LITTLE HEARTS MARKS FAMILY II L.P V. JASON D. CARTER, 61 PRIME LLC
- Summarized by David Banker , Womble Bond Dickinson (US) LLP
- 11 months 3 weeks ago
- Case Type:
- Business
- Case Status:
- Affirmed in part and Reversed in part
- Citation:
- 23-1202-bk (2nd Circuit, Mar 04,2025) Published
- Tag(s):
-
- Ruling:
- Circuit Court affirmed Bankruptcy Court's and District Court's dismissal of claims brought by non-debtors for breach of fiduciary duty and aiding and abetting breach of fiduciary duty. These claims belonged to the debtor and could be asserted only by the creditor trustee in the debtor's bankruptcy case. Circuit Court vacated judgment as to claims the Bankruptcy and District Courts dismissed for breach of contract and breach of implied covenant of good faith and fair dealing. These claims sought to vindicate rights belonging directly to members of the debtor LLC against other members.
- Procedural context:
- Bankruptcy Court dismissed certain claims in adversary proceeding. District Court affirmed. Circuit Court affirmed the Bankruptcy Court's judgment in part, vacated in part, and remanded for further proceedings.
- Facts:
- Plaintiff-Appellant Little Hearts Marks Family II L.P. was a member of 305 East 61st Street Group LLC, a company organized to purchase a building and convert it into a condominium. Defendant-Appellee 61 Prime LLC was the majority member and manager of the company, and Defendant-Appellee Jason D. Carter was the manager and sole member of Prime. In 2021, the company filed for bankruptcy and eventually sold the building to a different company that Carter had created. The plan of liquidation established a creditor trust with the exclusive right to pursue causes of action that belonged to the debtor’s estate. After the sale of the building, Little Hearts sued Prime and Carter for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Little Hearts sought damages representing its lost capital investment in the company and the loss of its rights under the Operating Agreement, including the right to use and develop designated units in the building.
- Judge(s):
- LYNCH, CARNEY, and MENASHI, Circuit Judges.
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