R. DEAN LINDEN, Ph.D., APPELLANT/CROSS-APPELLEE
WILLIAM TID GRIFFIN; JEFF VARNER; CHAD ESTES; HARTLEY BLAHA; RONALD BOWMAN, JR.; STEVEN STENGELL; JAMES E. SHANE; AND ALLIED ENERGY, INC., APPELLEES/CROSS-APPELLANTS
ON REVIEW FROM COURT OF APPEALS. CASE NOS. 2009-CA-000970-MR AND 2009-CA-001917-MR. JEFFERSON CIRCUIT COURT NO. 2009-CI-003347.
COUNSEL FOR APPELLANT/CROSS-APPELLEE: Ann B. Oldfather, Robert Sean Deskins, Donald L. Cox, John Davis Cox.
COUNSEL FOR APPELLEES/CROSS-APPELLANTS: J. Kent Wicker, Jennifer Anne Schultz.
OPINION OF THE COURT BY JUSTICE CUNNINGHAM. All sitting. All concur.
In 2006, Dr. R. Dean Linden and William Tid Griffin developed an industrial gravity and vacuum pressure filtration system. This technology, at its most basic level, separates liquid and solid components from sewage waste. In 2007, Linden and Griffin formed Gryphon Environmental, LLC (" Gryphon" or the " Company" ) to market and sell the filtration system. Linden maintains that this technology has a future estimated value of approximately two billion dollars. At its inception, Linden and Griffin agreed to be co-founders and equal owners of Gryphon. Linden served as President, Chief Executive Officer, Operating Manager, and Director. Griffin served as Chairman of the Board. Both Linden and Griffin signed an operating agreement (" Original Operating Agreement" ) in May of 2007.
Gryphon experienced growth and added additional members, including the named Defendants who share the interests of Griffin in this action. For the sake of simplicity, their interests are addressed under the Griffin name. Still needing further capital, and in order to attract new investors, Linden and Griffin retained Greenebaum, Doll and McDonald, PLLC to amend the Company's Private Placement Memorandum (" PPM" ) and Original Operating Agreement. Linden claims that Gryphon's lawyers and Griffin himself each represented to Linden that the PPM and the Amended Operating Agreement (" Amended Agreement" ) would not alter any of the members' material rights provided for in the Original Operating Agreement.
By July of 2008, the Amended Agreement had been formulated and signed by all members of the Company. At least two material provisions which were not
included in the Original Operating Agreement were added to the Amended Agreement. Specifically, § 17.4(a) added an involuntary purchase price sales provision and § 21.7 included an arbitration clause. It is unclear whether Linden actually reviewed the Amended Agreement before signing it. However, as evidenced from this lawsuit, Linden denies being aware of the inclusion of the arbitration and involuntary purchase price provisions.
Linden and Griffin began having disputes over Gryphon's management in late 2008. A Company meeting was held in January of 2009. Linden claims that he received no notice of the meeting and, therefore, did not attend. During this meeting, Gryphon's members unanimously voted to remove Linden as an officer and director of the Company. The members also voted to remove Linden as an authorized signatory of Gryphon's bank account. The Defendants maintain that Linden's removal was due to his misconduct and poor performance. The Defendants also alleged that Linden had persuaded potential investors to invest in another company in which he held an interest.
After the January 2009 meeting, Linden issued himself a check, or several checks, from Gryphon's bank account as reimbursement for Company expenses. Gryphon's bank failed to honor these checks, resulting in the filing of a criminal complaint against Linden and the freezing of his personal account. It is Linden's contention that he was unaware that he no longer had authority to issue and cash checks from Gryphon's bank account. Additionally, Linden claims Griffin was the individual who filed the criminal complaint. The record, however, is unclear as to who instituted the criminal complaint or if criminal charges resulted.
Linden filed suit against the Defendants in the Jefferson Circuit Court on April 2, 2009 alleging fraud, defamation, abuse of process, breach of fiduciary duties, Blue Sky violations, mutual mistake, and/or unilateral mistake coupled with fraud in the inducement. Linden's complaint also requested declaratory judgment, accounting, and injunctive relief. On April 9, 2009, the Defendants filed a motion to stay proceedings and compel arbitration pursuant to § 21.7 of the Amended Agreement. A hearing on the matter was conducted on May 11, 2009. The trial court issued an ...