Illinois Appellate Court Finds Limited Liability Company Co-Owner is Entitled to Prejudgment Interest and Share Interest Under the Illinois Limited Liability Company Act

Michael Maschmeyer was the co-owner of Chicago Roof, Deck and Garden LLC (CRDG) with 42.5% of the interest in the company. Darren Flynn and Tomasz Bartosiewicz owned the remaining 57.5% interest in the company.

Flynn and Maschmeyer had been partners for several landscaping and real estate development businesses in the past. They formed CRDG to provide outdoor living design, construction and landscaping services. All construction work was done by another company owned by Bartosiewicz and CRDG’s captive subcontractor.

Between 2009 and 2014, Maschmeyer deposited more than $1.7 million in checks made payable to CRDG, all for CRDG labor, to his personal bank account and refused to return $850,000 when confronted by Flynn and Bartosiewicz. Instead, Maschmeyer and his wife, Anne, formed Urban Rooftops LLC, a company directly competing with CRDG.

Flynn, Bartosiewicz and CRDG filed suit against Maschmeyer alleging breach of fiduciary duty for using CRDG assets for himself and for depositing checks in his personal account when the checks were issued to CRDG. CRDG also alleged conversion of corporate assets, fraud and an accounting and disassociation of Maschmeyer from CRDG.

Following the trial of this cause, the circuit court awarded CRDG $1,768,927 in compensatory damages, along with prejudgment interest of $236,350 and punitive damages and attorney’s fees totaling $651,104 for the breach of fiduciary duty.

However, the circuit court judge also found that Maschmeyer was entitled to compensation for his 42.5% share of CRDG. After review of the books and records of the company, which the court found were full of irregularities, the court valued Maschmeyer’s interest in CRDG at $2,867,376. The total award by the court to CRDG was only $2,656,382; this left a net judgment in favor of Maschmeyer of $210,995. CRDG and Maschmeyer appealed.

CRDG challenged the grant in Maschmeyer’s favor and the amount awarded, as well as the dismissal of other counts and the denial of its motion for leave to amend the complaint.

Maschmeyer challenged only the trial court’s refusal to award him attorney’s fees and interest. The appellate court found the trial court had not erred in its award to CRDG noting the findings regarding Maschmeyer’s help in growing the business and the supported suggestion that Flynn and Bartosiewicz were aware of what Maschmeyer was doing — that is, jobs on the side.

The appeals panel agreed with the trial judge that the additional counts were duplicative of the breach of the fiduciary duty claim and were properly dismissed.

The appellate court then evaluated Maschmeyer’s cross-appeal. Maschmeyer argued that the trial court erred in refusing to consider his request for prejudgment interest and attorney’s fees when the court awarded him compensation for the value of his shares of CRDG.

Citing Section 35-65 of the Illinois Limited Liability Company Act, the appeals panel found that where an LLC member is disassociated and compensated for his shares, “[i]nterest must be paid on the amount awarded from the date [of disassociation] to the date of payment.”

Because the trial court did not award any interest in violation of the act, the appellate court reversed the denial of prejudgment interest and concluded that the trial court should have decided the appropriate prejudgment interest to be awarded to Maschmeyer.

Accordingly, the appellate court affirmed in part and reversed in part and remanded the case back to the trial court with instructions.

Darren Flynn, et al. v. Michael Maschmeyer, et al., 2020 IL App (1^st) 190784; Nov. 5, 2020.

Kreisman Law Offices has been handling corporate litigation, commercial litigation, limited liability dispute lawsuits, breach of fiduciary duty cases, and employment controversy lawsuits for businesses, individuals, and families for more than 40 years in and around Chicago, Cook County and its surrounding areas, including South Elgin, Streamwood, Bartlett, Hanover Park, Bloomingdale, Lake Zurich, Cary, Countryside, Bedford Park, Blue Island, Crestwood, Forest Park, Lockport, Tinley Park, Calumet City, Dolton, Westchester, Elk Grove Village, Schiller Park, Lake Barrington, Hawthorne Woods, Chicago (North Park, Chinatown, Greek Town, Ukrainian Village, Galewood, East Garfield Park, Near West Side, North Lawndale, Fulton River District, River North, River West, Wicker Park, Logan Square, Lincoln Park, Roscoe Village, Ravenswood, Sauganash, Mount Greenwood), Oak Park, Maywood, Hillside, LaGrange Highlands, Burbank, Palos Heights, Orland Hills, Country Club Hills, Matteson, Flossmoor, Highwood, Markham and Dixmoor, Ill.

Robert D. Kreisman has been an active member of the Illinois and Missouri bars since 1976.