The Business Litigation Blog

Dispute Over Import Center Ownership

Partners, controlling shareholders, and controlling LLC members have fiduciary duties to their other­ interest holders. The duties can vary depending on agreements reached, but one of the classic duties is loyalty. A recent case illustrates how lawsuits might allege an action for breach of fiduciary duty.

After negotiating a deal to build a facility at O’Hare, two businessmen, plaintiffs Shlomo Danieli and James Richards, are suing their investor, Samuel Sax. They claim that he went behind their backs to negotiate deals that forced them out of the operation.

Danieli and Richards came up with the idea to have an import distribution center for perishable goods at O’Hare in 2008. In 2012, they approached Sax to finance the operation by offering him 51% ownership. After getting approval from the Chicago Department of Aviation in 2013, Sax convinced Danieli and Richards to give up 10% to bring on another investor and to name the distribution center the “Chicago Perishable Center.” During the final organization of the entity, Sax named himself manager, and later demanded a new lease with a buildout repaying him for construction and guaranteeing his return. “Since 2014,” the complaint stated, “Sax has unilaterally engaged the city in new negotiations of the lease without consulting plaintiffs and has frozen plaintiffs out of the operations of CPC.” Danieli and Richards claim that Sax refused to obey the original business plan and that the plaintiffs “are not members of the Chicago Perishable Center.” They seek a declaratory judgment naming them members of CPC, declaring that Sax lacks the authority to execute agreements without their authorization, and a complaint claiming breach of fiduciary duty.

More info on this case can be found here.

It appears Mr. Sax  has had other legal disputes with past companies:  “A group of investors in a company …. has won its court battle to oust founder and one-time Chicago banker Samuel Sax. The tussle ended in December, when Shield Technologies Corp. and the investor group, Shield Acquisition Group LLC, finalized an agreement to settle a lawsuit filed by the company in late 2011.” Before that, his banking career "ended in 1989 with a misdemeanor conviction for misusing funds at another bank.”

For more information on these articles, or partnership/contract disputes in general, please reach out to Tom Patterson or any of the other great attorneys at the Patterson Law Firm.

 

 

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