Frank C. Whittington, II v. Dragon Group, LLC, C.A. No. 2291-VCP (Del. Ch. May 25, 2012).
The Court addresses two challenges to an independent accounting which followed a judgment for Frank Whittington.
In addition to the previous relief granted to Frank, the Court determined that he is also entitled to additional money for which the Dragon Group and the Defendant Members are jointly and severally liable.
This is the latest in a series of seven prior opinions by the Court of Chancery and Delaware Supreme Court in this long-running internecine dispute among relatives. Prior opinions highlighted on these pages are available here. (Some were included in our annual review of key cases and referenced in other summaries.)
In a previous opinion the Court held that Frank owned a 18.81% interest in Dragon Group and was entitled to a judgment in his favor and a final accounting of Dragon Group to determine Franks’ proportionate share of any distributions. The Final Accounting was prepared and concluded that Frank was entitled to an additional $396,165 and funds from a capital account.
Frank raises two challenges to the accounting: he is entitled to attorneys’ fees and because the Final Accounting found that Dragon Group failed to produce proper documentation for $478,000, the amount should be treated as though it was distributed among the Defendant Members and he should be awarded his pro rata share; requesting that each Defendant Member be held jointly and severally liable for the judgment.
There were two deposits which Frank challenges, one for $270,000 and one for $208,000. The Dragon Group said this money went to development expenses, attorney’s fees, mortgage payments, and money transferred to Whittington, Ltd. through accounting errors. The defendants continuously failed to provide evidence of these transactions. The Court held that the defendants failed to sufficiently provide evidence and document the expenditure or transfer for which the $478,000 from the deposits allegedly were expended, and thus, Frank is entitled to his pro rata share (18.81%) of the unaccounted for money.
Defendant Members’ Liability:
Frank requested that each member be jointly and severally liable, and no compelling reason was offered as to why the Court should deviate from the earlier holding which held that the members be jointly and severally liable.