final until disposition of timely filed motion for rehearing.
Appeal from the Circuit Court for Miami-Dade Count Lower
Tribunal No. 13-24371y, John W. Thornton, Jr., Judge.
Bresky and Jonathan Mann (Boca Raton), for appellant.
Migdal & Hayden, LLC, and Donald J. Hayden and Lara
O'Donnell Grillo, for appellees.
SALTER, EMAS and LOGUE, JJ.
Family, LP (defendant and counter/third-party plaintiff
below) appeals two final summary judgment orders entered in
favor of Gail Frank, COJO Holdings, Swastic Srihari
Kaveeshwar, Joe Mitchell and the Estate of Walter Frank
(plaintiffs and counter/third-party defendants below). For
the reasons that follow, we affirm in part and reverse in
FACTS AND PROCEDURAL HISTORY
The Creation and Operation of Med-Rite
Laboratories, LLC ("Med-Rite" or "the
Company") was formed in April 2010 for the purpose of
manufacturing, marketing and selling a medical device to
treat hemorrhoids, which was developed by Frank Melendez.
Melendez partnered with Larry Ferk and Ted Morgan to find
investors for the startup, and successfully obtained
investments from, inter alia, Gail and Walter Frank,
a married couple. The original Members of the Company were
Alex Melendez, Gail Frank, Larry Ferk, Swastic Srihari
Kaveeshwar ("Swastic Srihari") and Ted Morgan.
on, there were serious disagreements between the Members over
issues related to financing, the location of the device's
manufacturing plant,  and termination of key personnel. In July
2011, the members agreed to raise at least $1 million in
capital, which they were able to secure with a capital
investment of $1 million from Joe Mitchell at the end of
The Relevant Provisions of the Operating Agreement
January 16, 2012, an Amended and Restated Limited Liability
Company Operating Agreement (the "Operating
Agreement") was executed. At the time of this Operating
Agreement, the Members were: Larry Ferk, Gail Frank,
Mas-Rite, LLC, Alternative Technologies International, Inc.,
Swastic Srihari, and Joe and Connie Mitchell. The Operating
Agreement identified the managers in section 5.1 as: Larry
Ferk, Gail Frank, Walter Frank, Joe Mitchell and Ted Morgan.
Under the terms of the Operating Agreement:
- A Manager may be removed at any time from the Board of
Management, including for "Cause" (as defined
below) as determined by the Members holding a Majority in
Interest. . . . In the event of the death, incapacity,
removal or resignation of any of the Managers, a successor
Manager shall be selected by the Members holding a Majority
of the Interests. For purposes of Article V,
"Cause" shall mean fraud, willful misconduct, gross
negligence, breach of fiduciary duty or other gross
misconduct by a Manager with respect to a material matter
relating to the affairs of the Company. § 5.1(e),
- A "Majority in Interest" is defined as "the
affirmative vote of the Members holding greater than 60% of
the Percentage Interests or the affirmative vote or presence
of greater than 60% of the Managers." § 1.1,
- Any Member may loan Med-Rite an aggregate of $500, 000 with
approval of a Majority of the Board of Management. §
3.1(c), Operating Agreement.
- A Member may not transfer his interest in the company, with
certain exceptions, without the prior written consent of the
Members holding a majority-in-interest. Any such transfer is
void and shall not bind the company. § 9.1, Operating
- In the event any Member wants to transfer his interest, the
Member shall notify the company and the other Members in
writing, offering to sell the interest to the company or the
other Members pro-rata. § 9.3(a), Operating Agreement.
after the Operating Agreement was executed, Ted Morgan
resigned from the management board and the other Members
bought him out.
The Member Interests in Med-Rite
Ted Morgan's resignation and the buyout of his interest
in the Company, and during the relevant time periods
thereafter, the Member interests in Med-Rite were as follows:
Ferk Family, LP (Larry Ferk)
COJO Holdings (Joe Mitchell)
Mas-Rite, LLC (Alex/Frank Melendez)
remaining members continued to have problems. On June 26,
2012, Ferk sent an email to Gail Frank, stating that he
refused to continue working with Swastic Srihari. On June 28,
2012, Walter Frank wrote to Larry Ferk to inform him that he
was being terminated for cause from the board of management,
pursuant to section 5.1(e) of the Operating Agreement.
The Transfer of Interest in Mas-Rite to Ferk Family
thereafter, on July 17, 2012, Mas-Rite, LLC
("Mas-Rite") transferred Alex Melendez's
majority interest in Mas-Rite to Ferk Family, which,
as a practical matter, resulted in a transfer of
Mas-Rite's voting interest in Med-Rite to Ferk
August 1, 2012, Ferk Family filed a member derivative action
on behalf of Med-Rite against Gail and Walter Frank and Joe
Mitchell, alleging a breach of fiduciary duty, and seeking to
inspect records. The trial court appointed Herbert Stettin to
conduct an independent investigation, and Mr. Stettin issued
a report, finding it was not in the best interest of the
company for the derivative action to proceed. Thereafter, the
trial court dismissed the derivative action.
the discovery process it came to light that Ferk Family had
purchased a majority interest in Mas-Rite, giving it voting
rights in Med-Rite. However, because the Operating Agreement
prohibits the transfer of interest in Med-Rite without the
consent of the other members, and also requires compliance
with a right-of-first-offer clause, Gail Frank, along with
COJO Holdings (Joe Mitchell) and Swastic Srihari filed suit
against Ferk Family, Mas-Rite and Alex Melendez, seeking
declaratory relief and damages for breach of contract and
specific performance. The complaint was later amended, and
the operative Second Amended Complaint added claims for
breach of implied covenant of good faith and fair dealing.
Family answered, asserted affirmative defenses,
counterclaimed, and asserted third-party claims against Joe
Mitchell and Walter Frank, claiming Larry Ferk was wrongfully
removed as a manager in violation of the Operating Agreement,
depriving Ferk Family and other minority members of their
voice in the operation and management of Med-Rite, as well as
virtually destroying their investment and equity interest in
the company. In addition, it was alleged that Gail and Walter
Frank had loaned more than the permissible amount for loans
by members, in violation of the Operating Agreement. Counts
were alleged against the counter-defendants and the
third-party defendants, collectively, for breach of fiduciary
duty, two counts of breach of contract, and two counts of
breach of implied covenant of good faith and fair dealing.
Frank, COJO Holdings, Joe Mitchell, Swastic Srihari and the
Estate of Walter Frank moved for summary judgment on their Second
Amended Complaint, and on Ferk Family's counterclaim and
third-party claims. Ferk Family also moved for summary
judgment on the Second Amended Complaint. The court denied
the motions for summary judgment.
Counts One and Two of the Second Amended Complaint for
declaratory judgment were withdrawn, and all parties later
agreed to submit the summary judgment papers and existing
record for the trial court's final determination in lieu
of a trial on the remaining claims of the Second Amended
court conducted a bench trial on the counterclaims and third
party claims, following which it entered an order in favor of
counter/third-party defendants Gail Frank, COJO Holdings, Joe
Mitchell, Swastic Srihari and the Estate of Walter Frank.
The Orders on Appeal
January 28, 2016, the trial court entered two orders: (1)
granting final summary judgment in favor of Gail Frank, COJO
Holdings and Swastic Srihari on the remaining claims in their
Second Amended Complaint; and (2) entering judgment in favor
of counter/third-party defendants Gail Frank, COJO Holdings,
Joe Mitchell, Swastic Srihari and the Estate of Walter Frank
on Ferk Family's counterclaims/third-party claims.