Triple H Family Limited Partnership, a Delaware limited partnership, Plaintiff and Counterclaim Defendant,
Jerry Neal, Defendant and Counterclaim Plaintiff,
Jeffrey A. Hoops, Counterclaim Defendant, and Omni Insurance Group, LLC, a Delaware limited liability company, Nominal Defendant and Counterclaim Defendant.
Submitted: April 19, 2018
B. Anthony and Sean A. Meluney, BERGER HARRIS LLP,
Wilmington, Delaware; Attorneys for Plaintiff and
J. Katzenstein and Clarissa R. Chenoweth, SMITH, KATZENSTEN
& JENKINS LLP, Wilmington, Delaware; Attorneys for
Defendant and Counterclaim Plaintiff.
MONTGOMERY-REEVES, VICE CHANCELLOR.
August 2014, two old friends decided to start an insurance
agency together. They had high hopes of a mutually beneficial
relationship, but these hopes were quickly dashed. Almost two
months to the day from the inception of their arrangement,
the parties agreed to dissolve their business. The parties
differ in their opinion on the cause of the failure; one side
claiming incompetence and the other hubris. In fact, the
parties differ in their opinion on pretty much everything
pertaining to this litigation, much as they differed on
pretty much everything during their business venture.
the failed venture created bad blood between the two friends.
This litigation was filed after months of fighting over how
to unwind their business. The plaintiff seeks damages for
breach of contract and breach of fiduciary duty as well as
judicial dissolution of the limited liability company
involved. The defendant seeks damages for breach of contract,
breach of fiduciary duty, and fraud. I find that the
defendant breached the contract and breached his fiduciary
duties, and the plaintiff did not breach the contract, breach
his fiduciary duties, or commit fraud. Finally, judicial
dissolution is not necessary because the parties already
agreed to dissolve the limited liability company. Instead, I
order that the limited liability company be wound up.
are my findings of fact based on the parties'
stipulations, over 300 trial exhibits, and the testimony of
six live witnesses during a three-day trial.
Parties and Relevant Non-Parties
and Counterclaim Defendant Triple H Family Limited
Partnership ("Triple H") is ninety-nine percent
owned by Hoops Family Dynasty Trust, which is controlled by
Jeffrey Hoops's three adult sons, and one percent owned
by its general partner, Milton Management. Triple H is a
holding company for investments made by Milton Management,
which is controlled by Jeffrey Hoops.
Defendant Jeffrey Hoops ("Hoops") has worked in
coal mining for more than forty years. Hoops started
several coal mining businesses during his career and
currently runs Revelation Energy LLC
("Revelation"), a coal mining business he started
and Counterclaim Plaintiff Jerry Neal ("Neal" or
"Defendant") is an insurance agent residing in West
Virginia. He has worked in the insurance business for almost
thirty years,  and in 2011 he formed his own insurance
business called Neal Insurance.
Insurance Group, LLC ("Omni") is a Delaware LLC
organized by Hoops on August 25, 2014. Triple H and Neal
both own fifty percent of Omni.
accord the evidence the weight and credibility I find it
deserves. There are several conflicts between the
contemporaneous documents and the live witness testimony
given three years after the fact. I tend to give more weight
to the contemporaneous evidence as it is free from the
realities of litigation and closer in time to the events that
transpired. Additionally, the contemporaneous written
evidence and live witness testimony in this case show a clear
pattern of behavior on the part of both Hoops and Neal that
greatly influenced the credibility of each. On the one hand,
Hoops is a seasoned businessman who seems to move with
breakneck speed when it comes to making business decisions.
But Hoops also has a strong personal code of ethics and
believes a man's word is his bond. Neal, on the
other hand, is the perpetual salesman who will say whatever
he needs to, regardless of veracity, in order to secure the
deal and who continuously tries to renegotiate deals to get
more favorable terms for himself. These characteristics are
repeatedly reaffirmed by the evidence; thus, when
contemporaneous written evidence is lacking and Neal's
and Hoops's testimony conflicts, I tend to give
Hoops's testimony more weight.
and Hoops attended high school together in West
Virginia. In August 2014, they both attended their
fortieth high school reunion. During the course of the
second night of the reunion, the two men discussed a shared
acquaintance in the coal industry who had started an
insurance agency. This idea appealed to Hoops as a way of
recouping some of the money he spent on insurance premiums
each year. From Neal's perspective, Hoops's business
and personal insurance would generate very lucrative
commissions. Forming an insurance agency together would be a
mutually beneficial endeavor, and the two men left the
reunion excited about the prospect.
