Judge: Curtis A. Kin, Case: 22STCP04241, Date: 2023-08-22 Tentative Ruling

Case Number: 22STCP04241    Hearing Date: March 19, 2024    Dept: 82

Petitioner Jimmi Lewis petitions for a writ of mandate directing respondents VOI Insurance Solutions, LLC and R & T Management, Inc. to deliver copies of documents specified in paragraph 14 of Lewis’s petition.

I.       Factual Background

VOI Insurance Solutions, LLC (“VOI”) is a Delaware limited liability company in the business of originating and producing insurance policies.  (Akerley VOI Decl. ¶ 2 & Ex. C at Recital A & § 2.4.)

            Starting July 1, 2012, pursuant to a written agreement (“Employment Agreement”), petitioner Jimmi Lewis was employed by respondent VOI Insurance Solutions, LLC (“VOI”) as the Executive Vice President. (Akerley VOI Decl. ¶ 2 & Ex. A.) In connection with petitioner’s employment, petitioner was granted “incentive membership interests” in VOI pursuant to an Award Agreement. (Akerley VOI Decl. Ex. A at 2.) In the Award Agreement, petitioner was granted “five percent (5%) of the total issued and outstanding membership interests” of VOI as of July 1, 2012, subject to adjustment based on reaching performance targets set forth in that agreement. (Akerley VOI Decl. Ex. B at 2].)

The Award Agreement was expressly subject to the terms of VOI’s Operating Agreement. (Akerley VOI Decl. Ex. B at 1 [Recital A].) Petitioner “accept[ed] and agree[d] to be bound by all the terms and conditions of the LLC Agreement [i.e., Operating Agreement], as such terms and conditions are modified in their application” to petitioner pursuant to the Award Agreement. (Akerley VOI Decl. Ex. B at 1 [¶ 1.a.].)

            VOI’s Operating Agreement defines “Members” as “any Person who has entered into a Subscription Agreement, has not withdrawn or disassociated itself from the Company, and is listed as a Member of the Company in the books and records of the Company.” (Akerley VOI Decl. Ex. C at § 1.49.) A “Subscription Agreement” is “an agreement to acquire interests in [VOI] entered into between [VOI] and each Member.” (Akerley VOI Decl. Ex. C at § 1.66.) “Assignee,” on the other hand, is defined as “an assignee or a transferee of a Member Interest who has not been admitted as a new Member.” (Akerley VOI Decl. Ex. C at § 1.8.)

            From May 2012 through December 31, 2021, respondent R & T Management, Inc. (“R&T”) owned and managed VOI. (Akerley R&T Decl. ¶ 2.) On December 31, 2021, R&T assigned its membership interests and management responsibilities in VOI to Mary Street Group II, Inc. (Akerley R&T Decl. ¶¶ 3, 4 & Ex. 1 at §§ 1, 3.)

            On May 12, 2022, VOI terminated petitioner’s employment. (Lewis Decl. ¶ 24.)

Through the instant petition, petitioner seeks the following documents from VOI:

(a)  The complete Operating Agreement of VOI INSURANCE SOLUTIONS, LLC (“VOI”) dated June 3, 2010 (the “Operating Agreement”) including the Subscription Agreements described therein and any amendments thereto.

(b)  A true, correct and complete copy of any written limited liability company agreement and certificate of formation and all amendments thereto with regard to VOI.

(c)  Any and all documents relating to R&T Management Inc. (“R&T”) being appointed the manager of VOI and the terms and conditions of any agreement pursuant to which R&T acts as the manager of VOI.

(d)  All minutes and resolutions of VOI in connection with the affairs of VOI since June 3, 2010 including but not limited to its members and its manager.

(e)  Any and all documents related to or referring to VOI in connection with an alleged transaction for a business combination, merger, purchase of assets, purchase of stock, purchase of assets [sic] in calendar year 2021 involving Pango and First American including but not limited to, documents providing for the exclusion of VOI from the transaction between Pango and First American or among other third parties.

(f)   Documents reflecting an alleged business combination transaction in calendar year 2021 between Pango and First American.

(g)  Any and all documents reflecting an agreement, understanding or course of conduct between VOI and Pango pursuant to which Pango agreed to provide sales leads to VOI.

(h)  Any and all documents reflecting that Pango was terminating its agreement or understanding with VOI to provide sales leads to VOI for the period January 1, 2021 to date.

(i)   Any and all documents during calendar years 2020, 2021, 2022 and to date reflecting any changes in ownership of R&T and any changes in the directors and officers of R&T.

