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Filing # 73060391 E-Filed 06/04/2018 06:25:43 PM
IN THE CIRCUIT COURT OF THE NINETEENTH JUDICIAL CIRCUIT
IN AND FOR ST. LUCIE COUNTY, FLORIDA
MADELINE and WILLIAM MCCONNELL,
Plaintiffs, Case No. 562017CA1650AXXXHC
Vv.
P.D.K, INC., A Florida Corporation,
Defendant.
PLAINTIFFS’ MOTION AND INCORPORATED MEMORANDUM OF LAW IN
SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT
Plaintiffs are contemporaneously submitting a Motion to Strike Defendant P.D.K, Inc.’s
Amended Affirmative Defenses. Plaintiffs also move for summary judgment in their favor as to
whether they are current shareholders of PDK by virtue of the $121,526.72 invested in PDK in
March, 2005, and whether they have established a proper purpose. The grounds and substantial
matters of law to be argued on this motion are set forth below. This motion will show that there
are no genuine issues as to any material fact as to Plaintiffs’ status as current shareholders and
that they have established a proper purpose for inspection. As such, Plaintiffs are entitled to a
judgment as a matter of law based upon all relevant authorities. A Statement of Undisputed
Material Facts in Support of this motion is attached hereto as Ex. A.
Florida law is well established on the legal standards required for granting a Motion for
Summary Judgment. Pursuant to Rule 1.510 (c) of the Florida Rules of Civil Procedure,
summary judgment shall be granted upon the showing of an absence of any genuine issues of
material fact and that the moving party is entitled to judgment as a matter of law. Whitten v.
Progressive Casualty Ins. Co., 410 So. 2d 501 (Fla. 1982). Once the plaintiff establishes thatthere is no genuine issue of material fact to be tried, a defendant has the burden “to prove
otherwise either through facts of justifiable inferences from facts presented to the trial court.”
Carbonell v. Bellsouth Telecommunications, Inc., 675 So. 2d 705, 706 (Fla. 3d DCA 1996);
Buitrago v. Rohr, 672 So. 2d 646, 648 (Fla. 4th DCA 1996). Summary judgment shall be
granted if the proof brought forth by the moving party overcomes all reasonable inferences in
favor of the party opposing summary judgment. Holl v. Talcott, 191 So. 2d 40 (Fla. 1966).
However, where the determination of the issues of a lawsuit “depends upon the
construction of a written instrument and the legal effect to be drawn therefrom, the question at
issue is essentially one of law only and determinable by entry of summary judgment.” Volusia
County v. Aberdeen at Ormond Beach, 760 So. 2d 126, 131 (Fla. 2000) citing Cox v. CSX
Intermodal, Inc., 732 So. 2d 1092, 1096 (Fla. 1st DCA 1999); Palm Beach County v. Trinity
Indus., 661 So. 2d 942, 944 (Fla. 4th DCA 1995) (same).
Here, the question before the Court on this motion is whether the express terms of the
Shareholder’s Agreement entered into between the parties on March 31, 2005 granted
shareholder rights to the McConnells to the extent they invested $121,526.72, imespective of any
future money paid (or not paid) and whether that shareholder interest was capable of “forfeiture”
as “liquidated damages” under the Shareholder’s Agreement, as PDK contends. Plaintiffs
believe they had an existing shareholder interest in PDK in 2005 (which PDK now admits), and
continue to hold an interest in PDK to date. Moreover, based on the criteria set forth in the
relevant statute and authorities, Plaintiffs also contend they have submitted a prima facie “proper
purpose”. As such, they should be permitted to inspect PDK’s books and records without further
delay.1. Background of Plaintiffs’ Investment and Participation
The circumstances regarding the McConnells’ investment in PDK are set forth in detail in
the Affidavit of William McConnell (“McConnell Affidavit”) submitted contemporaneously
herewith. They will be briefly summarized here.
Mr. McConnell met Katchmere in 2004 when the Katchmeres were interested in
parlaying funds received from the sale of a prior investment into a piece of real estate in a 1031
transaction to avoid capital gains tax. Mr. McConnell showed Katchmere a variety of
opportunities but Katchmere was interested in Crystal Trace. McConnell Affidavit, paragraphs
3-5. There was a shortfall in the amount of funds needed to close on the property, so the
McConnell family, deciding it was a good investment opportunity, put up $121,526.72
McConnell Affidavit, paragraphs 6-8.
In connection with the investment, the McConnells and the Katchmeres signed a
Shareholder’s Agreement, which had been prepared by PDK’s lawyer. McConnell Affidavit,
paragraph 8 and Ex. B thereto. The Shareholder’s Agreement described the investment and any
future monies to be paid by the McConnells in paragraph 3. Ex. B to McConnell Affidavit,
paragraph 3. There was no provision in the Shareholder’s Agreement with respect to any actions
to be taken if the Shareholder’s Agreement was breached. /d. Nor is there any provision for
liquidated damages in the event of a breach in the Shareholder’s Agreement. Jd.
While the parties to the Shareholder’s Agreement contemplated that Crystal Trace would
be converted into condominiums, at the outset there was a complication involving a
zoning/easement issue. McConnell Affidavit, paragraph 13. Thus, by the time the zoning issue
had been cleared and the condominium documents prepared, it was late in 2006. McConnell
Affidavit, paragraph 13. It was then difficult, with the issues emerging in the Florida real estatemarket, to get buyers qualified to purchase the condominiums., and the parties then sought to sell
the entire property. McConnell Affidavit, paragraphs 13, 15.
Sometime in April and May, 2011, Katchmere sought to obtain a loan from the
McConnells for $10,000, ostensibly to buy items in order to upgrade the existing apartments at
Crystal Trace. Katchmere originally just asked for a check, but the McConnells were unable to
get enough information on how the total $10,000 was to be spent. McConnell Affidavit,
paragraphs 17-19, 21. The loan was never intended to be part of the McConnells shareholdings
in PDK. McConnell Affidavit , paragraphs 17-19, 21 and Exs. F, G and H thereto.
At some point, perhaps at the meeting in May, 2011 wherein PDK claims it told William
McConnell that the McConnells their shares would be “forfeited”, William McConnell said that
if he gave the loan to Katchmere, it would have certain conditions attached to it, including that
the money would be used to prepay items at the store for specific things for the apartments and
that the McConnells wanted access to the financial information of PDK. McConnell Affidavit,
paragraphs 17, 19, 21 and Exs. F and G thereto. At or around the meeting in May, 2011, it
became apparent that Katchmere could not substantiate why $10,000 was needed for the upgrade
he claimed it was intended to cover. McConnell Affidavit, paragraph 21. Katchmere did not
advise McConnell at this meeting that there would be adverse consequences if the McConnells
did not make the loan. McConnell Affidavit, paragraph 21. As far as William McConnell
remembers, he did not commit to the loan one way or the other at the May, 2011 meeting.
McConnell Affidavit, paragraph 23. Ultimately, however, the McConnells decided they would
not contribute the $10,000. McConnell Affidavit, paragraph 22. While he does not know if and
when he could convey the family’s decision to Katchmere, Mr. McConnell received a letter from
PDK on May 19, 2011 which terminated him as a broker and claimed that his shares had beenforfeited on the basis of liquidated damages. McConnell Affidavit, paragraph 23 and Ex. J
thereto. Thereafter, Mr. McConnell (but not his wife or son) received a similar letter from
PDK’s lawyer, again advising him that the shares had been forfeited as liquidated damages, but
offering a resolution as long as he relinquished all claims in PDK. McConnell Affidavit,
paragraph 25 and Ex. K thereto. However, at this same time, a party had expressed interest in
possibly purchasing Crystal Trace so Mr. McConnell continued to communicate with
Katchmere. McConnell Affidavit, paragraph 27 and Ex.L thereto.
Despite the May 19 and May 27, 2011 letters, Katchmere continued to communicate with
McConnell to discuss “our” investment, and the two met up in July 2011 to “air some issues”.
McConnell Affidavit, paragraphs 28, 29 and Exs. M and N thereto. Possibly at the July 2011
meeting , Katchmere advised McConnell that PDK was close to signing with a new investor, but
would not disclose anything about the terms of the arrangement. McConnell Affidavit,
paragraph 29 and Ex. N thereto. Since May 2011, PDK has supplied the McConnells with
certain year-end tax returns of PDK. McConnell Affidavit, paragraph 29 and Ex. O thereto. In
recent years, McConnell has tried to meet with Katchmere to discuss the family’s investment in
PDK but has been rebuffed every time. McConnell Affidavit, paragraph 31 and Ex. P thereto.
