Illinois Appellate Court Affirms in Part, Reverses in Part — Lawsuit Involving Limited Liability Corporation Members and Prejudgment Interest

In this appeal, the defendant Michael Maschmeyer’s conduct as a member of the plaintiff, Chicago Roof, Deck and Garden LLC (CRDG), led to an appeal regarding the claimed interest owed CRDG. Plaintiffs Darren Flynn and Tomasz Bartosiewicz owned the rest of the membership interest.

After a bench trial, the trial judge found that Maschmeyer breached his fiduciary duty as a member of CRDG by taking business opportunities that should have been first offered to CRDG. The trial court entered judgment in favor of CRDG and against Maschmeyer as follows: (1) $1,768,927 in compensatory damages, (2) $236,350 in prejudgment interest, and (3) $651,104 in punitive damages. The total judgment in favor of CRDG and against Maschmeyer was $2,656,381.

However, the trial judge also found that CRDG was required to compensate Maschmeyer for the fair value of his membership interest upon his disassociation from CRDG, which the court found occurred on June 16, 2014. The trial court determined that the fair value of Maschmeyer’s membership interest was $2,867,376 and entered judgment in favor of Maschmeyer and against CRDG in that amount. After setting off the amount of the judgment against Maschmeyer, the trial court’s judgments resulted in a net judgment in favor of Maschmeyer and against CRDG in the amount of $210,995.

Both plaintiffs and Maschmeyer appealed, but neither party appealed (1) the finding that Maschmeyer breached his fiduciary duty to CRDG, (2) the imposition of punitive damages, or (3) the addition of prejudgment interest to the judgment against Maschmeyer.

In the parties’ appeal, plaintiffs challenged (1) the grant of judgment in Maschmeyer’s favor or, alternatively, the amount of that judgment; (2) the amount of the judgment in CRDG’s favor; (3) the dismissal of plaintiffs’ other counts, including counts against defendants Anne Maschmeyer and Bank of America, N.A.; and (4) the denial of plaintiffs’ motions for leave to amend their complaint.

In his cross-appeal, Maschmeyer challenged the trial court’s denial of his requests for interest and attorney’s fees.

The background in this case is lengthy. Flynn and Maschmeyer were high school friends and long-time business partners, having partnered in several landscaping and real estate development businesses in St. Louis and Chicago prior to forming CRDG. In February 2009, the two formed CRDG as an Illinois member-managed limited liability company, with each as a 50% member. CRDG was engaged in the business of outdoor living design and construction services, as well as landscaping services; however, it subcontracted all construction work. Thomas Wood Craft, a construction firm owned by Mr. Bartosiewicz, was CRDG’s captive subcontractor, building CRDG’s showroom and subcontracting with CRDG to build a substantial percentage of CRDG’s clients’ projects.

Under CRGD’s 2009 and 2013 operating agreements, Flynn was the chief executive manager of CRDG, with primary responsibility for managing the operations of CRDG, including responsibility for financial matters. Maschmeyer served as CRDG’s sales agent and designer and was responsible for most of the design work; the trial court found that Maschmeyer generated a substantial portion of CRDG’s business. On March 25, 2013, Flynn and Maschmeyer admitted Bartosiewicz as a member and manager of CRDG, granting him a 15% membership interest as consideration for cancellation of certain of CRDG’s accounts payable to Thomas Wood Craft. As a result, Flynn’s and Maschmeyer’s interests in CRDG were diluted to 42.5% each.

The appeals panel found that there was no abuse of discretion in the court finding that a partial forfeiture of the distributions Maschmeyer had received was appropriate, and in styling the award to include punitive damages of $651,104. There was no abuse of discretion in the court’s ruling that the plaintiffs were entitled to 5% prejudgment interest on the damages award.

Maschmeyer specifically raised Sections 35-60 and 35-65 of the Limited Liability Corporation Act in his counterclaim and Section 35-65 which requires the award of prejudgment interest.

The appeals panel remanded the matter back to the trial court to determine the appropriate award of prejudgment interest due Maschmeyer.

Flynn v. Maschmeyer, 2020 IL App (1st) 190784 (June 25, 2020).

Kreisman Law Offices has been handling business litigation matters, commercial litigation, corporation disputes, shareholder litigation, employment contracts and disputes, and partnership, limited liability company and corporation formation matters for individuals, families and businesses for more than 40 years in and around Chicago, Cook County and its surrounding areas, including Franklin Park, Schiller Park, Bensenville, Bolingbrook, Lake in the Hills, Crystal Lake, Elgin, Calumet City, Elmhurst, Elmwood Park, Oak Park, Oak Lawn, Maywood, Broadview, Hillside, Westchester, North Riverside, Berwyn, Cicero, Joliet, Aurora, Hinsdale, Chicago (Austin, Humboldt Park, Ukrainian Village, West Town, River West, Fulton River District, Little Italy, Near West Side, Pullman Square, Little Village, Bridgeport, Greek Town, Buck Town, Lakeview, Uptown, Ravenswood, Andersonville, West Ridge, Sauganash, Beverly), Park Ridge, Des Plaines, Skokie, Wilmette, Glenview, Northbrook and Glenbrook, Ill.

Robert D. Kreisman has been an active member of the Illinois and Missouri bars since 1976.

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