Initial conversations about forming Omni: August 18-25,
August 18 and 19, 2014, Neal and Hoops exchanged emails
discussing the preliminary plans for starting an insurance
agency together. On August 20 at 12:53 p.m., Hoops sent
the following email (the "August 20 Email") to his
long-time personal lawyer Edward "Eddie"
Looking to diversify a little as I just completed a meeting
with Jerry Neal a lifelong friend and business acquaintance
as we finalized the plans to move forward with forming a new
Insurance Agency. Would appreciate you pullingtogther our
normal operating agreement with the ownership to be
structured as follows:
1) New Entity Name
a. Omni Insurance Group (if available)
b. Assume we will register in Delaware, then get set up to do
business in WV, KY, TN, VA, and OH.
a. Jerry Neal
b. Triple H Family LP will have a 50% Net Profits Interest
with an option to convert that to 50% of the stock in the
i. Will have 50% voting rights on decisions.
Jerry has a base of business already that will move into the
entity and he will be provided a Base Salary plus Benefits as
President and CEO of the business. Jerry has all of the
necessary licenses required to underwrite insurance and if
there are any nuances to forming an Agency please let me know
as we were not aware of any.
If you are aware of anything we need to be concerned about,
Initially there will be minimal back office work, so if you
can set up a GL for this that would be great. Ultimately we
will need Alpha to set up a web page and other IT things we
may need for such a venture. Once Eddie has is set up with an
Operating Agreement and FEIN, please set up a bank account at
United Bank for this entity.
We would like to have everything in place and start rolling
Jerry's other business into this entity by October 1 and
he will go on salary at that point. We can make a loan from
Triple H to this entity for the initial working capital that
might be required. Ultimately Jerry will build out an office
staff, but will run lean initially.
Let us know if you have any questions or need any additional
information … Thanks … Jeff
August 20 Email was cc'd to Neal, Lisa Henson, and Sandy
Thomas. Lisa Henson was the CFO of Revelation,
and Sandy Thomas is a tax expert.
replied all to the August 20 Email at 7:04 p.m. on August 20,
"Thanks Jeff. Let me know what you need from me Eddie. I
can license the Agency with the various State Insurance
Departments if you want me to. Thanks." On August 21
at 1:27 p.m., Thomas replied all to the August 20 Email to
explain that "if Jerry is the only member of the LLC it
will be a single member LLC and a disregarded entity for
tax." Based on this advice, as well as
Cunningham's legal research on who could own an insurance
agency, Hoops replied all to Thomas at 1:41 p.m. on the same
day, "Those are good points, so let's go ahead and
make Triple H a member and we can pay Jerry from LLC and bill
it to Omni so he will not have to deal with the Quarterly Tax
August 22 at 9:36 a.m., Neal sent an email to his accountant
Bob Toler. The email stated:
Need your thoughts about new Insurance Agency that is being
set up with me as President and Jeff Hoops as 50% owner.
Please look at below and let's discuss. Eddie is
Jeff's attorney who sets up his business ventures etc.
Jeff is rolling in all his business plus another three or
four times that in associated business that he has ties
email also included the August 20 Email, Thomas's
response from August 21 at 1:27 p.m., and Hoops's
response to Thomas at 1:41 p.m. Toler replied at 10:29
a.m. on August 22, "Even if they make the other entity a
member you cannot received salary or wages from the LLC. You
will receive guaranteed payments to a partner and pay
estimated taxes accordingly. A member of an LLC can't be
an employee of the LLC."
August 22 at 1:41 p.m., Hoops informed Neal via email that
"Omni is available in Delaware and West Virginia, so
Eddie is going to proceed with getting us set up in Delaware,
then we will register to do business under that name in WV
where the main office will be located. Looks like everything
is coming together." On August 25, 2014, Hoops, as
organizer, executed the Certificate of Formation for Omni
creating the Delaware LLC.
