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Thomas v. B & I Lending LLC

Defendants did not have a reasonable opportunity to file suit first as provided for in the parties' Standstill Agreement.

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Michael R. Thomas, the founder and chief executive officer of a small company, became involved in a dispute with the company and its majority owner about his management of the company. To buy time to solve their differences and possibly to sell the company, the parties entered into a “Standstill Agreement,” which provided that no party would initiate litigation through a certain date and that, should litigation become necessary, the company had the right to file suit first, in Delaware. After the standstill date passed, Thomas filed suit first, in Georgia, without notice to the company. The issue presented is whether the company’s right to file suit first survived the term of the Standstill Agreement. The company Thomas founded is B & I Lending, LLC, a Delaware limited liability company. Hovde Acquisitions, LLC HACQ is the majority owner of B & I, and Eric D. Hovde is the managing member of HACQ. When HACQ acquired a controlling interest of B & I, Thomas and B & I entered into an employment agreement. In late 2000 and early 2001, HACQ and the board of B & I concluded that Thomas had breached his employment agreement, a related operating agreement, and his fiduciary duties, by, among other things, misappropriating B & I funds for his personal use.

On April 16, 2001 the B & I board removed Thomas as a member of the board, and as chief executive officer and president of B & I. They also voted to institute litigation against Thomas in Delaware and provided Thomas with a copy of the draft complaint. Immediately thereafter, the parties negotiated and entered into the Standstill Agreement.

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