(j)   True and full information regarding the status of the business and financial condition of VOI.

(k)  A current list of the name and last known business, residence or mailing address of each member and manager of VOI.

(l)   Any and all documents reflecting the ownership of R&T, its officer and directors for the period commencing January 1, 2018 to date.

(Pet. ¶ 14; Prayer for Relief ¶ A.)

II.      Procedural History

            On December 1, 2022, petitioner Jimmi Lewis filed a Petition for Writ of Mandate to Enforce Member’s Right to Obtain, Inspect and Copy Certain Records of a Limited Liability Company. On February 15, 2022, the verification to the petition was filed.

            On January 10, 2023, VOI filed an Answer. On June 12, 2023, after R&T’s motion to strike had been denied (see 5/18/23 Minute Order]), R&T filed an Answer.

            On January 9, 2023, VOI filed a cross-petition against James Alan Lewis, a/k/a Jimmi Lewis. On February 28, 2023, petitioner filed a cross-petition against VOI, R & T, Pango Group, Inc., First American Financial Corporation, and Scott Akerley. On March 16, 2023, the Court (Hon. Mary H. Strobel) stayed the cross-petitions pending resolution of the writ cause of action in the initial petition.

            On January 19, 2024, petitioner filed an opening brief. On February 16, 2024, VOI and R&T filed separate oppositions. On March 1, 2024, petitioner filed a reply to each of the two oppositions.

III.     Standard of Review

CCP § 1085(a) provides: “A writ of mandate may be issued by any court to any inferior tribunal, corporation, board, or person, to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust, or station, or to compel the admission of a party to the use and enjoyment of a right or office to which the party is entitled, and from which the party is unlawfully precluded by that inferior tribunal, corporation, board, or person.”

“There are two essential requirements to the issuance of a traditional writ of mandate: (1) a clear, present and usually ministerial duty on the part of the respondent, and (2) a clear, present and beneficial right on the part of the petitioner to the performance of that duty.” (California Assn. for Health Services at Home v. State Dept. of Health Services (2007) 148 Cal.App.4th 696, 704.) “An action in ordinary mandamus is proper where…the claim is that an agency has failed to act as required by law.” (Id. at 705.)

Corporate inspections are governed under CCP § 1085. (Wolf v. CDS Devco (2010) 185 Cal.App.4th 903, 912.) The rights of a member of an LLC to inspect and copy records of the LLC are set forth in Corporations Code §§ 17704.10 and 17701.13. Section 17704.10 provides in relevant part:

(a) Upon the request of a member or transferee, for purposes reasonably related to the interest of that person as a member or a transferee, a manager or, if the limited liability company is member-managed, a member in possession of the requested information, shall promptly deliver, in writing, to the member or transferee, at the expense of the limited liability company, a copy of the information required to be maintained by paragraphs (1), (2), and (4) of subdivision (d) of Section 17701.13, and any written operating agreement of the limited liability company.

(b) Each member, manager, and transferee has the right, upon reasonable request, for purposes reasonably related to the interest of that person as a member, manager, or transferee, to each of the following:

(1) To inspect and copy during normal business hours any of the records required to be maintained pursuant to Section 17701.13.

(2) To obtain in writing from the limited liability company, promptly after becoming available, a copy of the limited liability company's federal, state, and local income tax returns for each year….

(g) In any action under this section or under Section 17713.07, if the court finds the failure of the limited liability company to comply with the requirements of this section is without justification, the court may award an amount sufficient to reimburse the person bringing the action for the reasonable expenses incurred by that person, including attorney's fees, in connection with the action or proceeding.

With respect to records that are required to be maintained, section 17701.13 provides, in relevant part:

(d) Each limited liability company shall maintain in writing or in any other form capable of being converted into clearly legible tangible form at the office referred to in subdivision (a)^[[1]] all of the following:

(1) A current list of the full name and last known business or residence address of each member and of each transferee set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and transferee.

(2) If the limited liability company is a manager-managed limited liability company, a current list of the full name and business or residence address of each manager.

(3) A copy of the articles of organization and all amendments thereto, together with any powers of attorney pursuant to which the articles of organization or any amendments thereto were executed.

(4) Copies of the limited liability company’s federal, state, and local income tax or information returns and reports, if any, for the six most recent fiscal years.

(5) A copy of the limited liability company’s operating agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed.

(6) Copies of the financial statement of the limited liability company, if any, for the six most recent fiscal years.

