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Home/Blog/LA1: Miller Shah Secures $1.2 Million Judgment in Contract Dispute

LA1: Miller Shah Secures $1.2 Million Judgment in Contract Dispute

On July 9, 2021, a District Judge in the United States District Court of Nevada entered her Amended Findings of Fact and Conclusions of Law, ordering, adjudging and decreeing three causes of action in favor of LA1, LLC (“Plaintiff” or “LA1”). Plaintiff was awarded both compensatory and punitive damages, totaling an excess of $1.2 million.

The decision comes as a result of a week-long trial in which Plaintiff sought to prove that Capital Holdings, LLC (“Capital Holdings”), Debra Mitman, Flanders MLK Investors, LLC (“Flanders”), Capital Equities, Inc. (“Capital Equities”), and eight unnamed individuals (collectively “Defendants”), are liable under Nevada law for: (i) breach of contract, (ii) breach of the implied covenant of good faith and fair dealing,(iii) breach of fiduciary duty, (iv) conversion, (v) unjust enrichment, and (vi) alter ego liability, and that Plaintiff is entitled to declaratory relief and an accounting.

The Court ruled against Defendant Mitman for breach of contract and fiduciary duty and held her liable for conversion in two instances. The Court also found Plaintiff is entitled to declaratory relief and an accounting against Flanders MLK Investors, LLC and its trustee, Mitman.

The dispute arose when LA1, a Michigan limited liability company, entered into an agreement with John Bentley and Mitman to contribute funds to purchase properties at an auction sponsored by the Federal Deposit Insurance Corporation (“FDIC”). In exchange for its share of the purchase funds, LA1 was to receive a proportional share of interest in the properties and any future profits received from their sale. It was further agreed that the properties would be transferred into another limited liability company, Capital Holdings, with each investor having a membership interest equivalent to their contribution percentage.

Following the auction, Mitman and the other investors decided to close on four properties (the “FDIC Properties”). However, unbeknownst to LA1, three of the FDIC Properties were transferred to Flanders and none to Capital Holdings. As the properties sold, LA1 was not compensated according to the terms of the agreement and was not provided with the proper tax forms. Additionally, LA1 was not informed of the sale of a property purchased primarily with its funds, nor did LA1 see any distributions of the proceeds. On the basis of these facts, the Court found Mitman acted maliciously toward LA1 and consciously disregarded its rights in converting its membership interest to her own use.

This action also involved a third-party complaint brought by Capital Holdings, Mitman, Flanders, and Capital Equities (collectively “Third-Party Plaintiffs”), alleging two causes of action for indemnity and contribution against Bentley and various unnamed individuals and companies (collectively “Third-Party Defendants”).The Court decided it did not need to address the Third-Party Plaintiffs’ contribution claim and noted a previous default judgment against Bentley for the indemnification claim. Judgment was thus entered in favor of the Third-Party Defendants and against the Third-Party Plaintiffs.

Updates will be posted to this blog as the matter progresses. Plaintiff is represented by Miller Shah LLP. The case caption for this lawsuit is LA1, LLC v. Capital Holdings, LLC et al, Case No. A-17-749305-B, filed in the United States District Court for the District of Nevada.

The legal team at Miller Shah LLP has significant experience representing breach of contract matters. If you have any questions regarding this subject or this post, please contact Ronald Kravitz (rskravitz@millershah.com) or John Roberts (jcroberts@millershah.com). The firm can also be reached toll-free at (866) 540-5505.

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