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Ruppert v. Mav6 Holdings, LLC

Court of Appeals of Mississippi

June 9, 2015

DAVID RUPPERT AND PAUL FRANKEN APPELLANTS
v.
MAV6 HOLDINGS, LLC; MAV6 EMPLOYEE EQUITY PROGRAM, LLC; A. JAY HARRISON; AND BUFORD C. BLOUNT, III APPELLEES

DATE OF JUDGMENT: 03/21/2014

COURT FROM WHICH APPEALED: LAMAR COUNTY CHANCERY COURT TRIAL JUDGE: HON. DEBORAH J. GAMBRELL

ATTORNEYS FOR APPELLANTS: O. STEPHEN MONTAGNET III WILLIAM B. BARDWELL

ATTORNEY FOR APPELLEES: CORY T. WILSON

BEFORE IRVING, P.J., ISHEE AND CARLTON, JJ.

ISHEE, J.,

¶1. This case involves a defense-contractor company named Mav6 LLC (Mav6). Mav6 is the operating company tied to Mav6 Holdings LLC (Holdings) and Mav6 Employee Equity Program LLC (MEEP). Collectively, Mav6, Holdings, and MEEP are known as Mav6 Entities (Entities), which was founded by Major General Buford C. Blount III, a decorated war veteran and former commander of the Army's 3rd Infantry Division, and distinguished Navy veteran and former senior executive in the Army A. Jay Harrison, in 2007. The purpose of Holdings was laid out as follows:

(1) to oversee the operations of Mav6[] LLC ("Mav6") to create the leading agile, mid-tier systems integrator and technology innovation company serving the national security community; (2) to exploit [d]efense and commercial market synergies to build a highly differentiated Mav6 brand and diversified revenue stream; and (3) to drive high technology economic development in the State of Mississippi. The foregoing purposes shall be in addition to, and not in limitation of, the general powers of limited liability companies under the Act.

Likewise, the purpose of MEEP was:

(a) to act as a holding company for the employees of Mav6[] LLC ("Mav6") to combine their equity holdings and to secure continuity and stability of the capitalization of the Company; (b) to do and perform all acts necessary and desirable to carry out the foregoing purpose; and (c) to engage in any one or more business[es] or transactions which from time to time may be authorized or approved according to the provisions hereof. The foregoing enumerated purposes shall be in addition to, and not in limitation of, the general powers of limited liability companies under the Act.

¶2. From January 2008 until March 2012, Paul Franken worked for Mav6 as a nonexecutive employee.[1] Upon being given equity interests in MEEP, Franken became a member of MEEP and was therefore subject to MEEP's operating agreement, which he acknowledged and signed. The operating agreement contained the arbitration provision at issue. David Ruppert worked for Mav6 from April 2008 until June 2012, and served the company as its general counsel and vice president. Ruppert was granted equity interests in Holdings, and, as a member of Holdings, signed an operating agreement, which contained an arbitration provision identical to the one Franken submitted to through his membership in MEEP. The arbitration provisions read:

The Members agree that in the event of any dispute or disagreement solely between or among any of them arising out of, relating to or in connection with this Agreement or the Company or its organization, formation, business[, ] or management ("Member Dispute"), the Members shall use their best efforts to resolve any such dispute by good-faith negotiation and mutual agreement. However, in the event that the Members are unable to resolve any Member Dispute, such parties shall first attempt to settle such dispute through a non-binding mediation proceeding. In the event any party to such mediation proceeding is not satisfied with the results thereof, then any unresolved disputes shall be settled by final and binding arbitration conducted in the State of Mississippi. All mediation or arbitration proceedings shall be conducted in accordance with the American Arbitration Association's rules therefor. Judgment upon any award rendered by the arbitrator in a Member Dispute may be filed in any court of competent jurisdiction; the law of the State of Mississippi (excluding conflicts of law provisions) shall apply in any proceeding arising out of or relating to this Agreement.

At the time Franken and Ruppert filed their complaint, Holdings owned 91.41% of Mav6, and MEEP owned the remaining 8.59%. At all times relevant, Blount and Harrison served as managing partners of Holdings. Blount also served as the chairman of Entities, and Harrison served as managing director of Entities.

ΒΆ3. Mav6 operated profitably for several years. Appellees assert that several factors led to the demise of Mav6, including governmental policy shifts associated with the U.S. conflicts in the Middle East, which reduced Department of Defense investments; significant federal defense-oriented spending cuts promulgated in 2011; and a federal investigation of Mav6's CEO, retired U.S. Air Force ...


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