IN THE MATTER OF: WEEKAPAUG GROOVE LLC, a Delaware limited liability company,
CHARLES GALLANTI, INC., a New York corporation, Counterclaim Defendant. and SEAN AVERY, individually and derivatively on behalf of Weekapaug Groove LLC, a Delaware limited liability company, Counterclaim Plaintiff,
POST-TRIAL FINDINGS OF FACT AND CONCLUSIONS OF
LASTER, VICE CHANCELLOIR
Respondent Weekapaug Groove LLC (the "Company") is
a dissolved Delaware limited liability company with two
members: counterclaim-plaintiff Sean Avery and
counterclaim-defendant Charles Gallanti, Inc.
("CGI"). The Company's operating business has
been wound up. This order makes post-trial findings of fact
and reaches conclusions of law that address (i) certain
litigation assets of the Company that the parties have
asserted as derivative claims in this proceeding, (ii) a
disputed liability that CGI asserted as a creditor, and (iii)
the proper distribution of the Company's cash.
evidence at trial supported the following findings of fact:
is a successful building contractor in the New York area.
After Charles Gallanti, the eponymous principal of CGI,
worked on a vacation home that Avery owned, the two men
became friendly and discussed going into business flipping
houses. CGI would provide the construction and renovation
services. Avery would provide the bulk of the capital. Over
the long run, Avery would learn about construction from
October 2014, Avery and CGI formed the Company. Through the
Company, they entered into an agreement to purchase a
single-family home in Southampton, New York (the
"Property"), which they planned to renovate and
Contemporaneously, Avery and CGI entered into an oral
agreement regarding the renovation process (the
"Renovation Agreement"). Under the Renovation
Agreement, CGI agreed to provide, at cost, the labor and
materials needed to renovate the Property. In exchange, Avery
agreed to contribute to the Company all of the funds
necessary to pay CGI for the renovations.
initial construction budget contemplated a total project cost
of $647, 439. Avery understood that the initial budget was
not a guaranteed maximum price. He also understood that the
actual cost could change due to multiple factors and that it
likely would change if there were modifications to the
work progressed, Avery and Gallanti worked collaboratively on
the project. Avery was closely involved and approved changes
to the renovations.
During the course of the project, CGI informed Avery of
increases to the total project cost through invoices and
revised budgets. In doing so, CGI operated in its ordinary
course of business and followed the same procedure it uses
with all clients.
August 31, 2015, CGI submitted a draft final invoice in the
amount of $114, 963.67. At the time, CGI had not received all
of the invoices it expected to receive from subcontractors
and suppliers. The August 2015 invoice estimated the total
project cost at $738, 727.86. Avery refused to pay the
invoice. Before this point, Avery had paid all of CGI's
invoices without objection.
December 30, 2015, CGI sent a revised final invoice that
increased the amount sought to $ 190, 481.52 (the "Final
Invoice"). With this increase, the total project cost
rose to $746, 655.53. Avery continued to refuse to pay.
February 2016, CGI filed this action. CGI sought dissolution
of the Company on grounds of deadlock and the appointment of
a liquidating trustee. Avery opposed dissolution and asserted
counterclaims against CGI. The existence of a deadlock was
readily apparent. Among other things, although the
renovations were complete, the parties were unable to agree
how to manage, sell, or maintain the Property. Because the
deadlock jeopardized the value of the Property, I appointed a
trustee pendente lite to manage the Property, sell
it, and hold the proceeds in escrow pending the outcome of
the parties' disputes. Dkt. 24.
trustee carried out his charge. As of April 8, 2019, the
trustee held $1, 526, 108.41 in escrow. The Company's
operating account held another $7, 110.90.
Company has litigation assets in the form of derivative
claims that the parties have asserted on CGI's behalf.
The first four derivative claims, which Avery asserted
against CGI, lack merit. One other ...