Innovative Financing

As the Covid-19 pandemic began and the need for PPE became urgent, a local manufacturer contracted with the state to manufacture hand-sanitizer. However, the manufacturer did not have the capital to acquire the additional raw materials and packaging. A SKO client agreed to provide financing, and Tom Rutledge agreed to on a pro-bono basis prepare the necessary financing documents. Applying his knowledge and experience in financing and the Uniform Commercial Code, an arrangement was put in place that protected our client notwithstanding the interests of pre-existing lenders.

Forced Buyout of a Member of an LLC

When a minority member of an LLC threatened disruptive litigation, Tom was recommended by the company’s existing counsel to handle the dispute. Within a month of being engaged, he effected a forced buyout of the dissident member on terms advantageous to the company and at a value of some one-third of the dissident’s demand even as he negotiated for significant non-competition and non-solicitation limits. In the course of these actions, he as well sidelined the dissident’s efforts to inspect the LCC’s books and records.

Successful Defense of Veil-Piercing Claim

Spradlin v. Beads and Steeds Inn, LLC (In re Howland), Case No. 16-5499 (Jan., 2017) (unpublished)

The Sixth Circuit Court of Appeals upheld the lower court rulings SKO obtained in a matter involving novel Kentucky corporate law claims centered on reverse veil piercing and substantive consolidation claims under bankruptcy law. SKO successfully defended the client against efforts by a Chapter 7 trustee to avoid the transfer of a parcel of real property. In this case, the client purchased a farm from an LLC, which leased it back to continue operating its business at the location. When the individual members of the LLC later sought bankruptcy relief, the trustee filed a complaint, alleging the client was the recipient of a fraudulent transfer. SKO proved the property transfer was made to our client by the LLC, not the individual debtors. Efforts by the trustee to amend and consolidate the complaint on appeal, as well as invoke reverse veil-piercing, were unsuccessful in federal Bankruptcy Court, the U.S. District Court for the Eastern District of Kentucky and the Sixth Circuit Court of Appeals.

Defense of Alleged Breach of Fiduciary Duty in an LLC

SKO defended the majority member of a medical billing company from multiple claims of usurping corporate opportunities and breach of fiduciary duty. Counterclaims were filed against the plaintiffs alleging breach of fiduciary. The case was quickly settled on favorable terms to SKO’s client, resulting in the majority member being the sole owner of the company.

Defense of Majority Shareholder Against Breach of Fiduciary Duty Charges

SKO defended a majority shareholder against multiple claims of breach of fiduciary duty, self-dealing and fraud stemming from multiple construction and land use projects. The case was litigated over the course of four years, with the plaintiffs eventually agreeing to settle the dispute for a small fraction of their demand.

Suit Brought on Behalf of LLC Member to Follow Operating Agreement

When a faction of an LLC purported to take control of its board notwithstanding the absence of a vote of the members, SKO represented a group of members in litigation insisting that the requirements of the operating agreement be satisfied.

Terminated Shareholder Sued for Breach of Fiduciary Duty & Employment Agreements

A terminated shareholder/corporate officer was sued on a number of grounds, including breach of fiduciary duty and breach of an employment agreement. SKO represented the defendant corporation and its founding shareholder. SKO obtained a jury verdict substantially in favor of the defendant.

Defending a Shareholder Derivative Action

When a single, dissident shareholder brought both derivative claims on behalf of the corporation and direct claims against certain directors, SKO successfully argued in litigation that the dissident shareholder had no standing to assert claims and lacked the ability to bring a derivative action for failure to satisfy the statutory requirements for doing so. The litigation continued to the enforcement of a stock buy-sell agreement, upon which our client was successful in both its enforcement and the valuation of the minority member’s shares.

Ending a Derivative Action by a Merger and Dissenter Rights

When a small minority of the shareholders prevailed in derivative action, SKO was brought in to advise the majority owners. A merger transaction both ended the derivative action by depriving the minority of standing and provided a means of redeeming their shares so similar suits may not be brought in the future. The minority shareholders initiated a dissenter rights action, which was resolved on a valuation favorable to our client.

Defending Against a Threatened Change in Control

When a dissident group of shareholders threatened to alter the structure of the board and thereby take control of the corporation, SKO advised the incumbent board on how to structure an asset sale to a related company that preserved existing relationships.

