Harcourt Nevada - August Briefing

More on Harcourt in Nevada. The two "account states" claims remain outstanding. Under United States law, account stated is a statement between a creditor (the person to whom money is owed) and a debtor (the person who owes) that a particular amount is owed to the creditor as of a certain date.

Moreover, it seems the existing claims were dismissed on legal technicalities rather than because they had poor evidence to the claims - at the heart of the judge's decision is that Nevada law provides few if any protections to members of LLCs (limited liability companies), which is how the development partnership was set up. The most notable comment relating to that is below:

John Manley, the lawyer for Glen, Smith & Glen, tells GlobeSt.com that there will be another round of complaints filed on behalf of his client that addresses the fact that Nevada law does not recognize fiduciary responsibility within an LLC.

So if you've read anywhere that Harcourt's case in Nevada is over, don't be too sure, despite their press releases on the same.

http://www.propertyweek.com/story.asp?sectioncode=297&storycode=3120600&c=1

Harcourt Developments has had two claims filed against it in a Las Vegas court dismissed after a US judge ruled that the complaints could not be supported. Glen, Smith & Glen (GSG), a local US developer, was contracted as a 40% minority partner and was to sell the properties while Harcourt secured the finance. GSG alleged there had been a breach of contract and of fiduciary duty and that Harcourt was attempting to dilute its involvement in the scheme.

Harcourt said there was now only one claim remains against Harcourt Nevada which refers to its alleged failure to fund expenditures made by the manager of GSG Development Company in the sum of $2.1m (£1.1m). It said that it 'unequivocally denies these claims were within the approved budget and approved business plan' and said a detailed response and counter claim was being processed. The Court said it could not for now dismiss the claim and is awaiting proof of the allegations from GSG.

http://www.globest.com/news/1225_1225/lasvegas/173144-1.html

LAS VEGAS-District Court Judge Mark Denton has dismissed five of the seven causes of action in Glen, Smith & Glen Development's lawsuit against Dublin, Ireland-based Harcourt Development and its local subsidiary over Sullivan Square, a failed 1,300-unit luxury residential-over-retail project at Durango Drive and Interstate 215 valued at $1 billion. At the heart of the judge's decision is that Nevada law provides few if any protections to members of LLCs, which is how the development partnership was set up.

The lawsuit alleges two forms of "breach of contract" and two forms of "breach of fiduciary duty," as well as two forms of "account stated," the latter meaning Harcourt's project-specific LLC allegedly has not paid in full its share of the costs to date. After reviewing Harcourt's motion to dismiss, Judge Denton dismissed all but the two "account stated" claims.

"With respect to the [defendant's] contention that the Complaint fails to state claims for breach of fiduciary duty, Defendant is careful to point out that it is based on the relationship between a non-managing member, on the one hand, and the LLC and the other members, on the other. This would distinguish the LLC situation from a close corporation one where the law has become well established that ordinarily, and in the absence of a statute, organizational provision, or shareholders' agreement to the contrary, shareholders in a position of control do have a fiduciary responsibility to minority shareholders. "

"In this case, the operating agreement…does not state the existence of fiduciary duties of members inter se or to the LLC. The Court is thus persuaded by the line of cases cited by Defendant to the effect that under the circumstances alleged by Plaintiff to exist in this case – with reference, again, to the operating agreement and to the managerial role of the Plaintiff Glen, Smith & Glen Development Company, LLC – there is no claim stated by Plaintiff, either directly or derivatively, for breach of fiduciary duty."

In not dismissing the "account stated" claims, Judge Denton says "the Court is not at this time called upon to go beyond the face of the Complaint and items that can be properly considered on a motion to dismiss, and so the fact that, as the defendants put it, "the [plaintiff] does not allege any facts indicating that the parties agreed to a fixed amount for the debt or that Harcourt Nevada acquiesced to the amount claimed by the company," does not mean that the court cannot give effect to Plaintiff's allegation that "Defendant Harcourt Nevada became indebted to Plaintiff…on an account stated. Thus the Court Denies the motion…and will not for now dismiss the same."

Ryan Lower, one of the lawyers for Harcourt Developments, sent a letter to GlobeSt.com stating that Harcourt "unequivocally denies that it agreed to an account stated and then did not pay." John Manley, the lawyer for Glen, Smith & Glen, tells GlobeSt.com that there will be another round of complaints filed on behalf of his client that addresses the fact that Nevada law does not recognize fiduciary responsibility within an LLC.

"The significant thing is the court refused to dismiss the case as they asked and we are going to have a series of amendments. These types of arguments over the pleadings are pretty typical but what's really clear to us is this case is not going away until jury gets to decide it and that's the most important thing. The decision has to be a disappointment for Harcourt."