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Pinnacle Data Services, Inc. v. Gillen

104 S.W.3d 188 (2003)

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Pinnacle Data Services, Inc. v. Gillen

Texas Court of Appeals

104 S.W.3d 188 (2003)

Facts

In 1997 MJCM, LLC (defendant) was formed by Pinnacle Data Services, Inc. (PDS) (plaintiff), which was owned and operated by Max and Morris Horton, Joseph Gillen, and Charles Baldridge (defendants). Gillen, Baldridge, and MJCM were collectively known as GBM. Per the signed regulations, Gillen and Baldridge each owned 25 percent of MJCM and PDS owned 50 percent of MJCM. The regulations were signed by Gillen and Baldridge, individually, and by Max Horton on behalf of PDS. The articles of organization of MJCM listed Gillen, Baldridge, and PDS as members. The regulations and the articles of organization stated that MJCM would be member managed and that members would receive profit distributions, but not salaries and bonuses. The articles of organization were signed and filed with the Texas secretary of state on March 31, 1997, and publicly available. Max kept a copy of the articles in his desk. On August 29, 2000, Gillen and Baldridge voted to amend MJCM’s documents to convert MJCM to manager managed and elect Gillen the manager. After his election, Gillen hired employees, gave himself and Baldridge a salary, and dismissed Max and Morris from MJCM. PDS sued GBM for unjust enrichment, member oppression, breach of contract, breach of fiduciary duty, breach of the duty of loyalty, and civil conspiracy. PDS sought declaratory relief and reformation. PDS argued that the regulations controlled over the articles regarding member voting powers and procedures because it was a contract signed by all parties; the amended articles voted on August 29, 2000, and thereafter were void; and PDS was member managed. PDS further argued that it was not given a copy of the articles of organization after the regulations were signed, making the articles of organization void. The trial court granted summary judgment in favor of GBM, and PDS appealed.

Rule of Law

Issue

Holding and Reasoning (Morriss, C.J.)

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