Reorganization, Refinancing and Acquisition of Major Healthcare Entity

Stoll Keenon Ogden represented a major healthcare services entity, its affiliated upstream and sister companies, its owners and its founding management team in comprehensive reorganization, refinancing and acquisition transactions totaling more than $300 million. The matters resulted in the closing of a senior secured term loan and revolving credit facilities secured by owned senior care facilities in four states with a 9-member syndicate of commercial banks; the requisition of waivers, consents and estoppels from various property lessors on leased senior care facilities in four states; restructuring of upstream holding companies and combination of two upstream ownership groups and boards of managers; the creation of a management company; the introduction of healthcare facility management agreements; the migration of payroll and benefits for more than 7,000 employees; the related restructuring of multiple lease and debt financing and supplier relationships; the creation and reorganization of multiple SPE organizations accompanied by extensive non-consolidation analysis and issuance of a substantive non-consolidation opinion to the lending syndicate; the exercise of purchase option and acquisition of multiple senior care facilities; the contribution of additional equity capital from the client’s majority owners; and the amendment and restructuring of multiple Master Lease and inter-creditor agreements.

Reorganization of Equine Business, Insurance Trust and Gift Planning

Represented a husband and wife in planning and implementing the reorganization of a multi-million dollar equine business; in the preparation of multi-generation irrevocable trusts for each of the children and the gifting of interests in the equine business on a discounted basis to the trusts; in planning and implementing a multi-million dollar life insurance trust; and in preparing and implementing a beneficiary defective irrevocable dynasty trust.

Equity Offerings and Corporate Governance

Currently represent a software services company that provides a suite of management and IT solutions for financial institutions, designed to improve efficiency and compliance with federal regulations in connection with seed round and subsequent financings involving a large private equity funds.

Recapitalization and Restructuring of Financial Services Compliance Firm

Represented financial services compliance firm in all aspects of recapitalization and sale of multiple series of securities to private equity firm and other stockholders.

Sale of Financial Services Technology Business to Private Equity Firm

Represented sellers in negotiating and closing the sale of major high technology, financial services business. Included confidentiality and non-disclosure agreements, review of competing proposals by prospective purchasers; due diligence; negotiation and closing of all purchase agreements with well-known private equity firm buyer.

Sale of Natural Gas Production Interests

Represented sellers of significant natural gas production interests in series of large transactions with strategic buyers. Included negotiation with multiple prospective purchasers, NDAs, due diligence, regulatory issues, negotiation and closing of all purchase-related agreements.

Competing Venture by an LLC Member

When a minority member of an LLC organized a competing venture, SKO brought suit and obtained injunctive relief on behalf of our client based upon minority member’s breach of his statutory duty of loyalty. After a two-week jury trial, obtained favorable settlement for client.

LLC Member’s “Salary”

When a terminated member argued that he was still entitled to his “salary,” SKO prevailed in the lawsuit, demonstrating that the “salary” was a distribution and that under state law the LLC was prohibited from making a distribution under existing circumstances.

• Legislative and Case Law Update for the Business Law Practitioner, University of Kentucky’s Rosenberg College of Law 18th Biennial Business Associations Institute, KBA Business Law Section, Presenter, 2021
• Why Dying as a Member of an LLC is a Bad Idea, Speaker, LLC Institute, American Bar Association, 2020
• Operating Agreements from the Minority Perspective: Rosencrantz and Guildenstern are Dead, Program Chair, Section of Business Law, Americn Bar Association, 2019
• Biennial Case Law and Legislative Update for the Business Lawyer, Biennial Business Association’s Law Institute, Speaker, 2019
• LLC Boot Camp: Things You Need to Understand in Order to Write Effective Operating Agreements, American Bar Association Send of Business Law, Speaker, 2019
• Life Cycle of a Business, Florida Tax Institute, Speaker, 2019
• Piercing the Veil of the Single-Member LLC, Speaker, 2018
• Contract and business law to New Lawyers Program, Speaker, 2017
• Various topics involving Limited Liability Companies at Arkansas Bar Association Midyear Meeting, Speaker, 2017
• LLCs in Bankruptcy, Speaker, 2016