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LLC v. Lasala

United States District Court, D. Nevada

September 29, 2017

FIRST 100, LLC, a Nevada limited liability company; and 1ST ONE HUNDRED HOLDINGS, LLC, a Nevada limited liability company, Plaintiffs,
JOHN LASALA, an individual; IAN HAFT, an individual; JAMIE MAI, an individual; CHA SOLUTIONS INC., a foreign corporation; CORNWALL CAPITAL MANAGEMENT LP, a foreign corporation; Defendants.


          Gloria M. Navarro, Chief Judge United States District Court.

         On April 24, 2017, the Court conducted a one-day bench trial relative to the dispute between Plaintiffs First 100, LLC and 1st One Hundred Holdings, LLC (collectively, “First 100” or Plaintiffs) and Defendant John Lasala (“Lasala” or “Defendant”).[1] The Court, having read and considered the parties' briefings, testimony and documents admitted into the record, and oral arguments of counsel, and for good cause appearing, makes the following findings of facts and conclusions of law.

         FINDINGS OF FACT[2]

         1. Plaintiff First 100 was established on April 10, 2012, for the purpose of real estate investment through acquiring delinquent account receivables from homeowners associations (i.e. “HOAs”) in Nevada, Florida, and other states. (First Revised Joint Pretrial Order Stipulated Facts (“JPO”) 3:8-10, ECF No. 65).

         2. Thereafter, Plaintiff 1st One Hundred was established on December 3, 2013, as a holding company for First 100. (JPO 3:11-12).

         3. Defendant John Lasala (“Lasala”) served as Plaintiffs' chief legal officer between approximately December 13, 2013, and May 12, 2014, and is a licensed attorney in the State of New York. (JPO 3:13); (Jay Bloom (“Bloom”) Trial Test., ECF No. 100)[3]; (see also New York State Attorney Detail, Trial Ex. 3).[4]

         4. The Court finds Lasala's testimony was not credible. He contradicted himself, and his explanations were not reasonable. This credibility determination was taken into consideration to make these findings of fact.

         5. Lasala did not sign Plaintiff's Operating Agreement. (See Operating Agreement, Trial Ex. 4). At trial, Lasala questioned Bloom as to the signing of the Operating Agreement and Bloom's testimony regarding Lasala's offered and accepted employment package. Lasala asked whether Plaintiff's offer of employment to him would have been memorialized in writing. Bloom explained that Lasala, as CLO, was responsible for drafting such documents as employment offers and the Operating Agreement, and ensuring members signed the Operating Agreement. Lasala conceded during trial that he was an employee of Plaintiff. (Lasala Trial Test., ECF No. 100). The Court finds Bloom's testimony credible regarding the employment package Lasala was offered and accepted, including a salary and 2% equity under a three year vesting schedule. (Bloom Trial Test.). Lasala also acknowledged his duty of confidentiality to Plaintiff during trial. (Lasala Trial Test.).

         6. The 1st One Hundred Operating Agreement requires all members to hold in strict confidence any information received regarding 1st One Hundred, as follows:

3.14 CONFIDENTIAL INFORMATION. The Members acknowledge that from time to time, they may receive information from the Manager or other Persons regarding the Company or Persons with which it does business. Each Member shall hold in strict confidence any information it receives regarding the Company… and may not disclose it to any person other than to another Member or a Manager, except for disclosures: (i) compelled by law (but the Member must notify the Manager promptly of any request for that information, before disclosing it, if practicable); (ii) to advisers or representatives of the Member or Persons to which that Member's Membership Interest may be Disposed as permitted by this Operating Agreement, but only if the recipients have agreed to be bound by the provisions of this Section; or (iii) of information that Member also has received from a source independent of the Company that the Member reasonably believes obtained that information without breach of any obligation of confidentiality. The Members acknowledge that breach of the provisions of this Section may cause irreparable injury to the Company for which monetary damages are inadequate, difficult to compute, or both. Accordingly, the Members agree that the provisions of this Section may be enforced by specific performance. The Members acknowledge that the Manager from time to time may determine, due to contractual obligations, business concerns, or other considerations, that certain information regarding the business, affairs, properties, and financial condition of the Company should be kept confidential and not provided to some or all other Members, and that it is not just or reasonable for those Members to examine or copy that information.

(Operating Agreement at 5).

         7. Pursuant to Section 1.16 of the Operating Agreement, a “member” is defined therein as “any person executing this Operating Agreement as of the date of this Operating Agreement as a Member, or hereafter admitted to the Company as a Member as provided in this Operating Agreement, but does not include any Person who has ceased to be a Member in the Company.” (Id. at 2).

         8. As chief legal officer, Lasala was entrusted with drafting, reviewing and executing important documents for Plaintiffs and their investors, which contained detailed information pertaining to Plaintiffs' corporate structure, strategy, financial statements, value, and other extremely sensitive proprietary information, which was not accessible to the public. (Bloom Trial Test.); (Email Introduction, Trial Ex. 15) (email from Erika Twesme “Twesme” to Joseph Gutierrez, Jason Maier, and Luis Ayon with CC to Lasala introducing Lasala as her “colleague”).

