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Linworth LLC v. JGR Ventures

February 6, 2007


The opinion of the court was delivered by: Roger T. Benitez United States District Judge



Now before the Court is Defendants and Counterclaimants' Motion for Partial Summary Judgment [Dkt. No. 63] and Denying Plaintiff and Counterclaim Defendants' Motion for Summary Judgment [Dkt. No. 78]. The Defendants and Counterclaimants' motion is granted and the Plaintiff and Counterclaim Defendants' motion is denied.


The Complaint and Counterclaims focus on an office building located in Palo Alto, California and a California limited liability company and its members who own or owned an interest in the building. The Complaint and Counterclaims both seek only declaratory relief regarding whether one member's interest in the company which owned the building was effectively transferred to another. Specifically, there are three issues. First, there is the question of whether an assignment in June 2002, approved by the company's manager, was effective to transfer the economic interest of a member to a non-member is settlement of a lawsuit. The second and third questions arise only if the 2002 transfer was ineffective. The second question is whether a 2003 amendment to the operating agreement of the company was a valid amendment. The third question asks whether a 2004 offer of first refusal completed an effective transfer of the economic interest.

Though the issues are simple, the backdrop is complex. Sometime during the 1990's, a group of individuals formed a California limited liability company to invest in real estate known as Stanford Square LLC. The Operating Agreement (dated 1998) governed the operation of the company. Stanford Square LLC owned an office building in Palo Alto, California known as Stanford Square.*fn1 During the year 2002, Stanford Square LLC and its real estate was managed by Stanford Square Management Company, a Wyoming corporation, with Joan G. Rounds as its president. One of the members of Stanford Square LLC was another entity associated with Joan Rounds: JGR Ventures. JGR Ventures is a Colorado general partnership comprised of partners Joan Rounds and JGR Properties, Inc., a Colorado corporation.

Unrelated to the operation of Stanford Square LLC, a bankruptcy proceeding in Colorado would eventually involve Joan Rounds and her business interests. In connection with the liquidation of Consolidated Investment Services, Inc., a bankruptcy trustee by the name of Stephen E. Snyder was appointed. Snyder sued Joan Rounds. Snyder and Rounds decided to settle the litigation. The settlement required Rounds to transfer to Snyder (through his designee) all of the membership interest that JGR Ventures held in Stanford Square LLC. That interest was approximately 2.3 percent. Bankruptcy trustee Snyder designated a trust set up for his benefit as the entity to which Joan Rounds would transfer her 2.3% interest in Stanford Square LLC in settlement of the litigation between them. The trust was the 100 Hamilton Grantor Trust, with Charles A. Ramunno, a Colorado resident, as the trustee. Of these background facts there is no genuine dispute.

Moreover, there is no genuine dispute as to the material facts about the actions that took place next and which form the basis for the present lawsuit. Two documents were drawn. The first document was an assignment of interest in Stanford Square LLC (dated June 20, 2002). The document reflects an assignment to the 100 Hamilton Grantor Trust. The document reflects an Assignment of all of the interest in Stanford Square LLC held by JGR Ventures, Joan G. Rounds as an individual and a partner of JGR Ventures, and JGR Properties, Inc. as a partner in JGR Ventures, and "Joan G. Rounds, the sole shareholder and president of Stanford Square Management Company ('SSMC')." The second document is a Consent to the assignment executed by the manager of Stanford Square LLC, i.e., Joan G. Rounds as president of Stanford Square Management Company. It is the legal effect of the assignment and the consent to assignment that forms the basis of the instant action.


Federal Rule of Civil Procedure 56(c) governs motions for summary judgment. Rule 56 permits entry of summary judgment prior to trial where there is no genuine issue of material facts, thereby "secur[ing] the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 327 (1986). The legal standards for summary judgment are familiar and need little discussion here. Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is material if it "might affect the outcome of the suit under governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

The movant has the initial burden of demonstrating that summary judgment is proper. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). The movant is not required to produce evidence showing the absence of a genuine issue of material fact, nor is he or she required to offer evidence negating the non-movant's claims. Lujan v. Nat'l Wildlife Federation, 497 U.S. 871, 885 (1990).

If the movant meets his or her burden, the burden then shifts to the non-movant to show that summary judgment is not appropriate. Celotex, 477 U.S. at 324. The non-movant does not meet this burden by showing "some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The mere scintilla of evidence in support of the non-moving party's position is not sufficient, "there must be evidence on which the jury could reasonably find" for the non-moving party. Anderson, 477 U.S. at 252. Accordingly, the non-moving party cannot oppose a properly supported summary judgment motion by "rest[ing] on mere allegations or denials in his [or her] pleadings." Id. at 256. The non-movant must go beyond the pleadings to designate specific facts showing that there are genuine factual issues that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. at 250. If the non-movant fails to make a sufficient showing of an element of his or her case, the movant is entitled to a judgment as a matter of law. Celotex, 477 U.S. at 325.


At the time of these events, Plaintiff Linworth LLC, a California limited liability corporation, was a member of Stanford Square LLC. Plaintiff Linworth LLC filed a declaratory judgment action in a California Superior Court*fn2 seeking a declaration that the June 2002 assignment from JGR Ventures, et al. to the 100 Hamilton Grantor Trust, and Charles A. Ramunno, as trustee, was invalid due to a ...

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