The McConnells have since learned that the mortgage was refinanced in 2016, the
Katchmeres continue to publicly represent that they are the sole shareholders of PDK and despite
a theft of what appears to be a significant amount of money from PDK by a former property
manager, no charges were pursued. Komlossy Affidavit, Ex. B-D. In light of this, Plaintiffs
filed their books and records complaint to determine the value of their investment and verify that
the assets of the Company were being properly managed. Rather than comply with the statutory
mandate, PDK has regrettably chosen to fight.2. The Express Terms of the Shareholder’s Agreement Granted the McConnells an
Interest in PDK Upon the Investment of $121,526.72 Which Has Not Been Forfeited
As noted in Plaintiffs’ Motion to Strike the Affirmative Defenses, the key provision in
the Shareholder’s Agreement containing the scope of the McConnells’ interest as of March 31,
2005 is contained in paragraph 3 of the document, to wit:
The NEW SHAREHOLDERS [the McConnells] shall increase its percentage
of ownership of CORPORATION at any time by investing more funds in the
project of the Subject Property such that the total investment by the NEW
SHAREHOLDERS including the [$122,526.72] in closing expenses plus
the additional funds invested on the as need basis shall be the percentage of
the total equity invested by the CURRENT SHAREHOLDERS [the Katchmeres]
as the NEW SHAREHOLDERS percentage of ownership in the CORPORATION;
Shareholder’s Agreement, { 3 (emphasis added), Ex. B to the McConnell Affidavit.! Thus, the
express language of the contract demonstrates that the McConnells would increase their then
existing percentage of ownership if they invested more funds in PDK over the approximately
$122,000, implicitly acknowledges that the March 31, 2005 investment by the McConnells had
conferred shareholder status on them. Indeed, PDK does not now dispute that the McConnells
were shareholders from 2005 through May 2011. AA, at p. 3 (“Plaintiffs , however, are not
shareholders, even though they were once shareholders in October [sic], 2005”). However, the
Amended Answer contends that “In May, 2011, Plaintiffs were notified that their shares were
forfeited and canceled.” AA, p.3. PDK also states that the “cancelation and forfeiture of
Plaintiffs shares was not done arbitrarily or without legal basis...”. AA, at p.3. That statement is
incorrect.
' There is similar language about additional monies in the recitals to the Shareholder’s Agreement, but the text of the
contract provision in paragraph 3 is clear and unambiguous and resort to the recitals is unnecessary. Orlando Lake
Forest Joint Venture v. Lake Forest Master Cmty., 105 So. 3d 646, 648 (Fla. Sth DCA 2013) (where the operative
portion of a contract is unambiguous, the prefatory language should not be considered to vary the unambiguous
terms of the operative portion of the document).PDK has not provided the Court with the purported letters of notification of forfeiture in
May, 2011, for good reason. The correspondence is annexed to the McConnell Affidavit as Exs.
Jand K. Both state that the basis for the “forfeiture” of the McConnells’ shares was based on
“liquidated damages”. See, Ex. J at p. 2; Ex. K at p. 2. However, as can be clearly observed by
reviewing the Shareholder’s Agreement, there is no provision in the Shareholder’s Agreement
which provides for liquidated damages. See, Ex. B to McConnell Affidavit.
By definition, a liquidated damages provision is a clause in a contract that determines in
advance the measure of damages in the event of a contractual breach. RKR Motors, Inc. v.
Associated Unif. Rental & Linen Supply, Inc., 995 So. 2d 588, 594 (Fla. 3d DCA 2008), citing
Black’s Law Dictionary 949 (8th ed. 2004). No such provision was included in the
Shareholder’s Agreement. Even if there were such a provision in the Shareholder’s
Agreement, it would have to follow the guidelines developed by the courts and not constitute a
penalty. /d. The courts in Florida have made it clear that first, the damages consequent on a
breach must not be readily ascertainable, and second, the sum stipulated to be forfeited must not
be so grossly disproportionate to any damages that might be expected to follow from a breach as
to show that the parties could have only intended to induce full performance, rather than
liquidate their damages. RKR Motors, 995 So. 2d at 595, citing Lefemine v. Baron, 573 So. 2d
326, 328 (Fla. 1991). See also, Crosby Forrest Prods., Inc. v. Byers, 623 So. 2d 565, 567 (Fla.
5th DCA 1993) (same) and Humana Med. Plan, Inc. v. Jacobson, 614 So. 2d 520, 522 (Fla. 3d
DCA 1992) (same). Based on the facts in this case, any attempt to impose liquidated damages
by complete forfeiture of the McConnells’ interest in PDK even if there had been a provision for
the full amount of the McConnells’ investment would have failed.As indicated in Exs. J and K, the Katchmeres and PDK’s lawyer claimed that the
Katchmeres had contributed $75,000 in expenses for Crystal Trace since March 31, 2005. Ex. J
at p. 1; Ex. K at p.1. Based on the McConnells’ contribution in March 31, 2005, they had an
approximate 12% interest in PDK (not Crystal Trace). Thus, even if the McConnells were
obligated under the terms of the Shareholder’s Agreement to contribute 12% of such amount,
their contribution would have been approximately $9,000; the attempted forfeiture of
approximately $122,000 to satisfy an obligation of approximately $9,000 can only be viewed as
apenalty. Thus, even if there were an enforceable liquidated damages provision (which there is
not), “equity will relieve against its enforcement when the liquidated damages amount is
unconscionable in light of the circumstances existing at the time of the breach.” RKR Motors,
995 So. 2d at 595 citing Hutchinson v. Tompkins, 259 So. 2d 129, 132 (Fla. 1972); Coleman v.
B.R. Chamberlain & Sons, Inc., 766 So. 2d 427, 429 (Fla. 5th DCA 2000) and Perez v.
Aerospace Acad., Inc., 546 So. 2d 1139, 1141 (Fla. 3d DCA 1989). Based on the foregoing, the
attempted “forfeiture” of the McConnells’ interest in PDK is improper and invalid.
Moreover, the Shareholder’s Agreement is a creature of the statutes of the State of
Florida. Fla. Stat. Section 607.0732 (1) permits shareholder agreements among the shareholders
of a corporation with 100 or fewer shareholders, even if inconsistent with other provisions of the
chapter, to the extent it governs the making of distributions, among other things. The statute also
requires that it either be set forth in the articles of incorporation or bylaws and approved by all
shareholders at the time of the agreement or be set forth in a written agreement signed by all
shareholders at the time of the agreement (which was the method utilized between the
McConnells and PDK). However, this same statute provides in Fla. Stat. Section 607.0732 (2)
(b) that it is “Subject to termination or amendment only by ail persons who are shareholders atthe time of the termination or amendment, unless the agreement provides otherwise with respect
to termination and with respect to amendments that do not change the designation, rights,
preferences, or limitations of any of the shares of a class or series.” 607.0732 (2)(b) (emphasis
added). While the Shareholder’s Agreement was signed by the three McConnells and the two
Katchmeres, the letters purporting to terminate the relationship were sent only to William
McConnell (despite PDK’s ironic protestations that Daniel McConnell is necessary to this
action) and no agreement was ever drafted, much less executed, which terminated the
relationship as required by Fla. Stat. Section 607.0732 (2)(b). Having never terminated the
relationship as required by law, PDK’s position is statutorily invalid. The McConnells continue
to remain shareholders of PDK.
Moreover, even after Exs. J and K were sent to William McConnell, as set forth in the
McConnell Affidavit, Katchmere acknowledged in June, 2011 that the McConnells continued to
hold an investment in the Company, discussing options with William McConnell about “our”
investment.? McConnell Affidavit, paragraphs 28, 29 and Exs. M and N. And despite PDK’s
assertion that the McConnells were no longer shareholders of PDK after May 2011, it continued
to provide William McConnell with year-end tax returns for PDK, without objection on the basis
of shareholder status. McConnell Affidavit, paragraph 29 and Ex. O. This is hardly suggestive
of the fact that PDK and the Katchmeres considered the McConnells’ shareholdings in the
Company to have been forfeited.
Finally, it is worth noting that the additional money sought by PDK from the McConnells
would not have affected the McConnells’ percentage of ownership in the Company, and thus,
arguably outside of the Shareholder’s Agreement. At all times, the nature of the investment that
* When speaking with third parties about his own family’s investment in PDK, Katchmere uses “my family” (Ex. D
to McConnell Affidavit), “Don and I” or “my brother and I” (id.); “Don’s family and my family’s” (Ex. J) or “Don
and I” (id,).was then under discussion was of a “loan” from the McConnells to PDK. See, Exs. F, G and H
and paragraphs 17- 19 and 21 of the McConnell Affidavit. Specifically, the emails indicate that
any money the McConnells loaned PDK in May 2011 would come “off the top” of any sale of
PDK and would not count toward stock ownership. Thus, it is unclear if the Shareholder’s
Agreement is even implicated in this analysis.
Accordingly, the McConnells respectfully submit that there is no genuine issue of fact as
to whether they are currently shareholders of PDK. They are shareholders and PDK continued
to recognize their shareholder status after May, 2011, and the McConnells’ request to inspect the
books and records of PDK should be granted forthwith.
