Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Levey v. Brownstone Asset Management, LP

Supreme Court of Delaware

August 27, 2013

Gordon Scott LEVEY, Plaintiff Below, Appellant,
v.
BROWNSTONE ASSET MANAGEMENT, LP, Brownstone Investment Partners, LLC, Pinebank Investment Partners, LLC, Pinebank Asset Management, LP, Douglas Lowey, Oren Cohen, and Barrett Naylor, Defendants Below, Appellees.

Submitted: July 3, 2013.

Reargument Denied Oct. 1, 2013.

Page 765

Court Below: Court of Chancery of the State of Delaware, C.A. No. 5714.

Upon appeal from the Court of Chancery. REVERSED and REMANDED.

James S. Green, Sr. (argued) and Jared T. Green, Esquires, Seitz, Van Ogtrop & Green, P.A., Wilmington, Delaware; Of Counsel: David T. Shulick, Esquire, Shulick Law Offices, Philadelphia, Pennsylvania, for the Appellant.

Collins J. Seitz, Jr., David E. Ross (argued), and Eric D. Selden, Esquires, Seitz Ross Aronstam & Moritz LLP, Wilmington, Delaware, for the Appellees.

Before HOLLAND, BERGER, JACOBS, RIDGELY, Justices, and BRADY, Judge,[*] constituting the Court en Banc.

JACOBS, Justice:

Gordon Levey, the plaintiff-below (" Levey" ), appeals from a Court of Chancery order granting summary judgment and dismissing his action on the ground of laches by analogy to the statute of limitations. Levey claims that the Court of

Page 766

Chancery erred as a matter of law on both substantive and procedural grounds. We find that the specific claims actually advanced by Levey lack merit. Nonetheless, our independent review discloses that the judgment must be reversed, and the case remanded for further proceedings in the interest of justice.

FACTS AND PROCEDURAL BACKGROUND

The material facts are undisputed. Defendants Douglas Lowey (" Lowey" ) and Barrett Naylor (" Naylor" ), as well as Levey, were members of Brownstone Investment Group, LLC (" Brownstone" ) for many years. Around July 2004, Lowey and Defendant Oren Cohen (" Cohen" ) formed Brownstone Investment Partners, LLC, a Delaware limited liability company (" BIP" ), and Brownstone Asset Management LP, a Delaware limited partnership (" BAM" ).[1] Lowey and Cohen, who owned directly or indirectly 90% of BIP and BAM, invited Levey and Naylor each to become 5% non-managing owners of those two entities. Both accepted. [2]

On January 26, 2006, Levey announced that he was leaving Brownstone, BIP, and BAM (collectively, the " Brownstone Entities" ). That same day, he surrendered his corporate charge card, building identification card, and office keys. Five days later, on January 31, 2006, the Defendants filed a lawsuit against Levey in the United States District Court for the Southern District of New York (" Southern District" ).[3] The Defendants advanced claims that, although not relevant here, arose out of Levey's voluntary departure from the Brownstone Entities.[4] On February 23, 2006,[5] Levey, through counsel, filed an answer and counterclaim, alleging that he was " a member and one-third owner of [Brownstone] and [was] therefore entitled, under a breach of contract theory, to the return of his capital account as well as a cash payment equal to one-third of the company's value." [6] Thus, as early as February 23, 2006— the date Levey filed his answer and counterclaim in the Southern District action— the Defendants were on notice that Levey was formally claiming entitlement, in a court of law, to the return of his capital investment in BIP and BAM, plus a cash payment in connection with his voluntary departure from Brownstone.[7]

On January 25, 2007— almost one year after filing his Southern District answer and counterclaim— Levey wrote a letter to the defendants, formally demanding payment of the value of his claimed interests in the Brownstone Entities, in particular BIP and BAM. In his letter, Levey's counsel

Page 767

threatened to pursue " the full range of available legal remedies" if Levey's claim was not satisfactorily addressed. In their February 15, 2007 response, the Defendants took the position that Levey no longer had any legal interests in BIP and BAM, or any basis to believe that he any longer held such interests. In reply, Levey's counsel threatened that, unless there were prompt settlement discussions, he would seek to enforce Levey's rights through " appropriate legal action."

Shortly thereafter, on February 28, 2007, Levey filed a motion to stay the pending Southern District action and to compel the Defendants to submit to arbitration before the National Association of Securities Dealers (" NASD" ). [8] On September 17, 2007, the Southern District granted Levey's motion, holding that the Defendants were subject to mandatory NASD arbitration. [9] It then ordered the case closed.[10]

In compliance with the Southern District order, on February 15, 2008, Levey filed a formal demand for arbitration before the Financial Industry Regulatory Authority, Inc. (" FINRA" ), the successor to the NASD.[11] In his arbitration demand, Levey asserted the identical claim he had earlier raised in his counterclaim in the Southern District action. Specifically, Levey alleged that he was " entitled to a return of his Brownstone capital account ... and to a return of any capital amounts held in his name by either BIP or BAM." He claimed that " [a]s to Brownstone, [he was] entitled to receive a cash payment equal to 33% of the value of the company, as fair compensation for his partnership share. As to BIP and BAM, [he claimed to be] entitled to receive a cash payment equal to 5% of the value of these two entities...."

On June 24, 2008, however, the FINRA arbitration panel informed the parties that the Defendants were not compelled by the Rules of FINRA Dispute Resolution to arbitrate disputes with Levey in that forum. The panel further advised Levey to pursue his claims " in another forum which does have jurisdiction" over the Defendants.

Rather than acting on this advice promptly, Levey waited more than two years— until August 12, 2010— to commence this lawsuit in the Court of Chancery. On April 4, 2011, the Court of Chancery dismissed with prejudice all the claims in Levey's amended complaint, except for one: his claim for distributions made by BIP and BAM from and after August 12, 2007— i.e., for his share of BIP and BAM distributions made during the three years immediately preceding the filing of the Chancery action.[12] Thereafter, Levey filed a second amended complaint, claiming that he was entitled to receive " his proportionate share of dividends or

Page 768

net income distributions" from BIP and BAM based on his 5% ownership interest in those two entities. On July 30, 2012, the Defendants moved for summary judgment, claiming that Levey's claim was barred by the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.