         9. The Court does not find that Lasala was a member of Plaintiffs. While Lasala was involved with drafting Operating Agreement, to be a member of it specifically requires execution. Without a signature or even a signature block, the Court cannot find that Lasala executed the Operating Agreement to become a member.

         10. By Lasala's involvement with the drafting of the Operating Agreement, however, he was privy to confidential and proprietary information.

         11. Lasala also oversaw and participated in the preparation of First 100's employee manual (the “Employee Manual”). (Bloom Trial Test.); (Employee Manual, Trial Ex. 5). No evidence was provided at trial that Lasala signed the Employee Manual, but he helped to draft it. (Bloom Trial Test.).

         12. Pursuant to the Employee Manual, employees owed the company a duty of nondisclosure and confidentiality as follows:

Upon accepting employment with First 100, LLC, you were asked to sign a Confidentiality Agreement, which generally provided that you will not disclose or use any First 100, LLC confidential information, either during or after your employment. We sincerely hope that our relationship will be long-term and mutually rewarding. However, your employment with First 100, LLC assumes an obligation to maintain confidentiality, even after you leave our employ.
Additionally, our clients and suppliers entrust First 100, LLC with important information relating to their business. The nature of this relationship requires maintenance of confidentiality. In safeguarding the information received, First 100, LLC earns the respect and further trust of our clients and suppliers.
If you are questioned by someone outside the company or your department and you are concerned about the appropriateness of giving them certain information, you are not required to answer. Instead, as politely as possible, refer the request to your manager. No one is permitted to remove or make copies of any First 100, LLC records, reports or documents without prior management approval. Disclosure of confidential information could lead to immediate termination, as well as other possible legal action.

(Employee Manual at 15).

         13. While no evidence was produced at trial to indicate that Lasala signed the acknowledgment in the Employee Manual, the Court finds that he was on notice of the nondisclosure and confidentiality provisions and that Plaintiffs wanted their business information held in strict confidence because of his involvement in its drafting and subject to it as an employee of Plaintiffs. (See Bloom Trial Test.). At no point did Lasala express any concerns or objections to the terms of the Employee Manual, in writing or otherwise, because no confidential information would have been disclosed to him had he objected. (Id.). Regardless of his signature or lack thereof, as an employee of Plaintiffs, these provisions applied to Lasala and he was bound by them.

         14. Lasala owed fiduciary duties to Plaintiffs as Plaintiffs' chief legal officer. (Id.).

         15. Lasala acted as the primary point of contact for the Cornwall Defendants (“Cornwall”) throughout their business dealings with Plaintiffs, and in anticipation of the meeting and possible transaction, Lasala drafted a confidentiality agreement (the “Confidentiality Agreement”) for the Cornwall to sign. (Bloom Trial Test.); (Confidentiality Agreement, Trial Ex. 7). Lasala also made the initial introduction between Cornwall and Plaintiffs. (Lasala Trial Test.).

         16. At the meeting with Plaintiffs' representatives on February 6, 2014, Defendant Ian Haft (“Haft”), on behalf of Cornwall, executed the Confidentiality Agreement. (Id. at 11) (showing Haft's signature).

         17. In an effort to further business relations among Plaintiffs and Cornwall, Cornwall initiated a due diligence process and requested information pertaining to Plaintiffs' finances, legal involvement, investment performance, sales and marketing, clients and suppliers, compensation, background of management, and other related material. (Bloom Trial Test.).

         18. On or about February 7, 2014, Plaintiffs provided the Cornwall access to Plaintiffs' electronic data room, which contained a myriad of confidential and propriety information, including work product, trade secrets, client lists, corporate relationships, and other such sensitive information. (JPO 3:22-23); (Bloom Trial Test.).

         19. Lasala drafted and delivered extensive responses to the Cornwall's due diligence requests, which contained additional confidential and proprietary information. (JPO 3:24-25).

         20. On or about March 7, 2014, the Term Sheet for the business transaction between Plaintiffs and Cornwall was signed and executed. (Final Term Sheet, Trial Ex. 8).

         21. Cornwall also signed and executed a letter of intent on or about March 10, 2014, which detailed the pertinent terms and conditions of the proposed bridge loan to Plaintiffs in the amount of $6, 000, 000.00. (Letter of Intent, Trial Ex. 9).

         22. Plaintiffs wholly believed that Cornwall would deliver on their loan agreement, and in reliance on the previous representations and Letter of Intent from Cornwall, Plaintiffs turned down funding in the amount of approximately $6, 000, 000.00 from non-party Full Circle Capital Corporation. (Bloom Trial Test.). Cornwall's Letter of Intent had an exclusivity provision, so Plaintiffs could not accept multiple partners. (Id.); (see also Letter of Intent at 4).

         23. Although the Letter of Intent did not oblige Cornwall to fund the loan, the Letter dictated that “Cornwall Capital shall have the right in its sole discretion to reject Applicant's application for the Loan on the basis of its due diligence investigation by ...

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