his employment as authorized by section 9.2. Section 9.2 provides in part as follows:

9.2 Death; Other Incapacity of a Member; or Termination or Resignation of Employment. Upon the death, Incapacity of a Member, or Termination or Resignation of Employment of a Member for any reason, the Company and the remaining Members shall have the continuing option thereafter to acquire the Membership Interest of the deceased, Incapacitated Member, or former employed Member, at the price and on the terms as the Company, the remaining Members, the formerly employed Member, and/or the personal representative, guardian or analogous fiduciary (the "Representative") of the deceased or Incapacitated Member, as the cae [sic] may be, may mutually agree . . . .

         Kraft responded that section 9.2 was merely a buyout provision and did not apply to him because he was not an employee; instead, he provided services to the company in his capacity as a member. He argued that pursuant to the Internal Revenue Code, guaranteed payments are not a salary, and recipients of guaranteed payments are not employees. In a second affidavit, Kraft attested that no member had asserted a right to acquire his membership interest under section 9.2.

         Following a hearing, the trial court granted Limestone's motion for summary judgment and denied Kraft's motion for summary judgment. The court's order stated in part that

despite the lack of precision found in the operating agreement, the agreement clearly dealt with the rights, obligations and interest of ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.