3. As Shareholders of PDK, the McConnells Have Established a “Proper Purpose”
under the Florida Statutes and Summary Judgment Should Be Granted on This
Point As Well
Under the relevant statutes, the McConnells are not required to establish a proper purpose
for the requests sought pursuant to Fla. Stat. Section 607.1601. Indeed, a shareholder has an
unqualified right to inspect the records enumerated in Fla. Stat. Section 607.1601(5) which
include articles of incorporation and all amendments; bylaws and all amendments thereto;
resolutions adopted by the board of directors concerning the rights. preferences and limitations
with respect to stock and classes of stock; the minutes of all shareholder meetings and records of
all action taken without a shareholder meeting; written communications to shareholders within
the past 3 years, including financial statements furnished for the past 3 years; a list of the names
and addresses of current officers and directors; and the most recent annual report delivered to the
Department of State. Four of the nine requests made by the McConnells pursuant to their
10original books and records demand fall under the “unqualified category” but have not been
produced.*
While PDK disputes that the McConnells have articulated a “proper purpose” under Fla.
Stat. Section 607.1602 with respect to the remaining categories of documents sought, Plaintiffs
disagree. In order to obtain these “qualified” categories of documents, a shareholder must
establish: the demand is for a proper purpose; the shareholder describes the purpose with
reasonable particularity and the records sought to be inspected; and the records are directly
connected with the shareholder’s purpose. Fla. Stat. Section 607.1602 (3) (a-c). If those criteria
are met, a shareholder is entitled to board of director minutes and shareholder minutes not
otherwise falling under the unqualified category; accounting records; records of shareholders and
any other books and records. Fla. Stat. Section 607.1602 (2) (a-d). There is no genuine issue of
fact that Plaintiffs have satisfied this criteria.
Both the demand and the Complaint set forth three specified purposes for the inspection,
all of which have been held to be proper purposes under prevailing Florida law, including the
shareholder’s right to investigate possible wrongdoing or mismanagement, including the fact the
McConnells never received distributions; to ascertain if the assets of the Company have been
properly managed; and to value their shareholdings. Complaint, paragraph 13. Ample case law
supports these to be each, standing alone, a proper purpose. Soreno Hotel Co. v. State ex rel.
Otis Elevator Co., 107 Fla. 195 (1932); Florida Military Academy v. State ex rel. Moyer, 127
Fla. 781 (1937); and State ex rel. Fussell v. McLendon, 109 So. 2d 783, 786 (Fla. 3d DCA 1959)
all recognize that a proper purpose includes not only valuing an interest in the company but also
> Counsel for PDK maintains that the Company does not maintain corporate records for the most part. Komlossy
Affidavit at paragraph 2.
11to determine if the company is being properly managed. Indeed, even if the McConnells have
stated only one proper purpose, they have stated a proper purpose.
Plaintiffs are entitled to value their interest in PDK, particularly since they have never
received a K-1 from the Company, never been notified of a shareholder meeting (although PDK
originally maintained that the May 2011 meeting was a shareholder meeting (OA, at p. 3), never
received any distributions and no financial information about PDK, other than the occasional
year-end tax return. All of this is set forth in the face of the Complaint and nothing raised in the
Amended Answer rebuts this.
Plaintiffs also have reason to seek records to inspect whether the assets of PDK have
been properly managed. As indicated in the Affidavit of Emily Komlossy (“Komlossy
Affidavit”) submitted contemporaneously herewith, Katchmere has previously testified under
oath in a deposition in an unrelated litigation that he used funds from PDK to pay an attorney
working on a case involving his prior company, Car Classics. Komlossy Affidavit at paragraph
4 and Ex. A thereto at pages 38-40.. That litigation arose in part out of an action entitled
Edward J. Paulin and Olga S. Paulin v. Bretsarian, Inc. d/b/a Car Classics, a Florida
corporation and Paul Katchmere, Case No. 06-4107(18), in the Circuit Court of the 17th Judicial
Circuit wherein Robert A. Stok and Stok & Associates, P.A. claimed a charging lien against the
Bretsarian, Inc. d/b/a/ Car Classics and Katchmere for attorneys’ fees incurred in the litigation in
the amount of $54,183.88. A Release of Lien was subsequently recorded with the Clerk of
Broward County on January 10, 2017. Both the charging lien and the Release of Lien are
attached to the Komlossy Affidavit as Ex. E. Given the Katchmeres’ repeated claims that they
had no money after closing on Crystal Trace and their details of financial problems in 2011, it is
unclear where the money was obtained, and in what amount, to release the charging lien. See,
12AA at p. 3 (the Katchmeres “put up all of their money to purchase the subject property”); OA at
p. 3(the Katchmeres in May 2011 “stood the chance of losing their homes”); OA at p. 7,
paragraph 16 (Katchmere stated that “all of their funds were exhausted at time of closing”).
In addition, in connection with filing this books and records litigation, Plaintiffs learned
that PDK had refinanced the mortgage that they complain of in their pleadings and now operate
under a mortgage in the amount of $1.545 million which was recorded with the County Clerk, St.
Lucie County on March 2, 2016. Komlossy Affidavit, Ex. B. On this same date, on March 2,
2016, PDK also recorded a “Resolution of the Directors and Shareholders” of PDK, indicating
that the Katchmeres are the only officers, directors and shareholders of PDK (Ex. C to Komlossy
Affidavit) --this despite the fact that they allege in their Amended Answer that they brought in a
new investor just months after presumably firing the McConnells. AA, page 5.
This is all the more perplexing in that the new investor, Robert Leite, has represented to
public authorities in St. Lucie that he is the co-owner of Crystal Trace, with the implication that
he is also a shareholder ( and has been involved with PDK since at least mid-2011 according to
the Amended Answer). AA, at p. 5. As described in a publicly-available arrest affidavit filed by
the Ft. Pierce Police Dept. with the Clerk of the Court, Leite, as “co-owner” of Crystal Trace,
advised the police that his property manager had been skimming money from PDK by depositing
Jess in the Company’s bank accounts than the property manager actually collected. The property
manager was subsequently charged with organized fraud in an amount in excess of $50,000--yet,
inexplicably, the charges were ultimately dropped. Copies of the relevant portions of the court
records in that criminal proceeding are attached as Ex. D to the Komlossy Affidavit.
Each of the foregoing demonstrates that the McConnells have an adequate basis to
question whether the assets of PDK are being properly managed, and support the finding of a
13proper purpose on this issue. Given that Plaintiffs have established at least one, if not all, of their
expressed reasons to inspect the books and records of PDK, a judgment should be granted in
favor of them.
CONCLUSION
Plaintiffs request that this Court grant their Motion for Summary Judgment, and any other
relief this Court deems just and appropriate, including fees and costs for having to compel a
shareholder inspection under Fla. Stat. Section 607.1604(3). A form of proposed order is
attached hereto as Ex. B.
Dated: June 4, 2018 KOMLOSSY LAW P.A.
/s/ Emily C Komlossy
Emily Komlossy (FBN 7714)
eck@komlossylaw.com
4700 Sheridan St., Suite J
Hollywood, FL 33021
Phone: (954) 842-2021
Fax: (954) 416-6223
14CERTIFICATE OF SERVICE
THEREBY CERTIFY that a true and correct copy of the foregoing is being furnished by
email through the Florida E-Portal to counsel of record, Louis Arslanian,
arsgabriela@comcast.net, 5800 Sheridan St., Hollywood, FL 33021, this 4th day of June, 2018.
KOMLOSSY LAW P.A.
/s/ Emily C Komlossy
Emily Komlossy (FBN 7714)
eck@komlossylaw.com
4700 Sheridan St., Suite J
Hollywood, FL 33021
Phone: (954) 842-2021
Fax: (954) 416-6223
15EXHIBIT AIN THE CIRCUIT COURT OF THE NINETEENTH JUDICIAL CIRCUIT
IN AND FOR ST. LUCIE COUNTY, FLORIDA
MADELINE and WILLIAM MCCONNELL,
Plaintiffs, Case No. 562017CA1650AXXXHC
Vv.
P.D.K, INC., A Florida Corporation,
Defendant.
STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF PLAINTIFFS’
MOTION FOR SUMMARY JUDGMENT
Pursuant to Rule 1.510 of the Florida Rules of Civil Procedure, Plaintiffs Madeline and
William McConnell (“Plaintiffs” or the “McConnells”) submit the following Statement of
Undisputed Material Facts in support of their Motion for Summary Judgment as follows:
1. On or before March 31, 2005, Plaintiffs and their son provided P.D.K., Inc.
(“PDK”) with $121,526.72. Complaint, paragraph 5; PDK’s Amended Answer and Affirmative
Defenses, paragraph 5 (admitting same).
2. On or about March 31, 2005, the McConnells and their son Daniel executed a
Shareholder’s Agreement with Paul and Don Katchmere (the “Katchmeres” or with respect to
Paul Katchmere, “Katchmere”). Affidavit of William McConnell (“McConnell Affidavit”),
paragraph 8 and Ex. B.