(7) The books and records of the limited liability company as they relate to the internal affairs of the limited liability company for at least the current and past four fiscal years.

IV.     Analysis

            As a preliminary matter, VOI’s request for judicial notice is GRANTED in its entirety. (Evid. Code § 452(a).)

A.           Merits of Petition with Respect to VOI Insurance Solutions, LLC

            The essential issue presented in the petition is whether petitioner was a member of VOI. (See Pet. ¶¶ 4, 5, 6, 8 [alleging that petitioner is member of VOI and has inspection rights as member].) Petitioner maintains that, when he entered into the Employment Agreement, he was told by R&T and VOI that he would be an owner of VOI. (Lewis Decl. ¶ 13.)[2] Petitioner also asserts that he was “repeatedly assured” by VOI and R&T that he was a member of VOI. (Lewis Decl. ¶ 16.)

            Petitioner’s rights to inspect documents are governed by the statutes governing inspection. (See Ramirez v. Gilead Sciences, Inc. (2021) 66 Cal.App.5th 218, 224 [concerning shareholder inspection rights under Corp. Code § 1601].) Because VOI is a Delaware limited liability company, the right to inspect its documents is governed by Delaware law. (See Juul Labs, Inc. v. Grove (Del. Ch. 2020) 238 A.3d 904, 918; see also Grove v. Juul Labs, Inc. (2022) 77 Cal.App.5th 1081, 1086-87, 1099 [giving full faith and credit to Delaware decision].) It is undisputed that California law also governs petitioner’s inspection rights because more than 25% of VOI’s members reside in California. (See VOI Opp. at 5, fn. 25 [citing Corp. Code § 17708.08]; Opening Br. at 2:14-19 [stating that Corp. Code § 17708.08 applies].)

            Accordingly, the Court examines whether petitioner has the right to inspect VOI’s documents under Delaware law and California law.[3]

1.            Delaware Law

Under the Delaware Code, members (and managers) have the right to obtain information and documents of a limited liability company (“LLC”). (6 Del. Code § 18-305(a), (b); see also 6 Del. Code § 18-305(f) [providing that “demanding member or manager may apply to the Court of Chancery for an order to compel such disclosure”].) A “member” is “a person who is admitted to a limited liability company as a member as provided in § 18-301 of this title, and includes a member of the limited liability company generally and a member associated with a series of the limited liability company.” (6 Del. Code § 18-101(13).) Section 18-301 of title 6 distinguishes between members and assignees. Assignees of an interest of an LLC are admitted as members of the LLC as provided in section 18-704(a) of title 6. (6 Del. Code § 18-301(b)(2).) Section 18-704(a) provides three ways by which an assignee of an LLC interest becomes a member: (1) as provided in the LLC agreement; (2) upon the vote or consent of all the members of the LLC; or (3) upon the voluntary assignment of all the interests in the LLC by the sole member to a single assignee. (6 Del. Code § 18-301(a)(1-3).)

Petitioner does not present any evidence demonstrating that all the members of the LLC voted or consented to petitioner’s membership in VOI. Nor does petitioner present any evidence that there is a sole member of VOI that transferred all its interest in the LLC to petitioner. Thus, in accordance with section 18-704(a), petitioner may obtain documents and information only if he became a member of VOI in accordance with the terms of the Operating Agreement.

As recounted in the Factual Background section above, VOI’s Operating Agreement defines “Members” as “any Person who has entered into a Subscription Agreement, has not withdrawn or disassociated itself from the Company, and is listed as a Member of the Company in the books and records of the Company.” (Ackerley VOI Decl. ¶ 2 & Ex. C at § 1.49; see also id. at § 1.66 [defining “Subscription Agreement”].)  “The petitioner always bears the burden of proof in a mandate proceeding brought under Code of Civil Procedure section 1085.” (California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1154.)

Here, petitioner has presented no evidence that he entered into any such Subscription Agreement. (Cf. Akerley VOI Decl. ¶ 4 [“[Petitioner] was never voted into membership by the vote or consent of all VOI members. He never entered into a subscription agreement. And he has never been listed as a member of VOI in VOI’s books and records”].) Petitioner also has not presented any evidence that he is listed as a Member of VOI in its books and records.[4] Instead, in support of his opening brief, petitioner presents various documents, but none of these documents sufficiently meet petitioner’s burden to demonstrate he was a Member of VOI for the following reasons:

• The Employment Agreement references an Award Agreement, which granted petitioner an “incentive Membership Interest” subject to the terms of the Operating Agreement. (Lewis Ex. C at Recital A.) The terms of the Operating Agreement provide that “Members” must have entered into a Subscription Agreement and be listed as a Member of VOI’s books and records. (Lewis Ex. B at § 1.49.) As stated above, petitioner presents no evidence of either condition having been satisfied.

