Judge: Mark A. Young, Case: 22SMCP00353, Date: 2022-09-09 Tentative Ruling

Case Number: 22SMCP00353    Hearing Date: September 9, 2022    Dept: M

CASE NAME:           Jamal Holdings (US) Inc. v. 9010 Melrose Ave. LLC

CASE NO.:                22SMCP00353

MOTION:                  Writ of Mandate to Enforce Member Rights

HEARING DATE:   9/9/2022

 

Legal Standard

 

            There are two essential requirements to the issuance of an ordinary writ of mandate under Code of Civil Procedure section 1085: (1) a clear, present and 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 Ass’n for Health Services at Home v. Department of Health Services (2007) 148 Cal.App.4th 696, 704.)  “Generally, a writ will lie when there is no plain, speedy, and adequate alternative remedy . . ..”  (Pomona Police Officers’ Ass’n v. City of Pomona (1997) 58 Cal.App.4th 578, 583-84.) “The petitioner always bears the burden of proof in a mandate proceeding[.]” (California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1154.)  

 

            The rights of a member of an LLC to inspect and copy records of the LLC are set forth in Corporations Code sections 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.

 

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) 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.

 

Analysis

 

Petitioners Jamal Holdings (US), Inc., 0999849 B.C. Ltd. d/b/a Hardy Capital Ltd., and Innhouse US Investments Inc. seek a writ of mandate commanding Respondents 9010 Melrose Avenue LLC (the “Company”) and Futura Media, Inc. (“Manager”) to comply with their statutory obligations to (1) provide Petitioners with copies of certain Company documents, and (2) permit Petitioners and their agent(s) to inspect and copy certain other Company documents, or, in the alternative, to appear and show cause for the failure to do so.

 

According to the verified First Amended Petition, Petitioners are entitled to such an inspection pursuant to Corporations Code §§ 17704.10 and 17701.13 as well as provisions of the Company’s Operating Agreement. (FAP ¶ 24.) Petitioners are capital contribution members of Respondent. (Id., ¶¶ 1-6.) The Operating Agreement, at Section 5.04, provides that “Upon commencement of the Restaurant business contemplated by this Agreement, the Manager will, on a semi-annual basis, prepare and provide to each Member via the email address or mailing address supplied in Exhibit 1, a financial summary report of the operational sales performance of the Company.” (Id., ¶ 34.) Further, at Section 6.01, the Agreement provides that “The Manager will cause to be kept full, complete, accurate and proper ledgers and other books of account of all receipts and disbursements and other financial activities and of each and every transaction of the Company, as well as such other records as may be required by applicable law (including, without limitation, the LLC Act). The Members shall be entitled to review and inspect such books and records upon seven (7) days written notice to the Manager for any proper purpose.” (Id., ¶ 35.)

 

            On May 31, 2022, Petitioners sent a letter requesting:

 

• “a financial summary of the operational sales performance of the Company on a semi-annual basis pursuant to Section 5.04 of the Operating Agreement of the Company;

 

• review and inspection of all accounts, ledges, books, records, income tax or returns, activities, affairs, and transactions of the Company pursuant to Section 6.01 of the Operating Agreement;

 

• annual reports for each fiscal year containing a balance sheet as of the end of the fiscal year and an income statement and a statement of cash-flows for each fiscal year the Company has been in operation pursuant to Section 17704.10 (c) of the California Corporations Code (‘Code’);

 

• the Company’s income statement for the initial 3-month, 6-month and 9- month period of the current fiscal year and a balance sheet of the Company as of the end of such period;

 

• copies of any amendment to the Articles of Organization or the Operating Agreement which are executed by a manager pursuant to a power of attorney from the member pursuant to Section 17704.10(d) of the Code; and

 

• fully executed Operating Agreement with the most recent Exhibit A with the names, contact information, contribution, unit amounts and such other details of all other members.”

 

 (the “Requested Information”). (FAP ¶ 41.) Manager, though counsel, requested additional time to respond to the request, indicating that they intended to comply by August 1, 2022. (Id., ¶¶ 50-51.) On August 1, 2022, Manager provided four documents.  The documents provided were the 2019 and 2020 federal tax returns for the Company and “9010 Melrose Ave P&Ls”, and the Second Amended and Restated Limited Liability Company Agreement. (Id., ¶¶ 52-53.) Petitioners assert that this is a small portion of the Requested Information. (Id., ¶ 54.) As Respondents did not comply with the May 31, 2022, request by June 31, 2022, Respondents did not provide Petitioners access to the Company’s books and records as required by statute.

 

            Petitioners have shown that they are members of the Company and made records requests for purposes reasonably related to their interest in the LLC. (§ 17704.10(a).) Petitioners have a right to participate in certain of the Company’s decisions and activities, which require basic information about the Company. Moreover, the Company’s Operating Agreement envisions that members will have access to such information about their investment, and imposes a contractual duty on the Company to permit access to the LLC’s books and records. 

 

Accordingly, pursuant to section 17701.10(a), Petitioner, as an LLC member, has a right to obtain copies of the documents identified in her counsel’s May 31 letter. Pursuant to section 17701.10(b)(1), Petitioners also have a right to inspect and copy all documents required to be maintained by the Company pursuant to section 17701.13, as demanded in the same letter. Respondents have not filed an opposition brief and have made no argument as to why they should not be ordered to comply with the document and inspection requests. 

 

Accordingly, the petition is GRANTED.  The Court will grant the relief requested by Petitioner.  Petitioner to prepare a proposed order.