3. At the time of the execution of the Shareholder’s Agreement, the McConnells’
investment represented approximately 12% of PDK based upon the terms of the Shareholder’s
Agreement. McConnell Affidavit, paragraph 8.4. The McConnells were shareholders of PDK from March 31, 2005 through at least
May, 2011. Defendant PDK’s Amended Answer and Affirmative Defenses, Affirmative
Defense No. 1.
5. The Shareholder’s Agreement does not contain a provision for liquidated damages
in the event of a breach of the Shareholder’s Agreement. McConnell Affidavit, Ex. B.
6. None of the McConnells were officers or directors of PDK at any time.
McConnell Affidavit, paragraph 9 and Ex. C.
7. The McConnells staged a model apartment for Crystal Trace. McConnell
Affidavit, paragraph 10.
8. William McConnell spent considerable time in Ft. Pierce dealing with the
management of Crystal Trace and attempting to sell condominiums, and later the entire property.
McConnell Affidavit, paragraph 10.
9. Only the Katchmeres had authority to enter into contracts on behalf of PDK.
McConnell Affidavit, paragraphs 11 and 12.
10. William McConnell and his employers at the time served as the broker on behalf
of PDK from late 2004 through approximately May, 2011. McConnell Affidavit, paragraph 14.
1l. Crystal Trace was never vacated by all tenants from 2005 through May, 2011.
McConnell Affidavit, paragraph 16.
12. In or about April and May, 2011, Katchmere requested a loan of $10,000 from the
McConnells for Crystal Trace. McConnell Affidavit, paragraph 17.
13. The loan requested from the McConnells was not to be considered part of the
McConnells’ stockholdings in PDK; it was outside of the Shareholder’s Agreement. McConnell
Affidavit, paragraph 17-19, Exs. F, G and H.14. | Katchmere wanted the money from the McConnells directly in the form of a
check. McConnell Affidavit, paragraph 17.
15. William McConnell advised Katchmere that he was willing to prepay for items at
a store, along with other conditions, but was not willing to simply hand over a check.
McConnell Affidavit, paragraphs 17, 19, 21, Exs. F, G and H.
16. The meeting held in May, 2011 between William McConnell, Katchmere and
Schlichte was not a formal shareholders’ meeting. McConnell Affidavit, paragraph 20; Original
Answer at p. 3, Affirmative Defense 4, Amended Answer at pages 5-6.
17. PDK has never held a formal annual shareholders’ meeting required by statute.
McConnell Affidavit, paragraph 20.
18. As part of the requirement by the McConnells to provide Katchmere with
additional funds for Crystal Trace, the McConnells requested greater access to the financial
information of PDK. McConnell Affidavit, paragraph 17.
19. At the meeting held in May, 2011, Katchmere never advised McConnell that any
adverse consequence would arise if the McConnells did not make the $10,000 loan. McConnell
Affidavit, paragraph 21.
20. | Katchmere was unwilling to provide the McConnells with financial information
about PDK other than year-end tax returns. McConnell Affidavit, paragraph 22 and Ex.I.
21. PDK advised William McConnell in its May 19, 2011 letter that the basis for
PDK determining the McConnells must forfeit their shares was for “liquidated damages”.
McConnell Affidavit, paragraph 23 and Ex.J.
22. — A subsequent letter was sent to William McConnell by PDK’s lawyer dated May
27, 2011. McConnell Affidavit , paragraph 25 and Ex.K.23. The May 27, 2011 letter sent to William McConnell by PDK’s lawyer also
indicated that the McConnells were deemed to have forfeited their shares on the basis of
“liquidated damages.” McConnell Affidavit, paragraph 25 and Ex.K.
24. The May 27, 2011 letter sent to William McConnell offered, despite the claimed
“forfeiture” to refrain from reporting William McConnell to administrative authorities or require
the McConnells to be guarantors on the Crystal Trace mortgage and provide the McConnells
with 9% of any net profits on the sale of Crystal Trace if they would agree to relinquish all
claims in PDK. McConnell Affidavit, paragraph 25 and Ex.K.
25. The letters of May 19 and May 27, 2011 were not sent to Madeline McConnell or
Daniel McConnell. McConnell Affidavit, paragraphs 23 and 25 and Exs. J and K.
26. After the letters of May 19 and May 27, 2011 were sent to William McConnell,
Katchmere and William McConnell continued to communicate. McConnell Affidavit,
paragraphs 27-29 and Exs. L, M and N.
27. On or about June 28, 2011, Katchmere sent an email to William McConnell
which stated in part “if you are interested in protecting what left of our investment, we need to
find an investor that will take a chance on the future returns with a minimal up front investment,
hopefully making it somewhat attractive. McConnell Affidavit, paragraphs 28 and Ex. M.
28. The McConnells were shareholders after May, 2011 and continue to be
shareholders. McConnell Affidavit, paragraphs 28-30 and Exs. M, N and O.
29. Katchmere and William McConnell met in person in July 2011. McConnell
Affidavit, paragraph 29 and Ex. N.
30. Katchmere sent William McConnell an email on July 29, 2011 stating, “Bill, 1 am
glad we were able to meet and air some issues. I feel we are very fortunate to have foundsomeone to take over our very troubled property and carry the losses and expenses until it is
hopefully tumed around.” McConnell Affidavit, paragraph 29 and Ex. N.
31. Katchmere would not tell McConnell specific information about the new investor.
McConnell Affidavit, paragraph 29.
32. Katchmere continued to provide the McConnells with year-end tax returns.
McConnell Affidavit, paragraph 29 and Ex. O.
33. William McConnell emailed Katchmere to try to meet in person repeatedly in
2016, but Katchmere put him off. McConnell Affidavit, paragraph 31 and Ex. P.
34. The McConnells have never received distributions. McConnell Affidavit,
paragraph 22.
35. The Katchmeres have taken draws from PDK. McConnell Affidavit, Ex. 22.
36. Katchmere testified in a June 25, 2010 deposition in an action entitled Aim
Recovery Services, Inc. v. Paul Katchmere, an individual, P.D.K., Inc., a Florida corporation,
Bretsarian, Inc., d/b/a/ Car Classics, a Florida corporation, Donald Katchmere, an individual,
and Roy Collins, an individual, Case No. 09-CACE-20740 (17th Jud. Cir.) (“Aim Action”) that
he and his brother were the only shareholders of PDK. Komlossy Affidavit, paragraph 5 and Ex.
A, pages 42-47 thereto.
37. Katchmere testified in his June 25, 2010 deposition in the Aim Action that there
are no formal minutes kept of “regular meetings” of PDK and they keep “a mental record of our
conversations” since it is a “two-person business”., and thus there are no PDK corporate records
available. Komlossy Affidavit, paragraph 2 and 5, Ex. A, pages 42-47 and 91-92 thereto.38. Katchmere testified in his June 25, 2010 deposition in the Aim Action that PDK
paid fees to Robert Stok, an attomey, for litigation that involved a different company. Komlossy
Affidavit, paragraph 4, Ex. A pages 38-40 thereto.
39. Katchmere testified in his June 25, 2010 deposition in the Aim Action that the
only financial records, “for the most part” are the bank statements of PDK. Komlossy Affidavit,
paragraph 6, Ex. A, pages 49-50 thereto.
40. PDK refinanced its mortgage in or about February, 2016, which was recorded
with the St. Lucie County Clerk on March 2, 2016. Ex. C to Komlossy Affidavit.
41. PDK did not discuss the 2016 refinancing with the McConnells. Ex. C to
Komlossy Affidavit.
42. PDK filed a resolution with the St. Lucie County Clerk on March 2, 2016 which
stated that the Katchmeres were the only shareholders of PDK. Ex. C to Komlossy Affidavit.
43. At the time the resolution was filed as set forth in paragraph 41 above, the
McConnells and the new investor, Robert Leite, were also shareholders of PDK.
44. — Robert Leite alleged that his property manager in April 2017 had stolen in excess
of $50,000 from PDK. Ex. D to Komlossy Affidavit.
45. The charges against the former Crystal Trace property manager were not pursued.
Ex. D to Komlossy Affidavit.
Dated: June 4, 2018 KOMLOSSY LAW P.A.
/s/ Emily C Komlossy
Emily Komlossy (FBN 7714)
eck@komlossylaw.com
4700 Sheridan St., Suite J
Hollywood, FL 33021
Phone: (954) 842-2021
Fax: (954) 416-6223
Attorneys for PlaintiffsEXHIBIT BIN THE CIRCUIT COURT OF THE NINETEENTH JUDICIAL CIRCUIT
IN AND FOR ST. LUCIE COUNTY, FLORIDA
MADELINE and WILLIAM
MCCONNELL,
Case No. 562017CA1650AXXXHC
Plaintiffs,
v.
P.D.K, INC., A Florida Corporation,
Defendant/.
