Red River Wings, Inc. v. Hoot, Inc.

Facts

Thomas M. Lavelle is a Fargo restauranteur who owns and manages restaurants through LTM, Ltd, a corporation whose only shareholder is Lavelle. In the mid 1990s, Lavelle learned from Arther Stern that Hooters of America was looking to expand into Canada. Hooters of America approved Lavelle as a franchisee, but as a condition for getting a first franchise in Edmonton. Because of the expenses involved, Lavelle sought advice from Louis Emerson, a retired securities broker, who suggested a limited partnership as the best entity to finance and organize the venture. The attorney prepared a private placement memorandum for Canadian Wings Investment Limited Partnership and Lavelle formed Red River Wings, Inc. to serve as the general partner. After executing the action disposing of Red River Wings as the general partner, Stern traveled to Edmonton to physically take control of the Canadian Wings restaurant. At the same time, Emerson and Swede Stelzer, the sole officer, director, and shareholder of Hoot and an employee of Kesselring and Leno, traveled to take over the Manitoba Wings restaurant. Texas Wings performed poorly as the manager of Edmonton and Winnipeg Hooters restaurants. After Hoot became the general partner, the limited partners did not receive distributions from Canadian Wings and the limited partners received no distributions from Winnipeg Wings. The majority partners eventually sued Lavelle, Red River Wings, and other plaintiffs.