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A&M Hospitalities, LLC v. Alimchandani

Court of Appeals of Georgia, Second Division

May 15, 2019


          MILLER, P. J., RICKMAN and REESE, JJ.


         In 1998, Prenita Alimchandani and Jane Motley created A&M Hospitalities, LLC ("A&M"), a Georgia limited liability company, to develop and operate a hotel in Lake Park, Georgia. Over the next few years, A&M greatly expanded and developed many more hotels throughout Georgia, Florida, and Alabama. According to Alimchandani, however, starting in 2008, Jane Motley and her husband, David Motley, conducted a campaign to freeze her out of the company, leading her to initiate this lawsuit to judicially dissolve A&M. As part of the litigation, the trial court appointed a "limited receiver," whom the court charged with conducting an audit and inspection of A&M. The Motleys and A&M filed this interlocutory appeal from that appointment order, arguing that Alimchandani did not demonstrate a clear and urgent need for a receiver and that they did not receive sufficient notice before the superior court appointed the receiver. After a close and careful review of the record, we affirm.

         The record shows that Alimchandani and Jane and David Motley jointly created A&M in 1998 to develop and operate a Hampton Inn in Lake Park, Georgia. Originally, Jane Motley owned a 75% interest in A&M and Alimchandani owned 25%. From the beginning, operational control and decision making for A&M was vested with Jane Motley, who was designated A&M's manager. In 2006, half of Jane Motley's 75% interest was transferred to David Motley, and then the interests of Jane and David Motley were both transferred to JDS&J Enterprises, LP, a limited partnership comprising of Jane and David Motley and their children. At the same time, David Motley was made a co-manager of A&M with Jane Motley.

         In October 2017, Alimchandani filed the instant lawsuit against the Motleys and A&M (collectively, "the defendants"), seeking the judicial dissolution of A&M and raising claims of breach of fiduciary duties and violations of Georgia's Racketeer Influenced and Corrupt Organization Act ("RICO"), OCGA § 16-14-1, et seq. In her complaint, Alimchandani alleged that between 2008 and 2014, the Motleys misappropriated, wasted, and abused A&M's assets, failed to make required distributions to her as a partner of A&M, failed to provide her with notice of the transfer of Jane Motley's interest to David Motley and JDS&J Enterprises, LP, failed to provide her with required financial information, threatened the employment of Alimchandani's husband (a hotel operations manager at A&M), failed to hold annual meetings, and failed to communicate with her or deal in good faith. Alimchandani alleged that this conduct occurred in an apparent effort to freeze her out of A&M and to transfer business away from A&M to other companies owned by the Motleys and in which Alimchandani did not have an ownership interest.

         At the same time that she filed the complaint, Alimchandani also filed a motion for the appointment of a receiver and related injunctive relief, alleging that she would be "subjected to immediate and irreparable injury, loss and damage" if A&M was not placed in a receivership. The defendants answered the complaint and filed a motion to stay discovery and compel arbitration pursuant to an arbitration clause in A&M's operating agreement. The defendants also moved to dismiss the lawsuit for lack of subject matter jurisdiction and due to Alimchandani's alleged failure to satisfy the ante litem requirements of OCGA § 14-11-801.

         The trial court conducted a hearing on March 28, 2018, to address the parties' various motions. On April 12, 2018, following the hearing, the trial court judge sent a letter to the parties, stating, "Considering the current nature of the case, I do not think that the business is in such imminent peril that the appointment of a receiver is warranted." However, the trial court said that it would order the defendants "to permit the Plaintiff and an accountant/accounting team to conduct a full audit of [A&M]" and that the "audit shall be entitled to inspect all records pertaining to the businesses as contemplated under OCGA § 14-11-313." The trial court instructed Alimchandani's counsel to prepare a draft order and provide a copy to the defendants for approval.

         On May 18, 2018, the trial court judge sent a letter to the parties noting that the parties were still disputing the wording of a proposed order and that the court was "somewhat distressed that the parties ha[d] not begun the audit yet." The trial court judge noted that it was "still not convinced a receivership is needed for the day to day operations of the business." However, the judge indicated his belief that a limited receivership for purposes of the audit and discovery would possibly be necessary and requested any responses to its letter by May 22, 2018.

         The parties all filed responses to the letter with their respective proposed orders. The defendants objected to Alimchandani's proposed order because they believed it was a full receivership order and went beyond the trial court's April 12, 2018 letter ordering that an audit occur. Jane and David Motley responded, however, that they were "ready and willing to comply with [the] audit" and that they had uploaded "thousands of documents" in preparation. On May 23, 2018, the trial court responded that it was considering attorney Chris Cohilas for the position of potential receiver and that the court would "allow [the parties] to respond again before any decisions are made."

         On May 31, 2018, counsel for David and Jane Motley sent another letter to the court expressing their disapproval of Alimchandani's proposed order, which they alleged amounted to the appointment of an actual receiver and an overturning of the April 12 decision. Counsel further stated that the "[d]efendants are more than happy for such an audit to take place . . . and are ready to comply with any order that the Court wishes to enter in order to accomplish the same." On June 1, 2019, counsel filed the May 31, 2018 letter in the trial court as part of a styled "Supplemental Brief in Continued Opposition to Plaintiff's Request for Appointment of a Receiver."

         On July 18, 2018, the trial court entered an order appointing a "limited receiver" and denying the defendants' motions to compel arbitration and dismiss the complaint.[1] The trial court ordered that Chris Cohilas was to be appointed as a "receiver" "for the purposes of audit and discovery." The trial court ordered that Cohilas "shall have full and complete access, at any time, to all real property, personal property, assets, books, records, documents, and accounts" of A&M and that Cohilas "is authorized and directed to retain an accountant, accounting team, and/or legal representatives for the purposes of conducting an audit and inspection" of A&M. The court ordered that A&M "shall not transfer, sell or encumber any real property," or "change membership interests or transfer, sell or encumber shares or other interests," or "transfer assets with a value equal to or greater than $10, 000 . . . unless such transfer of assets is done in the ordinary and recurring course of business," without Cohilas's consent. The court ordered that Cohilas "shall attempt to not disturb the ordinary business of the Company, if reasonably possible," and that "[t]he day to day operations of the Company shall remain the responsibility of the duly elected managers of the Company." The order also provided that "[n]either the appointment of the Receiver pursuant to this Order nor any actions taken by the Receiver pursuant to this Order or otherwise shall cause or be deemed to cause . . . the Receiver . . . [to] be deemed . . . a lender or mortgagee in possession of the property of the Company." The order also provided numerous provisions for the production of documents and records to aid Cohilas in his inspection.

         The defendants timely filed this interlocutory appeal from the trial court's appointment order.[2]

         1. The defendants first argue that the trial court erred by appointing the receiver without making a finding that there was a clear and urgent need for such extraordinary relief as placing A&M in a receivership. We disagree, however, because we conclude that the trial court appointed an auditor, not a receiver.

         We review the appointment of a receiver, a special master, or an auditor for an abuse of discretion. (Citations omitted.) Petrakopoulos v. Vranas, 325 Ga.App. 332, 336-337 (2) (750 S.E.2d 779) (2013) (reversed ...

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