Summary 2009 WY 65

Summary of Decision issued May 19, 2009

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Lieberman v. Mossbrook; Mossbrook v. Lieberman

Citation: 2009 WY 65

Docket Number: S-08-0159; S-08-0160

Appeal from the District Court of Fremont County, the Honorable Norman E. Young, Judge.

Representing Lieberman: William D. Bagley of Frontier Law Center, Cheyenne, Wyoming.

Representing Mossbrook, et al: Alexander K. Davison and Terry W. Connolly of Patton & Davison, Cheyenne, Wyoming.

Facts/Discussion: After Lieberman withdrew as a member of Wyoming.com LLC, Wyoming.com filed a petition for a declaratory judgment seeking a determination of its rights and Lieberman filed a complaint for dissolution of the company and the return of his share of its value. Three district court determinations and three appeals to the Court followed during which it was established that Lieberman’s withdrawal did not result in dissolution of the company, he was entitled to the return of his $20,000 capital contribution and he retained an equity interest in the company. Those determinations having been made, the declaratory action was dismissed. Lieberman then filed a complaint against the owners of Wyoming.com, who in the meantime had merged the limited liability company into a corporation. The district court granted partial summary judgment for Lieberman on his claim for conversion and set trial for determination of the value of his equity interest and his entitlement to other damages. The district court entered judgment on the conversion claim for Lieberman in the amount of $958,475.44. The district court found for the Mossbrooks on the remaining claims.
See the opinion for a complete summary of Lieberman I, II and III.

Statute of limitations: In a claim of conversion, the cause of action accrues when the plaintiff knew or should have known that his property was wrongfully converted. The dispute began in 1998 when Lieberman withdrew from Wyoming.com and demanded return of his proportionate share of the company’s value. He filed a complaint in June, 1998 well within the four year statute of limitations for conversion claims. The nature of Lieberman’s equity interest became clear in 2004 when the Court decided Lieberman II and within six months, he filed his claim for conversion. The district court correctly determined that Lieberman’s claim was not barred.
The law of the case: The Court’s decisions in the prior Lieberman cases were based upon an incomplete record from which they were able to determine only that Lieberman retained an equity interest in Wyoming.com. The law of the case doctrine did not limit the district court to any particular method for determining the value of Lieberman’s equity interest in a conversion action.
Date of conversion and valuation of Lieberman’s equity interest: Based upon the record before the Court which included the cancelled membership certificate, Mossbrook’s testimony that the certificate was in fact cancelled April 16, 1998, and the evidence showing that Wyoming.com paid the $20,000 capital contribution to the district court in the garnishment proceeding, the Court stated it was clear Lieberman was entitled to liquidating distributions as of that same date. Therefore, pursuant to § 17-15-142, the corporation was liable to him for conversion. The Court stated that the prior Lieberman decisions were never intended to suggest that Lieberman had any legitimate claim to a shareholder interest in the successor corporation.
The Court determined the value of Lieberman’s interest at the time and place of the conversion based upon an independent appraiser’s value from April 1998. Lieberman’s equity interest was $100,000.
Breach of fiduciary duty: Lieberman alleged the Mossbrooks owed him a fiduciary duty of good faith and fair dealing to provide him with K-1 reports and tax returns. The Court stated that after Lieberman withdrew and Wyoming.com returned his capital contribution, he had no right to K-1 reports and tax returns.
Judgment against the members/shareholders individually and joint and several liability: There was nothing in the record to support a determination that the separate identity of Wyoming.com or the corporation should have been disregarded and the members or shareholders held individually liable. Both the Wyoming and the Federal rules allow the dismissal or addition of parties to an action even after the trial has concluded. The Court stated that adding Wyoming.com prejudiced no one and that no grounds existed for piercing the corporate veil. The shareholders have no liability to Lieberman, jointly, severally or otherwise.
Discovery sanctions: In considering whether a district court abused its discretion, the ultimate issue is whether or not the court could reasonably conclude as it did. The Mossbrooks’ actions with regard to the documents and the deposition did not comply with the district court’s order. The order granting sanctions was affirmed.

Conclusion: Lieberman’s 2005 complaint was not barred by the statute of limitations. The Court’s decisions in Lieberman I, II and III did not establish law of the case precluding the district court from considering the status of Lieberman’s equity interest in light of his conversion claim and evidence presented for the first time after the earlier decisions were rendered. Given the evidence establishing that Lieberman’s membership and equity interest in Wyoming .com ended in 1998, and the applicable statutory and contractual provisions, the district court’s judgment valuing his equity interest as of 2001 was erroneous as a matter of law.
The Mossbrooks presented evidence that the value of Lieberman’s interest was $100,000 less than the $27,965 they returned to him. The Court concluded from the record that the evidence supported Mossbrooks’ calculation and held that Lieberman was entitled to a judgment of $72,035 plus interest. Because the parties against whom he brought his claims were not liable, the corporation must be substituted as the defendant when the judgment was entered. The Court affirmed the district court’s sanctions against the Mossbrooks, although the order must be amended on remand to reflect that Wyoming.com was the responsible party.

Affirmed in part, reversed in part.

J. Kite delivered the decision.

Link: http://tinyurl.com/qm74tg .

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