The push to get Omni off the ground and Revelation's
policies renewed before they lapsed: September 1-30,
insurance world, agents make commissions, which are a
percentage of the premium paid by the customer. Hoops was
under the impression that Omni would earn $600, 000 a year in
commissions just from Revelation's insurance
policies. Triple H would then be entitled to fifty
percent of those commissions after expenses as a fifty
percent owner of Omni. Securing these commissions came with a
hitch, however. Revelation's insurance policies were
yearlong policies that ran from October 5 to October
5. All of Revelation's policies would
be renewing on October 5, and in order to secure the
2014-2015 commissions, Omni would have to be the agent of
record and place those policies.
an insurance agent would start to look for those renewal
policies three months in advance, or July for policies
renewing in October. Hoops had a meeting set up with his
current insurance broker, Van Meter Insurance Group
("Van Meter") for September 24, 2014. Since Omni
was created on August 25, it was generally understood that
having Omni handle the renewal of Revelation's policies
would be challenging. Hoops's personal policies,
securing $15 million in assets, were up for renewal on
October 15, which further compounded the amount of work
required by Neal and Omni in a very short amount of time.
September 1, 2014, Neal wrote to Hoops:
I need to focus on getting everything moved by 10-5 or so.
Best if I do it from here for at least a few weeks. Thinking
of farming out your personal policies to agent here who is
really good. 50/50 split maybe on commission. Hopefully for
just this year. You OK with that?
Assuming premiums same or better. Going to get appointed with
current carriers but might be tough in 30 days.
of all the work required to place Revelation's and
Hoops's insurance policies by the renewal dates, there
was significant work required just to set up Omni to function
as an insurance agency. In the same September 1 email, Neal
I hope to have the Errors and Omissions Insurance in place
tomorrow. Will need about $5000 to pay for the year. Next is
getting Broker/Agency Appointments. Will need W9-FEIN. Hope
we can get it tomorrow. Will this be Eddie, Lisa, or me?
Need to get Business licensed in WV so I can do same with
E&O carriers will not do business in Delaware. I had to
change address on applications. I used my address and phone
number. We can change easily and will.
even further strain was the fact that Neal kept attempting to
renegotiate the structure and operation of Omni. In the same
September 1 email above, Neal also wrote:
I don't think I have a single Neal Insurance policy
renewing between now and 12-31-14. All are done already.
Nothing really gained by moving them until renewal.
I do have some Consulting fees coming up which do not involve
any contracts or agreements with any company, Brook and SM
included. I get paid a fee for getting the bonds and keeping
the bonds placed. Two customers. Ungureans and one small bond
in Pa. I would need to discuss with them which I really
don't want to do. I don't want to discuss with Brook
either although there is no arrangement with him other thatn
fact that he knows that I get something on a fee basis.
I would like to leave these alone for now and also keep Neal
Insurance operating mainly for reason to place something that
we might not be able to do with Omni.
Heather mentioned this in a way.
I am going to need the income from the Consulting this year.
Guessing, but Revelation probably pays quarterly installments
that are interest free. If so, we might get only get a
quarter of the commission this year. My half added to 3
months of dray might leave me a little short for the year.
Most important thing is that I absolutely will not do any new
business in Neal Insurance after Oct. 1 unless you and I
agree before hand and have a good reason. My thinking is by
first quarter of next year my business will be an
insignificant portion of my income comparted to Omni and I
will want to roll it in. We can discuss further if we need
to. I don't want this to be an issue with you at all. I
will show all records for this and past years.
Hoops wanted to maintain their original agreement. He replied
several hours later:
Thought we had discussed and agreed on many of these things
as here was my understanding
1) Fine with considering sharing or leasing office space with
Ron but want to clearly understand and formalize the
2) the FEIN can be done on line if it is not done already I
will make sure it gets done tomorrow
3) I can have Lisa register us on line in WV
4) Omni Insurance Group, LLC address is 1051 Main Street,
Milton, WV 25541
5) as discussed I am not hung up on where you work from
6) had thought we could do personal policies as they are a
month behind others, but if that is all we can do then we
have no choice. They are October 25th
7) copy me on request to Heather and I will follow up as
8) understood we were going to do the following
- roll all of your current income into Omni
- you would draw salary of $100K, vehicle, and health
- 50% ownership
- Commissions on my business along could be as much as $600,
I went into this with the understanding it was all going to
roll together and we were going to be 100% focused on growing
Omni. If that does not work for you that is fine and need to
know now so we can go in another direction.
quickly backed off. He replied, in relevant part, the next
day, September 2 at 9:23 a.m.:
I am 100% committed to growing Omni.