ORDER GRANTING PLAINTIFFS’ MOTION FOR
SUMMARY JUDGMENT
THIS CAUSE coming to be heard on Plaintiffs Madeline and William McConnell’s
Motion for Summary Judgment filed on June 4, 2018, and the Court having heard argument or
otherwise reviewed the papers filed in connection with said motion, and being fully advised in
the premises, it is
ORDERED AND ADJUDGED that Plaintiffs’ Motion is GRANTED.
DONE AND ORDERED at St. Lucie County, Florida this _ day of , 2018.
JUDGE JANET C. CROOM
Circuit Court Judge
Emily C. Komlossy (eck@komlossylaw.com)
Louis C. Arslanian (arsgabriela@comcast.net
Preview
Filing # 73060391 E-Filed 06/04/2018 06:25:43 PM IN THE CIRCUIT COURT OF THE NINETEENTH JUDICIAL CIRCUIT IN AND FOR ST. LUCIE COUNTY, FLORIDA MADELINE and WILLIAM MCCONNELL, Plaintiffs, Case No. 562017CA1650AXXXHC Vv. P.D.K, INC., A Florida Corporation, Defendant. PLAINTIFFS’ MOTION AND INCORPORATED MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Plaintiffs are contemporaneously submitting a Motion to Strike Defendant P.D.K, Inc.’s Amended Affirmative Defenses. Plaintiffs also move for summary judgment in their favor as to whether they are current shareholders of PDK by virtue of the $121,526.72 invested in PDK in March, 2005, and whether they have established a proper purpose. The grounds and substantial matters of law to be argued on this motion are set forth below. This motion will show that there are no genuine issues as to any material fact as to Plaintiffs’ status as current shareholders and that they have established a proper purpose for inspection. As such, Plaintiffs are entitled to a judgment as a matter of law based upon all relevant authorities. A Statement of Undisputed Material Facts in Support of this motion is attached hereto as Ex. A. Florida law is well established on the legal standards required for granting a Motion for Summary Judgment. Pursuant to Rule 1.510 (c) of the Florida Rules of Civil Procedure, summary judgment shall be granted upon the showing of an absence of any genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. Whitten v. Progressive Casualty Ins. Co., 410 So. 2d 501 (Fla. 1982). Once the plaintiff establishes thatthere is no genuine issue of material fact to be tried, a defendant has the burden “to prove otherwise either through facts of justifiable inferences from facts presented to the trial court.” Carbonell v. Bellsouth Telecommunications, Inc., 675 So. 2d 705, 706 (Fla. 3d DCA 1996); Buitrago v. Rohr, 672 So. 2d 646, 648 (Fla. 4th DCA 1996). Summary judgment shall be granted if the proof brought forth by the moving party overcomes all reasonable inferences in favor of the party opposing summary judgment. Holl v. Talcott, 191 So. 2d 40 (Fla. 1966). However, where the determination of the issues of a lawsuit “depends upon the construction of a written instrument and the legal effect to be drawn therefrom, the question at issue is essentially one of law only and determinable by entry of summary judgment.” Volusia County v. Aberdeen at Ormond Beach, 760 So. 2d 126, 131 (Fla. 2000) citing Cox v. CSX Intermodal, Inc., 732 So. 2d 1092, 1096 (Fla. 1st DCA 1999); Palm Beach County v. Trinity Indus., 661 So. 2d 942, 944 (Fla. 4th DCA 1995) (same). Here, the question before the Court on this motion is whether the express terms of the Shareholder’s Agreement entered into between the parties on March 31, 2005 granted shareholder rights to the McConnells to the extent they invested $121,526.72, imespective of any future money paid (or not paid) and whether that shareholder interest was capable of “forfeiture” as “liquidated damages” under the Shareholder’s Agreement, as PDK contends. Plaintiffs believe they had an existing shareholder interest in PDK in 2005 (which PDK now admits), and continue to hold an interest in PDK to date. Moreover, based on the criteria set forth in the relevant statute and authorities, Plaintiffs also contend they have submitted a prima facie “proper purpose”. As such, they should be permitted to inspect PDK’s books and records without further delay.1. Background of Plaintiffs’ Investment and Participation The circumstances regarding the McConnells’ investment in PDK are set forth in detail in the Affidavit of William McConnell (“McConnell Affidavit”) submitted contemporaneously herewith. They will be briefly summarized here. Mr. McConnell met Katchmere in 2004 when the Katchmeres were interested in parlaying funds received from the sale of a prior investment into a piece of real estate in a 1031 transaction to avoid capital gains tax. Mr. McConnell showed Katchmere a variety of opportunities but Katchmere was interested in Crystal Trace. McConnell Affidavit, paragraphs 3-5. There was a shortfall in the amount of funds needed to close on the property, so the McConnell family, deciding it was a good investment opportunity, put up $121,526.72 McConnell Affidavit, paragraphs 6-8. In connection with the investment, the McConnells and the Katchmeres signed a Shareholder’s Agreement, which had been prepared by PDK’s lawyer. McConnell Affidavit, paragraph 8 and Ex. B thereto. The Shareholder’s Agreement described the investment and any future monies to be paid by the McConnells in paragraph 3. Ex. B to McConnell Affidavit, paragraph 3. There was no provision in the Shareholder’s Agreement with respect to any actions to be taken if the Shareholder’s Agreement was breached. /d. Nor is there any provision for liquidated damages in the event of a breach in the Shareholder’s Agreement. Jd. While the parties to the Shareholder’s Agreement contemplated that Crystal Trace would be converted into condominiums, at the outset there was a complication involving a zoning/easement issue. McConnell Affidavit, paragraph 13. Thus, by the time the zoning issue had been cleared and the condominium documents prepared, it was late in 2006. McConnell Affidavit, paragraph 13. It was then difficult, with the issues emerging in the Florida real estatemarket, to get buyers qualified to purchase the condominiums., and the parties then sought to sell the entire property. McConnell Affidavit, paragraphs 13, 15. Sometime in April and May, 2011, Katchmere sought to obtain a loan from the McConnells for $10,000, ostensibly to buy items in order to upgrade the existing apartments at Crystal Trace. Katchmere originally just asked for a check, but the McConnells were unable to get enough information on how the total $10,000 was to be spent. McConnell Affidavit, paragraphs 17-19, 21. The loan was never intended to be part of the McConnells shareholdings in PDK. McConnell Affidavit , paragraphs 17-19, 21 and Exs. F, G and H thereto. At some point, perhaps at the meeting in May, 2011 wherein PDK claims it told William McConnell that the McConnells their shares would be “forfeited”, William McConnell said that if he gave the loan to Katchmere, it would have certain conditions attached to it, including that the money would be used to prepay items at the store for specific things for the apartments and that the McConnells wanted access to the financial information of PDK. McConnell Affidavit, paragraphs 17, 19, 21 and Exs. F and G thereto. At or around the meeting in May, 2011, it became apparent that Katchmere could not substantiate why $10,000 was needed for the upgrade he claimed it was intended to cover. McConnell Affidavit, paragraph 21. Katchmere did not advise McConnell at this meeting that there would be adverse consequences if the McConnells did not make the loan. McConnell Affidavit, paragraph 21. As far as William McConnell remembers, he did not commit to the loan one way or the other at the May, 2011 meeting. McConnell Affidavit, paragraph 23. Ultimately, however, the McConnells decided they would not contribute the $10,000. McConnell Affidavit, paragraph 22. While he does not know if and when he could convey the family’s decision to Katchmere, Mr. McConnell received a letter from PDK on May 19, 2011 which terminated him as a broker and claimed that his shares had beenforfeited on the basis of liquidated damages. McConnell Affidavit, paragraph 23 and Ex. J thereto. Thereafter, Mr. McConnell (but not his wife or son) received a similar letter from PDK’s lawyer, again advising him that the shares had been forfeited as liquidated damages, but offering a resolution as long as he relinquished all claims in PDK. McConnell Affidavit, paragraph 25 and Ex. K thereto. However, at this same time, a party had expressed interest in possibly purchasing Crystal Trace so Mr. McConnell continued to communicate with Katchmere. McConnell Affidavit, paragraph 27 and Ex.L thereto. Despite the May 19 and May 27, 2011 letters, Katchmere continued to communicate with McConnell to discuss “our” investment, and the two met up in July 2011 to “air some issues”. McConnell Affidavit, paragraphs 28, 29 and Exs. M and N thereto. Possibly at the July 2011 meeting , Katchmere advised McConnell that PDK was close to signing with a new investor, but would not disclose anything about the terms of the arrangement. McConnell Affidavit, paragraph 29 and Ex. N thereto. Since May 2011, PDK has supplied the McConnells with certain year-end tax returns of PDK. McConnell Affidavit, paragraph 29 and Ex. O thereto. In recent years, McConnell has tried to meet with Katchmere to discuss the family’s investment in PDK but has been rebuffed every time. McConnell Affidavit, paragraph 31 and Ex. P thereto. The McConnells