Obeid v. Hogan

William Obeid (plaintiff), Christopher La Mack, and Dante Massaro were the founders and only members of Gemini Equity Partners, LLC (Gemini Equity) and Gemini Real Estate Advisors, LLC (Gemini Real Estate) (defendants). Each entity was a limited-liability company (LLC) governed by an LLC agreement that mimicked corporate governing structures. Gemini Equity’s agreement vested governing power in a board of directors, and Gemini Real Estate vested governing power in its managers. Obeid, La Mack, and Massaro served as the only directors of Gemini Equity and the only managers of Gemini Real Estate. After a dispute over company roles, Obeid filed several state and federal lawsuits that were combined into a New York federal suit, alleging that La Mack and Massaro had started competing real estate companies using Gemini Equity’s and Gemini Real Estate’s assets. Obeid asserted claims based on his rights as a member of the two entities and derivatively on behalf of the entities themselves. During Obeid’s filing process, Obeid, La Mack, and Massaro met together with associated counsel in a joint special meeting of Gemini Equity’s directors and Gemini Real Estate’s managers. During the meeting, La Mack and Massaro discussed hiring a former federal judge to create a parallel special-litigation committee (SLC) for each entity and to recommend whether to pursue the derivative claims on behalf of both entities. La Mack and Massaro independently engaged Judge Michael Hogan (defendant) for the parallel special-litigation committees. Hogan was not a director of Gemini Equity or a member of Gemini Real Estate. La Mack and Massaro also voted to remove Obeid as a director of Gemini Equity. Obeid filed suit in Delaware Chancery Court, seeking declaratory judgment that Hogan could not serve as an SLC for either LLC and that Hogan had no authority over either LLC’s derivative claims. Obeid also sought judgment stating that he could not be removed as a director. Obeid filed for summary judgment. The chancery court denied summary judgment regarding Obeid’s director status because the LLC agreement allowed a director to be removed by majority rule, which La Mack and Massaro had. The court then addressed Hogan’s status as an SLC.