I will roll Neal Insurance beginning in October. Maybe a
short term perspective on my part.
I will feel better when it is clear that I have Oct. 5
Most of concerns are on my end.
I want to handle your Personal [insurance] and will if I can
get proper markets. Inside of 60 days which is a minimum for
some markets to quote.
Total Personal premium for 8 policies is about $18, 959.69.
About $3800 commission.
No issue with you maintaining Neal Insurance entity in the
even we would need it for separation. My intent is to be a
silent partner and unless it is an account I can help land,
everyone else will see it as your company.
Agree the personal is not a big part of what we are doing.
Thought based on your conversation with Jim last week you
were confident you could get everything done. Agree getting
business covered is critical and if you see that cannot be
done, then we pull the plug on everything and go back to the
way it is right now.
September 2014, Neal and Hoops continued to try to place
Revelation's and Hoops's insurance policies, get Omni
running, and discuss their business relationship. Central to
all of this was Heather Hammond.
began working in the coal industry nineteen years ago at
Jacobs Risk Management, helping to prepare mine plans for the
Mine Safety and Health Administration. Jacobs Risk
Management assists small and large coal companies with
regulatory affairs and insurance needs; it had
serviced Revelation's and Hoops's insurance policies
since 2009. Jacobs Risk Management was contracted to
work with Van Meter to place the insurance
Hoops and Neal first decided to form Omni, they met with
Hammond and Joseph Jacobs,  the owner of Jacobs Risk
Management. At that meeting, Neal and Hoops asked
Hammond and Jacobs to help with the transition into Omni and
for help with future administrative work. They all
agreed that "Jacobs Risk Management would receive a
commission on current business of Revelation as well as
commission on any new business that's brought to the
table." Hammond continued to work with Neal
through September, assisting with renewing Revelation's
policies. She provided Neal with renewal paperwork
to be submitted to insurance carriers, helped new carriers
conduct site visits with Jacobs, and provided additional
information to Neal as needed.
relationship between Neal and Hammond was strained almost
immediately. Neal felt that Hammond was not providing
him with the type of cooperation he was expecting,
and Hammond felt that Neal treated her like he was superior
to her or like she was" lower class." Despite this
tension, Hammond and Neal continued to work towards renewal
of Revelation's policies, sending out Agent of Record
letters and getting insurance quotes.
September 22, 2014, Cunningham sent a proposed operating
agreement for Omni, a proposed employment agreement for Neal,
and a proposed member agreement for Omni to Hoops and Neal.
Neal never signed these agreements.
Things fall apart: October 1-31, 2014
October 1, 2014, Neal emailed Hoops saying, "We did it.
I have everything done." Neal then walked through the
particulars of the different insurance policies, including
workers' compensation, director and officer
("D&O"), crime, and excess
insurances. Hoops replied, "Amazing you got all
of this pulled together in such a short time, great
job." The celebrations continued on October 3,
but the celebrations were short lived. On October 4, a
Saturday, Neal emailed Hoops at 6:02 p.m., "I was not
able to get the policy number on the D&O from the
wholesaler representing Westchester. The wholesaler said
there was a concern with the questions on
Friday." Hoops replied at 6:20 p.m., "Are we
going to be without insurance for some period of time now?
Having coverage is more important than anything else as I
would not Want to e itch out insurance for one minute as we
have people on our jobs 24/7." Neal assured Hoops that
everything was likely fine, writing, "Most likely
someone of authority with Westchester was out Friday
afternoon and upon return Monday morning will approve and
coverage will be in effect midnight Sunday morning - 10-05-14
as if nothing happened." Hoops replied, "I would
have submitted financing without D&O as I would never
take the chance of not having liability and equipment
coverage. Will anything be covered as of midnight tomorrow
night? If not I would shut the operations down until
something is in place. That cost us about $1.1mm per
a.m. on Monday, October 6, Neal assured Hoops again that,
"All coverages are bound, went into effect at midnight
Sunday morning. I have the policy numbers for them except the
D&O." At 8:20 a.m., Neal emailed the D&O
insurance intermediary asking, "Are we bound? No policy
number or word Friday. Very concerned that we are exposed.
