Corporations Keyed to Klein
VGS, Inc. v. Castiel
Facts
Defendant, David Castiel, formed LLC to pursue an FCC license to build and operate satellites. The members of LLC included Virtual Geosatellite Holdings, Inc. (“Holdings”) which controlled 660 units of LLC; Ellipso, Inc. (“Ellipso”) which controlled 120 units; and Sahagen Satellite Technology Group LLC (“Sahagen Satellite”) which controlled 260 units. Castiel had controlling ownership of Holdings and Ellipso, and Peter Sahagan controlled Sahagan Satellite. Castiel was able to appoint two of the three managers (Castiel and Tom Quinn) and Sahagan was the third manager. Sahagan and others associated with LLC believed that Castiel’s management of LLC was subpar. Sahagan was able to convince Quinn to vote with him to merge LLC into VGS, a move which would change Castiel’s majority status into a minority status. Because Castiel would remove Quinn and make sure his majority standing remained if he knew of the merger vote, Quinn and Sahagan voted without Castiel’s knowledge. Af ter the merger, Sahagan’s ownership went from 37.5% to 62.5% while Castiel’s ownership was 37.5% of VGS compared to 75% of LLC. Sahagan justified the vote by declaring that only a majority had to vote in favor (not unanimous).
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