have since learned that the mortgage was refinanced in 2016, the Katchmeres continue to publicly represent that they are the sole shareholders of PDK and despite a theft of what appears to be a significant amount of money from PDK by a former property manager, no charges were pursued. Komlossy Affidavit, Ex. B-D. In light of this, Plaintiffs filed their books and records complaint to determine the value of their investment and verify that the assets of the Company were being properly managed. Rather than comply with the statutory mandate, PDK has regrettably chosen to fight.2. The Express Terms of the Shareholder’s Agreement Granted the McConnells an Interest in PDK Upon the Investment of $121,526.72 Which Has Not Been Forfeited As noted in Plaintiffs’ Motion to Strike the Affirmative Defenses, the key provision in the Shareholder’s Agreement containing the scope of the McConnells’ interest as of March 31, 2005 is contained in paragraph 3 of the document, to wit: The NEW SHAREHOLDERS [the McConnells] shall increase its percentage of ownership of CORPORATION at any time by investing more funds in the project of the Subject Property such that the total investment by the NEW SHAREHOLDERS including the [$122,526.72] in closing expenses plus the additional funds invested on the as need basis shall be the percentage of the total equity invested by the CURRENT SHAREHOLDERS [the Katchmeres] as the NEW SHAREHOLDERS percentage of ownership in the CORPORATION; Shareholder’s Agreement, { 3 (emphasis added), Ex. B to the McConnell Affidavit.! Thus, the express language of the contract demonstrates that the McConnells would increase their then existing percentage of ownership if they invested more funds in PDK over the approximately $122,000, implicitly acknowledges that the March 31, 2005 investment by the McConnells had conferred shareholder status on them. Indeed, PDK does not now dispute that the McConnells were shareholders from 2005 through May 2011. AA, at p. 3 (“Plaintiffs , however, are not shareholders, even though they were once shareholders in October [sic], 2005”). However, the Amended Answer contends that “In May, 2011, Plaintiffs were notified that their shares were forfeited and canceled.” AA, p.3. PDK also states that the “cancelation and forfeiture of Plaintiffs shares was not done arbitrarily or without legal basis...”. AA, at p.3. That statement is incorrect. ' There is similar language about additional monies in the recitals to the Shareholder’s Agreement, but the text of the contract provision in paragraph 3 is clear and unambiguous and resort to the recitals is unnecessary. Orlando Lake Forest Joint Venture v. Lake Forest Master Cmty., 105 So. 3d 646, 648 (Fla. Sth DCA 2013) (where the operative portion of a contract is unambiguous, the prefatory language should not be considered to vary the unambiguous terms of the operative portion of the document).PDK has not provided the Court with the purported letters of notification of forfeiture in May, 2011, for good reason. The correspondence is annexed to the McConnell Affidavit as Exs. Jand K. Both state that the basis for the “forfeiture” of the McConnells’ shares was based on “liquidated damages”. See, Ex. J at p. 2; Ex. K at p. 2. However, as can be clearly observed by reviewing the Shareholder’s Agreement, there is no provision in the Shareholder’s Agreement which provides for liquidated damages. See, Ex. B to McConnell Affidavit. By definition, a liquidated damages provision is a clause in a contract that determines in advance the measure of damages in the event of a contractual breach. RKR Motors, Inc. v. Associated Unif. Rental & Linen Supply, Inc., 995 So. 2d 588, 594 (Fla. 3d DCA 2008), citing Black’s Law Dictionary 949 (8th ed. 2004). No such provision was included in the Shareholder’s Agreement. Even if there were such a provision in the Shareholder’s Agreement, it would have to follow the guidelines developed by the courts and not constitute a penalty. /d. The courts in Florida have made it clear that first, the damages consequent on a breach must not be readily ascertainable, and second, the sum stipulated to be forfeited must not be so grossly disproportionate to any damages that might be expected to follow from a breach as to show that the parties could have only intended to induce full performance, rather than liquidate their damages. RKR Motors, 995 So. 2d at 595, citing Lefemine v. Baron, 573 So. 2d 326, 328 (Fla. 1991). See also, Crosby Forrest Prods., Inc. v. Byers, 623 So. 2d 565, 567 (Fla. 5th DCA 1993) (same) and Humana Med. Plan, Inc. v. Jacobson, 614 So. 2d 520, 522 (Fla. 3d DCA 1992) (same). Based on the facts in this case, any attempt to impose liquidated damages by complete forfeiture of the McConnells’ interest in PDK even if there had been a provision for the full amount of the McConnells’ investment would have failed.As indicated in Exs. J and K, the Katchmeres and PDK’s lawyer claimed that the Katchmeres had contributed $75,000 in expenses for Crystal Trace since March 31, 2005. Ex. J at p. 1; Ex. K at p.1. Based on the McConnells’ contribution in March 31, 2005, they had an approximate 12% interest in PDK (not Crystal Trace). Thus, even if the McConnells were obligated under the terms of the Shareholder’s Agreement to contribute 12% of such amount, their contribution would have been approximately $9,000; the attempted forfeiture of approximately $122,000 to satisfy an obligation of approximately $9,000 can only be viewed as apenalty. Thus, even if there were an enforceable liquidated damages provision (which there is not), “equity will relieve against its enforcement when the liquidated damages amount is unconscionable in light of the circumstances existing at the time of the breach.” RKR Motors, 995 So. 2d at 595 citing Hutchinson v. Tompkins, 259 So. 2d 129, 132 (Fla. 1972); Coleman v. B.R. Chamberlain & Sons, Inc., 766 So. 2d 427, 429 (Fla. 5th DCA 2000) and Perez v. Aerospace Acad., Inc., 546 So. 2d 1139, 1141 (Fla. 3d DCA 1989). Based on the foregoing, the attempted “forfeiture” of the McConnells’ interest in PDK is improper and invalid. Moreover, the Shareholder’s Agreement is a creature of the statutes of the State of Florida. Fla. Stat. Section 607.0732 (1) permits shareholder agreements among the shareholders of a corporation with 100 or fewer shareholders, even if inconsistent with other provisions of the chapter, to the extent it governs the making of distributions, among other things. The statute also requires that it either be set forth in the articles of incorporation or bylaws and approved by all shareholders at the time of the agreement or be set forth in a written agreement signed by all shareholders at the time of the agreement (which was the method utilized between the McConnells and PDK). However, this same statute provides in Fla. Stat. Section 607.0732 (2) (b) that it is “Subject to termination or amendment only by ail persons who are shareholders atthe time of the termination or amendment, unless the agreement provides otherwise with respect to termination and with respect to amendments that do not change the designation, rights, preferences, or limitations of any of the shares of a class or series.” 607.0732 (2)(b) (emphasis added). While the Shareholder’s Agreement was signed by the three McConnells and the two Katchmeres, the letters purporting to terminate the relationship were sent only to William McConnell (despite PDK’s ironic protestations that Daniel McConnell is necessary to this action) and no agreement was ever drafted, much less executed, which terminated the relationship as required by Fla. Stat. Section 607.0732 (2)(b). Having never terminated the relationship as required by law, PDK’s position is statutorily invalid. The McConnells continue to remain shareholders of PDK. Moreover, even after Exs. J and K were sent to William McConnell, as set forth in the McConnell Affidavit, Katchmere acknowledged in June, 2011 that the McConnells continued to hold an investment in the Company, discussing options with William McConnell about “our” investment.? McConnell Affidavit, paragraphs 28, 29 and Exs. M and N. And despite PDK’s assertion that the McConnells were no longer shareholders of PDK after May 2011, it continued to provide William McConnell with year-end tax returns for PDK, without objection on the basis of shareholder status. McConnell Affidavit, paragraph 29 and Ex. O. This is hardly suggestive of the fact that PDK and the Katchmeres considered the McConnells’ shareholdings in the Company to have been forfeited. Finally, it is worth noting that the additional money sought by PDK from the McConnells would not have affected the McConnells’ percentage of ownership in the Company, and thus, arguably outside of the Shareholder’s Agreement. At all times, the nature of the investment that * When speaking with third parties about his own family’s investment in PDK, Katchmere uses “my family” (Ex. D to McConnell Affidavit), “Don and I” or “my brother and I” (id.); “Don’s family and my family’s” (Ex. J) or “Don and I” (id,).was then under discussion was of a “loan” from the McConnells to PDK. See, Exs. F, G and H and paragraphs 17- 19 and 21 of the McConnell Affidavit. Specifically, the emails indicate that any money the McConnells loaned PDK in May 2011 would come “off the top” of any sale of PDK and would not count toward stock ownership. Thus, it is unclear if the Shareholder’s Agreement is even implicated in this analysis. Accordingly, the McConnells respectfully submit that there is no genuine issue of fact as to whether they are currently shareholders of PDK. They are shareholders and PDK continued to recognize their shareholder status after May, 2011, and the McConnells’ request to inspect the books and records of PDK should be granted forthwith. 