Please advise asap. Customer is not happy with me about
this." The intermediary responded at 10:13 a.m.
that the underwriter and carrier both had additional
questions as of Monday, October 6. At 9:37 a.m. on October 6,
Neal emailed a different intermediary to see if they could
give him a quote for D&O insurance. On October 8
at 9:58 a.m., Neal emailed yet another underwriter, "I
have a pressing need to get D&O in place on [Revelation].
Westchester is stalling and have not bound. They offered
renewal terms but have refused to bind through
Crump." At some point after this October 8
email, Westchester bound the D&O insurance effective
October 5, 2014.
than ten days later, on October 14 at 9:20 a.m., Neal emailed
Hoops, Henson, and Hammond, "Your [Hoops] personal
policies come due tomorrow, so we need to bind today. I was
not successful in getting all policies policies replaced with
my agent here as I had hoped to do . . . The best option is
to renew with VMI unless they refuse." At 10:17
a.m., Hammond replied all, "I have some pretty good
pricing on your personal lines. I'll email you some
options to look at."
p.m., Hoops emailed Neal and cc'd Henson and Hammond, but
the email was addressed to Hammond. It read, "Heather
Just do whatever it takes to make sure I have coverage
disappointed only 1 hour notice as that that just does not
work." At 4:33 p.m., Neal emailed Hoops,
Hammond, and Henson, "My experience is that companies
will bind effective of the day of the instruction to bind
especially if it is a renewal, so we could bind tomorrow
effective 10-15. However it might be trouble getting a claim
paid in the window of midnight to whenever we send order to
bind." At 4:38 p.m., Hoops replied "24
hours of exposure is unacceptable this is no way to do
business." At 4:57 p.m., Hammond emailed Neal,
"I'll be heading out of the office soon. Do I need
to do anything to help on this?" Neal
responded at 5:01 p.m., "Yes, Bind all with [Van Meter]
before you leave. Send clear email that coverage will be
effective 10-15-14. A return acknowledgment would also be
good." Van Meter, from whom Omni had just taken
all of Revelation's insurance, ended up placing
Hoops's personal insurance with almost no
parties did not submit contemporaneous written evidence that
illuminates the events of October 15-17 as clearly as the
other events in this case. Hoops testified that on October
15, he and Neal agreed "Omni would be dissolved and that
we would go our separate ways and that we would split the
commissions for the next year 50-50." On October 16
at 1:19 p.m., Neal wrote, in part:
Lisa needs to issue check for 25% today. Ok?
I would like to get the carriers aid their portion of the 25%
today, or as many of the 9 as possible. Ok?
The balance of the 25% down is Omni commission. I would like
to get a check for half as we agreed. I will see if Lisa put
any money in a new 401K and I will subtract that out. KEMI
commission is the most part of the commission, about 40%, and
is not financed as you know. We can use that commission to
settle on for whatever expenses come out etc. including any
monthly if we need to.
I advised Lisa to max my 401K and planned on taking money out
to live on. Regardless of how or whether we change our Omni
concept. We are in agreement on a 50/50 split for this year.
replied, "Lisa has been waiting to give you a check for
nearly 2 weeks. Believe I want to go direction I laid out
morning on October 17, Neal, Hoops, and Henson met at
Hoops's office. Originally, Henson and Neal were meeting
to sign the financing agreement that would govern the
financing for the premiums that Revelation needed to
pay. Hoops testified that Henson called him
down to her office to address an issue. He further
testified that he went down to her office, and she told him
that Neal was refusing to sign the finance agreement
"which is obviously required in order to get the
additional premiums that are necessary to be paid to the
underwriter. So without that, we would not have insurance
coverage" unless Henson wrote "him a check
for the full commissions at the time, which were $200,
000." Hoops testified that he told Neal,
"'Jerry, our deal was 50-50. You don't get all
the commissions. It's 50-50.' So eventually we agreed
that we would distribute $150, 000. And so 75, 000 was given
to Jerry and 75, 000 was given to Triple H Family Limited
Partnership, leaving about $50, 000 in Omni at that
time." Neal testified:
[Hoops] threw out a 75, 000 distribution for each of us.