• The Business Entity Disclosure form filed with the California Department of Insurance lists petitioner as having 5% ownership (Lewis Ex. D), but being listed as having an ownership interest is not necessarily synonymous with declaring petitioner a Member of VOI in accordance with its Operating Agreement. Indeed, being listed as having a 5% ownership interest is consistent with being an Assignee of a 5% membership interest, which explicitly is not the same as being a Member of VOI.  (See Akerley VOI Decl. Ex. C at § 1.8.)

• VOI’s August 2021 Business Plan indicates that Lewis is a Principal (Lewis Ex. E), but such a description does not necessarily mean he is a Member of VOI in accordance with its Operating Agreement.  Being described as a so-called principal is also consistent with being an Assignee of a 5% membership interest, which is not the same as being a Member of VOI.  (See Akerley VOI Decl. Ex. C at § 1.8.)

• VOI’s admission in discovery that petitioner owned 8% of VOI as of December 31, 2021 only indicates that petitioner had an ownership interest, but does not constitute an admission that petitioner was a Member. (See Lewis Ex. F [No. 4].) While VOI also admitted that it “has not purchased [petitioner’s] membership interest in VOI,” such admission does not necessarily concede petitioner was a Member with an interest to sell.  Rather such admission is also consistent with petitioner being an Assignee of a membership interest that he has not sold. (See Monroy v. City of Los Angeles (2008) 164 Cal.App.4th 248, 260 [“If a response to a request for admission is unambiguous, and is not subject to different meanings, the matter admitted is conclusively established”].)

• The Statement of Information filed with the California Secretary of State only indicates that R&T and Scott Akerley, VOI’s CEO, are managers or members of VOI, not petitioner. (Lewis Ex. G.)

Petitioner’s averments that he was told by VOI and R&T that he was an owner are also unavailing, because ownership is not equivalent to membership under the Operating Agreement. (See Lewis Decl. ¶¶ 12, 18-20, 23.) Petitioner also avers that he was “repeatedly assured by VOI and R&T” that he was a member of VOI “[a]t all times relevant.” (Lewis Decl. ¶ 16.) Petitioner does not state who from VOI or R&T made the purported representations of membership and specifically when such representations were made. Petitioner’s vague and conclusory assertions are insufficient for petitioner to satisfy his burden to show that he was a Member of VOI under the Operating Agreement. (See Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 281 [legal conclusions and ultimate facts without evidentiary basis insufficient to support relief].)

Lastly, petitioner claims that he must have been a Member of VOI, because VOI and R&T needed Lewis’ licensure with the California Department of Insurance, to conduct business. (Opening Br. at 3:11-15.)   Petitioner cites no authority for this proposition, and contentions unsupported by citation of authority are disregarded. (Niko, 144 Cal.App.4th at 368; Valov, 132 Cal.App.4th at 1132.) Further, it does not necessarily follow that petitioner was made a Member of VOI, notwithstanding the failure to adhere to the requirements of the Operating Agreement to become a Member, just because his license may have been needed.

For the foregoing reasons, petitioner was an “assignee” under the Operating Agreement. (Akerley VOI Decl. ¶ 2 & Ex. C at § 1.8 [“assignee” defined as “an assignee or a transferee of a Member Interest who has not been admitted as a new Member”].) As an “assignee,” petitioner may own an interest in VOI, but this does not mean that petitioner is a Member of VOI. Petitioner thus does not meet his burden to demonstrate that he has inspection rights under Delaware law.

2.            California Law

Corporations Code § 17708.08 states: “If the members of a foreign limited liability company residing in this state represent 25 percent or more of the voting interests of the members of that foreign limited liability company, those members shall be entitled to all information and inspection rights provided in Section 17704.10.” There is no dispute that at least 25% of the voting interests of the members of VOI, a foreign LLC based in Delaware reside in California.