3. As Shareholders of PDK, the McConnells Have Established a “Proper Purpose” under the Florida Statutes and Summary Judgment Should Be Granted on This Point As Well Under the relevant statutes, the McConnells are not required to establish a proper purpose for the requests sought pursuant to Fla. Stat. Section 607.1601. Indeed, a shareholder has an unqualified right to inspect the records enumerated in Fla. Stat. Section 607.1601(5) which include articles of incorporation and all amendments; bylaws and all amendments thereto; resolutions adopted by the board of directors concerning the rights. preferences and limitations with respect to stock and classes of stock; the minutes of all shareholder meetings and records of all action taken without a shareholder meeting; written communications to shareholders within the past 3 years, including financial statements furnished for the past 3 years; a list of the names and addresses of current officers and directors; and the most recent annual report delivered to the Department of State. Four of the nine requests made by the McConnells pursuant to their 10original books and records demand fall under the “unqualified category” but have not been produced.* While PDK disputes that the McConnells have articulated a “proper purpose” under Fla. Stat. Section 607.1602 with respect to the remaining categories of documents sought, Plaintiffs disagree. In order to obtain these “qualified” categories of documents, a shareholder must establish: the demand is for a proper purpose; the shareholder describes the purpose with reasonable particularity and the records sought to be inspected; and the records are directly connected with the shareholder’s purpose. Fla. Stat. Section 607.1602 (3) (a-c). If those criteria are met, a shareholder is entitled to board of director minutes and shareholder minutes not otherwise falling under the unqualified category; accounting records; records of shareholders and any other books and records. Fla. Stat. Section 607.1602 (2) (a-d). There is no genuine issue of fact that Plaintiffs have satisfied this criteria. Both the demand and the Complaint set forth three specified purposes for the inspection, all of which have been held to be proper purposes under prevailing Florida law, including the shareholder’s right to investigate possible wrongdoing or mismanagement, including the fact the McConnells never received distributions; to ascertain if the assets of the Company have been properly managed; and to value their shareholdings. Complaint, paragraph 13. Ample case law supports these to be each, standing alone, a proper purpose. Soreno Hotel Co. v. State ex rel. Otis Elevator Co., 107 Fla. 195 (1932); Florida Military Academy v. State ex rel. Moyer, 127 Fla. 781 (1937); and State ex rel. Fussell v. McLendon, 109 So. 2d 783, 786 (Fla. 3d DCA 1959) all recognize that a proper purpose includes not only valuing an interest in the company but also > Counsel for PDK maintains that the Company does not maintain corporate records for the most part. Komlossy Affidavit at paragraph 2. 11to determine if the company is being properly managed. Indeed, even if the McConnells have stated only one proper purpose, they have stated a proper purpose. Plaintiffs are entitled to value their interest in PDK, particularly since they have never received a K-1 from the Company, never been notified of a shareholder meeting (although PDK originally maintained that the May 2011 meeting was a shareholder meeting (OA, at p. 3), never received any distributions and no financial information about PDK, other than the occasional year-end tax return. All of this is set forth in the face of the Complaint and nothing raised in the Amended Answer rebuts this. Plaintiffs also have reason to seek records to inspect whether the assets of PDK have been properly managed. As indicated in the Affidavit of Emily Komlossy (“Komlossy Affidavit”) submitted contemporaneously herewith, Katchmere has previously testified under oath in a deposition in an unrelated litigation that he used funds from PDK to pay an attorney working on a case involving his prior company, Car Classics. Komlossy Affidavit at paragraph 4 and Ex. A thereto at pages 38-40.. That litigation arose in part out of an action entitled Edward J. Paulin and Olga S. Paulin v. Bretsarian, Inc. d/b/a Car Classics, a Florida corporation and Paul Katchmere, Case No. 06-4107(18), in the Circuit Court of the 17th Judicial Circuit wherein Robert A. Stok and Stok & Associates, P.A. claimed a charging lien against the Bretsarian, Inc. d/b/a/ Car Classics and Katchmere for attorneys’ fees incurred in the litigation in the amount of $54,183.88. A Release of Lien was subsequently recorded with the Clerk of Broward County on January 10, 2017. Both the charging lien and the Release of Lien are attached to the Komlossy Affidavit as Ex. E. Given the Katchmeres’ repeated claims that they had no money after closing on Crystal Trace and their details of financial problems in 2011, it is unclear where the money was obtained, and in what amount, to release the charging lien. See, 12AA at p. 3 (the Katchmeres “put up all of their money to purchase the subject property”); OA at p. 3(the Katchmeres in May 2011 “stood the chance of losing their homes”); OA at p. 7, paragraph 16 (Katchmere stated that “all of their funds were exhausted at time of closing”). In addition, in connection with filing this books and records litigation, Plaintiffs learned that PDK had refinanced the mortgage that they complain of in their pleadings and now operate under a mortgage in the amount of $1.545 million which was recorded with the County Clerk, St. Lucie County on March 2, 2016. Komlossy Affidavit, Ex. B. On this same date, on March 2, 2016, PDK also recorded a “Resolution of the Directors and Shareholders” of PDK, indicating that the Katchmeres are the only officers, directors and shareholders of PDK (Ex. C to Komlossy Affidavit) --this despite the fact that they allege in their Amended Answer that they brought in a new investor just months after presumably firing the McConnells. AA, page 5. This is all the more perplexing in that the new investor, Robert Leite, has represented to public authorities in St. Lucie that he is the co-owner of Crystal Trace, with the implication that he is also a shareholder ( and has been involved with PDK since at least mid-2011 according to the Amended Answer). AA, at p. 5. As described in a publicly-available arrest affidavit filed by the Ft. Pierce Police Dept. with the Clerk of the Court, Leite, as “co-owner” of Crystal Trace, advised the police that his property manager had been skimming money from PDK by depositing Jess in the Company’s bank accounts than the property manager actually collected. The property manager was subsequently charged with organized fraud in an amount in excess of $50,000--yet, inexplicably, the charges were ultimately dropped. Copies of the relevant portions of the court records in that criminal proceeding are attached as Ex. D to the Komlossy Affidavit. Each of the foregoing demonstrates that the McConnells have an adequate basis to question whether the assets of PDK are being properly managed, and support the finding of a 13proper purpose on this issue. Given that Plaintiffs have established at least one, if not all, of their expressed reasons to inspect the books and records of PDK, a judgment should be granted in favor of them. CONCLUSION Plaintiffs request that this Court grant their Motion for Summary Judgment, and any other relief this Court deems just and appropriate, including fees and costs for having to compel a shareholder inspection under Fla. Stat. Section 607.1604(3). A form of proposed order is attached hereto as Ex. B. Dated: June 4, 2018 KOMLOSSY LAW P.A. /s/ Emily C Komlossy Emily Komlossy (FBN 7714) eck@komlossylaw.com 4700 Sheridan St., Suite J Hollywood, FL 33021 Phone: (954) 842-2021 Fax: (954) 416-6223 14CERTIFICATE OF SERVICE THEREBY CERTIFY that a true and correct copy of the foregoing is being furnished by email through the Florida E-Portal to counsel of record, Louis Arslanian, arsgabriela@comcast.net, 5800 Sheridan St., Hollywood, FL 33021, this 4th day of June, 2018. KOMLOSSY LAW P.A. /s/ Emily C Komlossy Emily Komlossy (FBN 7714) eck@komlossylaw.com 4700 Sheridan St., Suite J Hollywood, FL 33021 Phone: (954) 842-2021 Fax: (954) 416-6223 15EXHIBIT AIN THE CIRCUIT COURT OF THE NINETEENTH JUDICIAL CIRCUIT IN AND FOR ST. LUCIE COUNTY, FLORIDA MADELINE and WILLIAM MCCONNELL, Plaintiffs, Case No. 562017CA1650AXXXHC Vv. P.D.K, INC., A Florida Corporation, Defendant. STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT Pursuant to Rule 1.510 of the Florida Rules of Civil Procedure, Plaintiffs Madeline and William McConnell (“Plaintiffs” or the “McConnells”) submit the following Statement of Undisputed Material Facts in support of their Motion for Summary Judgment as follows: 1. On or before March 31, 2005, Plaintiffs and their son provided P.D.K., Inc. (“PDK”) with $121,526.72. Complaint, paragraph 5; PDK’s Amended Answer and Affirmative Defenses, paragraph 5 (admitting same). 