CSC, a general partnership of siblings, formed a partnership, FLTC, with their uncles, the Flippos. CSC converted its interest in FLTC to an LLC, and FLTC was also converted to an LLC, with CSC and the Flippos as three members and Carter Flippo as manager. Two years later, the Flippos considered creating individual LLCs to hold their interests in FLTC, but CSC rejected their requests.
Carter Flippo consulted with the law firm of MWBB, which advised him that he could create a joint venture with Flippo Lumber Corporation and transfer all of its assets to the joint venture, resulting in its dissolution under its operating agreement. LLCs could then hold the Flippos interests in the new venture, and CSC's approval would not be required.
Carter Flippo then did this and informed CSC of it, and CSC sued every other party to recover FLTC's assets, remove Carter Flippo as manager, to enjoin further efforts to dissolve FLTC, and to recover damages for breach of fiduciary duty. Carter Flippo also sued to dissolve FLTC and distribute its assets and the suits were consolidated.
Trial court held that Carter Flippo breached his fiduciary duties to FLTC and violated the operating agreement thereof and rejected the Flippos' arguments. It awarded CSC $12,860.64 in compensatory and $350,000 in punitive damages, as well as $178,349.02 in attorneys' fees and $9,166.75 in sanctions. It also prohibited the Flippos from serving as managers and installed CSC instead.