Which, when I went in there, I just needed some money. I
didn't even know that we had to do a distribution for me
to get a little bit of money. But in reality, the business
sense of it was that we probably did both have to take a
distribution, as he said. And then he said 75 K. I said,
Okay, fine. It didn't last a minute, and that was the end
At 8:55 a.m. on October 17, Hoops emailed Hammond, Jacobs,
I told him this morning we are done and guess this will
probably work out for the best as if you guys are Interested,
then my plan is as follows:
1) Agree to give Jerry 50% of the commission for this year on
Revelation Energy less expenses including the 10% to you.
2) He will sign over his 50% ownership in Omni
3) Then assuming this goes as planned I would envision you
guys taking 50% ownership in Omni and we will work together
to grow this business.
At 9:15 a.m., twenty minutes later, Hoops emailed Neal and
As you know on September 1, 2014 we agreed to the following
structure for Omni:
1) Omni owned 50/50 by you and Triple H family LP
2) You would be paid a salary of $100K per year plus benefits
to manage Omni
3) All commissions including what you projected from Neal
Insurance o deals in place of $65, 000 would go to Omni
4) Jacobs will receive 10% of commissions on Revelation deal
and 33% on any new business they bring.
5) Then as cash built up in Omni we would periodically
distribute the earnings on a 50/50 basis Given the recent
turn of events it appears the best path forward would be to
unwind Omni and I would like for you to surrender your 50%
interest for the following consideration:
1) You keep all income from Neal Insurance
2) I will eat the expense of remodeling the main floor for
$65, 000 to accommodate the offices
3) You will receive the following:
- 50% of the commissions after the following expenses are
- Any expense incurred to ate for benefits or 401-K match
- Half of the 10% commission we agreed to pay Jacobs
4) This will be paid to you by Omni as the commissions flow
into the company Lisa will provide a complete accounting and
will make those payments wherever you direct. If you are in
agreement I will have Eddie prepare the documents to take you
off of Omni, then Lisa can pay you any amounts that are
available at that time.
party submitted an email response to this October 17 email
next email submitted from Neal was on October 22. Henson
asked, "Where did you and Jeff leave it [on Oct 17] with
payroll for you? Not sure if I owe you or not and I will be
working on payroll tomorrow." Neal responded:
I can't say for certain, but I would like for you to pay
me and put all in 401K as we discussed. We need some money in
account I know but hopefully a couple of my guys will pay on
time and we can be in good shape by the end of the year. KEMI
commission won't kick in until December which will be for
month of October and each month thereafter as I understand
it. You and I need to discuss Invoicing Neal Insurance
accounts which I need to do right now.
replied in part, "Need to talk to Jeff about all the
moving of account. . . . I thought [on Oct 17] he said he was
leaving your current accounts with you. We really need to get
this settled. Need to talk to Jeff about additional $ in
account as those are his personal funds."
October 27, 2014, Neal emailed Hoops about Omni hiring a
person to help with administrative work part time. At 11:11
a.m. Hoops responded, in part:
I am really concerned about whether we are going to be able
to make this work with Lisa and Heather as I spoke with both
of them and it is not good.
In the event we cannot get this worked out, I would propose
we just unwind what we were going to do with Omni and you
will get 50% of the commissions and keep everything you earn
from Neal Insurance and just let our deal die when it comes
up for renewal. Lisa is involved as CFO with all of my
entities and she is an integral part of everything I am
doing. It is clear you do not think much of Heather and I
know little about insurance but she has done a great job for
us the past 6 years and with all she and Joe are involved in
for us, I cannot cut her loose.
My gut is just work this out with you and give you the 50%
and let you keep Neal and go back to the way it was for you
before. I will eat the remodeling downstairs as I can
probably use that space sometime in the future. If you are in
agreement, I will get Eddie to draft up something that
commits me to get you the 50% of ...