            Under the California Revised Uniform Limited Liability Company Act (Corp. Code § 17701.01, et seq.), “member” is defined as a “person that has become a member of a limited liability company under Section 17704.01….” (Corp. Code § 17701.02(p).) Section 17704.01 provides that a person becomes a member of an LLC (1) as provided in the operating agreement, (2) as the result of the LLC’s conversion from another business form, or (3) with the consent of all members of the LLC. (Corp. Code § 17704.01(c).) Membership is distinct from ownership of an interest in the LLC. (See Corp. Code §§ 17701.02(aa) [“transferable interest” is right to receive distributions from LLC “whether or not the person remains a member], 17701.02(ab) [“transferee” defined as “a person to which all or part of a transferable interest has been transferred, whether or not the transferor is a member”], 17704.01(d) [“A person may become a member without acquiring a transferable interest and without making or being obligated to make a contribution to the limited liability company”].)

            There is no assertion that VOI has converted from any other business form. Accordingly, under California law, petitioner may be a member of VOI as provided in the Operating Agreement or with the consent of all members of VOI. As stated above with respect to Delaware law, petitioner presents no evidence that he entered into a Subscription Agreement or is listed as a Member in VOI’s books and records, as is required by the Operating Agreement. Petitioner also presents no evidence that all the members of VOI consented to petitioner’s membership. (Cf. Akerley VOI Decl. ¶ 4 [petitioner “was never voted into membership by the vote or consent of all VOI members”].)

            For the foregoing reasons, petitioner does not establish that he is entitled to inspect VOI’s records under California law.

3.            Conclusion

Based on the foregoing, petitioner has not established that he can compel the inspection of VOI’s records because he is not a “Member” under the Operating Agreement. Accordingly, the Court does not reach VOI’s argument that petitioner’s inspection request is overbroad under Delaware or California law.

B.           Merits of Petition with Respect to R & T Management, Inc.

In a separate opposition, R&T presents the following arguments: (1) petitioner failed to make any pre-litigation demand on R&T; (2) R&T is not a proper party; and (3) petitioner’s inspection request is overbroad.

The second contention is dispositive. R&T establishes that it is not properly named in the writ cause of action. Corporations Code § 17704.10(b)(1) provides that members, managers, and transferees have the right to “inspect and copy during normal business hours any of the records required to be maintained pursuant to Section 17701.13.” Reference to inspection during normal business hours implies that the records may be inspected at the office where the records are kept. (See Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238, 1263 [analyzing similarly worded Corporations Code § 1601].) Further, Corporations Code § 17704.10(g) states: “In any action under this section…if the court finds the failure of the limited liability company to comply with the requirements of this section is without justification, the court may award an amount sufficient to reimburse the person bringing the action for the reasonable expenses incurred by that person, including attorney’s fees, in connection with the action or proceeding.”

            Any failure by VOI to comply with petitioner’s purported inspection rights cannot be imputed to R&T. On December 31, 2021, prior to the filing of the instant petition, R&T assigned all of its VOI membership interests and management responsibilities to Mary Street Group II, Inc. (Akerley R&T Decl. ¶¶ 3, 4 & Ex. 1.) Accordingly, R&T no longer has any control over VOI. R&T cannot order VOI to allow inspection of the documents which petitioner seeks to inspect.

            In support of the opening brief, petitioner presents a Statement of Information filed by VOI on May 25, 2023 at 3:01 p.m. indicating that R&T was the manager of VOI. (Lewis Decl. Ex. G.) However, VOI subsequently filed an amended Statement of Information at 4:26 p.m. on May 25, 2023 indicating that Scott Akerley, not R&T, was VOI’s manager. This amended Statement of Information, combined with the assignment of management responsibilities more than a year prior, indicates that the Statement of Information filed at 3:01 p.m. on May 25, 2023 was in error. (See Hill Decl. ¶¶ 3, 4 & Exs. A, B.)

            For the foregoing reasons, petitioner’s writ cause of action against R&T is misdirected. The Court therefore does not reach R&T’s first and third arguments about the failure to make pre-litigation demand or overbreadth of petitioner’s inspection request, respectively.

C.           Attorney Fees

Petitioner alleges that he is entitled to attorney fees under the Operating Agreement and Corporations Code § 17704.10(g). However, petitioner is not the prevailing party. To the extent that VOI or R&T may be entitled to attorney fees, that issue is reserved for a future fee motion.

V.      Conclusion

The petition is DENIED. Pursuant to Local Rule 3.231(n), respondent VOI Insurance Solutions, LLC and R & T Management, Inc. shall jointly prepare, serve, and ultimately file a proposed judgment.

            At the hearing, the parties shall discuss whether the causes of action in the cross-petitions remain after resolution of the writ cause of action.