Questions are on the right side and the summary is on the right. 1-3 is short answer and the rest are True or False.

Preview File Edit View Go Tools Window Help 60% Mon 11:42 AM Q DE Screen Shot 2021-11-08 at 11.32.29 AM Screen Shot 2021-11-08 at 11.32.19 AM Q Search |Q Search Case 14.2: Headfirst Baseball LLC v. Elwood, 239 F.Supp.3d 7 (D.D.C. 2017) (p. 488) Facts: Elwood and Sullivan were each members and managers of a variety of LLCs related to amateur baseball training camps including Headfirst Baseball, LLC (collectively "Headfirst"). In 2012, Elwood made several loans to himself totaling $600,000 from Headfirst, although Sullivan had authorized only a single $200,000 loan. Sullivan first learned about Elwood's unauthorized loans in late 2012 based on a conversation with the company's bookkeeper. Sullivan confronted Elwood about the unauthorized loans, and further investigation uncovered unauthorized credit card purchases made by Elwood in the LLC's name. After receiving an unsatisfactory response from Elwood about his expenditures, Sullivan terminated Elwood's 1. What does the court mean when it cites a "breach of the implied covenant of good management position at Headfirst. Sullivan conceded, however, that the Operating Agreement did not authorize him to terminate Elwood's membership status in the LLC. Soon after his faith"? What specific acts constituted bad faith? termination, Elwood began a campaign of retaliation. For example, Elwood (1) caused Headfirst's website registration to be suspended, resulting in its website being shut down for 2. Because the Operating Agreement did not address whether Sullivan could terminate several days; (2) provided false information to Bank of America that resulted in a two-month Elwood's membership in the LLC, didn't Elwood have the right to continue to act on freeze of Headfirst's bank account, which at the time contained $600,000; and (3) deprived Headfirst of its access to its Google Adwords account, an advertising tool Headfirst used to behalf of the LLC? Explain. recruit potential customers. Elwood denied that his actions were retaliatory, explaining instead that he was exercising his rights as a member of the LLC. On behalf of the LLC, Sullivan 3. What kind of language and procedure could have been included in the Operating filed suit against Elwood asking the court to issue an order to expel Elwood pursuant to the Agreement that may have prevented the LLC from having to seek a judicial expulsion of District of Columbia's LLC statute. one of its members? Issue: Although the LLC Operating Agreement was silent on expulsion of members, is Elwood's conduct sufficient to justify a judicial expulsion? 1. Headfirst Baseball LLC is a member-managed LLC. 2. Sullivan's ability to terminate Elwood's management position at Headfirst Ruling: Yes. The Federal District Court for the District of Columbia ruled in favor of Headfirst, holding that even though the LLC Operating Agreement was silent on expulsion of because of his unauthorized loans and credit card purchases in Headfirst's members, Elwood's conduct was sufficient to justify a judicial expulsion. The court reasoned name likely stems from his status as a controlling member of Headfirst. that Elwood materially breached the LLC Operating Agreement in a way that triggered the 3. Elwood's fiduciary duties to Headfirst and Sullivan were not terminated upon right to expel him. the termination of Elwood's managerial authority in Headfirst. The court noted that a breach of the operating agreement is material only if it relates to a 4. As a member of Headfirst, Elwood has limited personal liability for repayment matter of vital importance or goes to the essence of the contract and substantially frustrates the of the $600,000 he borrowed from Headfirst. purpose for which the contract was agreed to by the injured party. The evidence adduced at 5. If the actions of Elwood caused Headfirst to operate at a loss, that loss will be trial showed that Elwood's conduct constituted a breach of the implied covenant of good faith and fair dealing contained in Headfirst's Operating Agreement. The operation of the several reported on an informational return prepared by Headfirst and on Elwood and Headfirst entities was closely managed by both Elwood and Sullivan, and Elwood's Sullivan's individual income tax returns via the default provisions of unauthorized use of Headfirst's funds and his acts of sabotage in 2013 with respect to RULLCA. Headfirst relate to a matter of vital importance to the agreement between them, i.e., Sullivan's ability to rely on Elwood to act in good faith as a business associate. The Court therefore determined that Elwood's conduct warrants his expulsion as a member of Headfirst pursuant to D.C.'s LLC statute. Limited Liability Dartnowching. (IT Dal. tad TL D statuton 9 NOV 1 8 city