2. On or about March 31, 2005, the McConnells and their son Daniel executed a Shareholder’s Agreement with Paul and Don Katchmere (the “Katchmeres” or with respect to Paul Katchmere, “Katchmere”). Affidavit of William McConnell (“McConnell Affidavit”), paragraph 8 and Ex. B. 3. At the time of the execution of the Shareholder’s Agreement, the McConnells’ investment represented approximately 12% of PDK based upon the terms of the Shareholder’s Agreement. McConnell Affidavit, paragraph 8.4. The McConnells were shareholders of PDK from March 31, 2005 through at least May, 2011. Defendant PDK’s Amended Answer and Affirmative Defenses, Affirmative Defense No. 1. 5. The Shareholder’s Agreement does not contain a provision for liquidated damages in the event of a breach of the Shareholder’s Agreement. McConnell Affidavit, Ex. B. 6. None of the McConnells were officers or directors of PDK at any time. McConnell Affidavit, paragraph 9 and Ex. C. 7. The McConnells staged a model apartment for Crystal Trace. McConnell Affidavit, paragraph 10. 8. William McConnell spent considerable time in Ft. Pierce dealing with the management of Crystal Trace and attempting to sell condominiums, and later the entire property. McConnell Affidavit, paragraph 10. 9. Only the Katchmeres had authority to enter into contracts on behalf of PDK. McConnell Affidavit, paragraphs 11 and 12. 10. William McConnell and his employers at the time served as the broker on behalf of PDK from late 2004 through approximately May, 2011. McConnell Affidavit, paragraph 14. 1l. Crystal Trace was never vacated by all tenants from 2005 through May, 2011. McConnell Affidavit, paragraph 16. 12. In or about April and May, 2011, Katchmere requested a loan of $10,000 from the McConnells for Crystal Trace. McConnell Affidavit, paragraph 17. 13. The loan requested from the McConnells was not to be considered part of the McConnells’ stockholdings in PDK; it was outside of the Shareholder’s Agreement. McConnell Affidavit, paragraph 17-19, Exs. F, G and H.14. | Katchmere wanted the money from the McConnells directly in the form of a check. McConnell Affidavit, paragraph 17. 15. William McConnell advised Katchmere that he was willing to prepay for items at a store, along with other conditions, but was not willing to simply hand over a check. McConnell Affidavit, paragraphs 17, 19, 21, Exs. F, G and H. 16. The meeting held in May, 2011 between William McConnell, Katchmere and Schlichte was not a formal shareholders’ meeting. McConnell Affidavit, paragraph 20; Original Answer at p. 3, Affirmative Defense 4, Amended Answer at pages 5-6. 17. PDK has never held a formal annual shareholders’ meeting required by statute. McConnell Affidavit, paragraph 20. 18. As part of the requirement by the McConnells to provide Katchmere with additional funds for Crystal Trace, the McConnells requested greater access to the financial information of PDK. McConnell Affidavit, paragraph 17. 19. At the meeting held in May, 2011, Katchmere never advised McConnell that any adverse consequence would arise if the McConnells did not make the $10,000 loan. McConnell Affidavit, paragraph 21. 20. | Katchmere was unwilling to provide the McConnells with financial information about PDK other than year-end tax returns. McConnell Affidavit, paragraph 22 and Ex.I. 21. PDK advised William McConnell in its May 19, 2011 letter that the basis for PDK determining the McConnells must forfeit their shares was for “liquidated damages”. McConnell Affidavit, paragraph 23 and Ex.J. 22. — A subsequent letter was sent to William McConnell by PDK’s lawyer dated May 27, 2011. McConnell Affidavit , paragraph 25 and Ex.K.23. The May 27, 2011 letter sent to William McConnell by PDK’s lawyer also indicated that the McConnells were deemed to have forfeited their shares on the basis of “liquidated damages.” McConnell Affidavit, paragraph 25 and Ex.K. 24. The May 27, 2011 letter sent to William McConnell offered, despite the claimed “forfeiture” to refrain from reporting William McConnell to administrative authorities or require the McConnells to be guarantors on the Crystal Trace mortgage and provide the McConnells with 9% of any net profits on the sale of Crystal Trace if they would agree to relinquish all claims in PDK. McConnell Affidavit, paragraph 25 and Ex.K. 25. The letters of May 19 and May 27, 2011 were not sent to Madeline McConnell or Daniel McConnell. McConnell Affidavit, paragraphs 23 and 25 and Exs. J and K. 26. After the letters of May 19 and May 27, 2011 were sent to William McConnell, Katchmere and William McConnell continued to communicate. McConnell Affidavit, paragraphs 27-29 and Exs. L, M and N. 27. On or about June 28, 2011, Katchmere sent an email to William McConnell which stated in part “if you are interested in protecting what left of our investment, we need to find an investor that will take a chance on the future returns with a minimal up front investment, hopefully making it somewhat attractive. McConnell Affidavit, paragraphs 28 and Ex. M. 28. The McConnells were shareholders after May, 2011 and continue to be shareholders. McConnell Affidavit, paragraphs 28-30 and Exs. M, N and O. 29. Katchmere and William McConnell met in person in July 2011. McConnell Affidavit, paragraph 29 and Ex. N. 30. Katchmere sent William McConnell an email on July 29, 2011 stating, “Bill, 1 am glad we were able to meet and air some issues. I feel we are very fortunate to have foundsomeone to take over our very troubled property and carry the losses and expenses until it is hopefully tumed around.” McConnell Affidavit, paragraph 29 and Ex. N. 31. Katchmere would not tell McConnell specific information about the new investor. McConnell Affidavit, paragraph 29. 32. Katchmere continued to provide the McConnells with year-end tax returns. McConnell Affidavit, paragraph 29 and Ex. O. 33. William McConnell emailed Katchmere to try to meet in person repeatedly in 2016, but Katchmere put him off. McConnell Affidavit, paragraph 31 and Ex. P. 34. The McConnells have never received distributions. McConnell Affidavit, paragraph 22. 35. The Katchmeres have taken draws from PDK. McConnell Affidavit, Ex. 22. 36. Katchmere testified in a June 25, 2010 deposition in an action entitled Aim Recovery Services, Inc. v. Paul Katchmere, an individual, P.D.K., Inc., a Florida corporation, Bretsarian, Inc., d/b/a/ Car Classics, a Florida corporation, Donald Katchmere, an individual, and Roy Collins, an individual, Case No. 09-CACE-20740 (17th Jud. Cir.) (“Aim Action”) that he and his brother were the only shareholders of PDK. Komlossy Affidavit, paragraph 5 and Ex. A, pages 42-47 thereto. 37. Katchmere testified in his June 25, 2010 deposition in the Aim Action that there are no formal minutes kept of “regular meetings” of PDK and they keep “a mental record of our conversations” since it is a “two-person business”., and thus there are no PDK corporate records available. Komlossy Affidavit, paragraph 2 and 5, Ex. A, pages 42-47 and 91-92 thereto.38. Katchmere testified in his June 25, 2010 deposition in the Aim Action that PDK paid fees to Robert Stok, an attomey, for litigation that involved a different company. Komlossy Affidavit, paragraph 4, Ex. A pages 38-40 thereto. 39. Katchmere testified in his June 25, 2010 deposition in the Aim Action that the only financial records, “for the most part” are the bank statements of PDK. Komlossy Affidavit, paragraph 6, Ex. A, pages 49-50 thereto. 40. PDK refinanced its mortgage in or about February, 2016, which was recorded with the St. Lucie County Clerk on March 2, 2016. Ex. C to Komlossy Affidavit. 41. PDK did not discuss the 2016 refinancing with the McConnells. Ex. C to Komlossy Affidavit. 42. PDK filed a resolution with the St. Lucie County Clerk on March 2, 2016 which stated that the Katchmeres were the only shareholders of PDK. Ex. C to Komlossy Affidavit. 43. At the time the resolution was filed as set forth in paragraph 41 above, the McConnells and the new investor, Robert Leite, were also shareholders of PDK. 44. — Robert Leite alleged that his property manager in April 2017 had stolen in excess of $50,000 from PDK. Ex. D to Komlossy Affidavit. 45. The charges against the former Crystal Trace property manager were not pursued. Ex. D to Komlossy Affidavit. Dated: June 4, 2018 KOMLOSSY LAW P.A. /s/ Emily C Komlossy Emily Komlossy (FBN 7714) eck@komlossylaw.com 4700 Sheridan St., Suite J Hollywood, FL 33021 Phone: (954) 842-2021 Fax: (954) 416-6223 Attorneys for PlaintiffsEXHIBIT BIN THE CIRCUIT COURT OF THE NINETEENTH JUDICIAL CIRCUIT IN AND FOR ST. LUCIE COUNTY, FLORIDA MADELINE and WILLIAM MCCONNELL, Case No. 562017CA1650AXXXHC Plaintiffs, v. P.D.K, INC., A Florida Corporation, Defendant/. ORDER GRANTING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT THIS CAUSE coming to be heard on Plaintiffs Madeline and William McConnell’s Motion for Summary Judgment filed on June 4, 2018, and the Court having heard argument or otherwise reviewed the papers filed in connection with said motion, and being fully advised in the premises, it is ORDERED AND ADJUDGED that Plaintiffs’ Motion is GRANTED. DONE AND ORDERED at St. Lucie County, Florida this _ day of , 2018. JUDGE JANET C. CROOM Circuit Court Judge Emily C. Komlossy (eck@komlossylaw.com) Louis C. Arslanian (arsgabriela@comcast.net