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Lexington real estate development dispute survives motion to dismiss

| Feb 16, 2021 | Business contracts, Business law |

Haymaker Development Company, LLC, of Lexington and its owner Timothy Haymaker and businessman and philanthropist Bill Gatton and the C.M. Gatton Trust have a history of cooperative work on significant Hamburg-area commercial and residential real estate developments. But the cooperation apparently ended with Haymaker suing Gatton in a dispute about whether the two are in a partnership or joint venture in which they allegedly agreed that the trust would purchase prime tracts of land totaling roughly 200 acres for later transfer to Haymaker for development.

In turn, Gatton would allegedly get 70% of the development’s proceeds. Haymaker asserts that Gatton’s refusal now to transfer the land is a breach of their agreement and of Gatton’s fiduciary duty, and that the land is an asset of the partnership or joint venture.

According to the Lexington Herald Leader, Gatton’s lawyer states that the trust owns the land and there is no contract to sell it to Haymaker.

Federal court says Haymaker’s claims may proceed

On Jan. 28, 2021, the federal trial court in Lexington issued an opinion refusing to dismiss the case against Gatton and the trust. The judge wrote that Haymaker’s factual allegations, if true, are sufficient to state plausible claims for relief.

Gatton and the trust assert that there was at most an oral contract that would not be enforceable because a contract for real estate must be in writing under the statute of frauds. Haymaker responds that the allegation is a breach of an oral joint venture or partnership agreement so it would not need to be in writing.

The court held that the case may proceed because Haymaker sufficiently alleged facts that if proven true could provide the basis for valid claims. The judge explained that the behavior of the parties can imply the existence of a partnership or joint venture, and partners have fiduciary duties of care and loyalty to one another.

It will be interesting to see if this case settles or proceeds to trial.

Takeaways

This dispute raises many issues for Kentuckians to keep in mind when engaging in any kind of business. For example:

  • What legal entity (corporation, LLC, partnership or others) is most advantageous for a business venture? How should the entity be legally established?
  • What agreements should be put into place to carry out the business goals and define the legal relationships between the participants?
  • Robust contracts should be negotiated, drafted and executed for important business transactions.

An attorney can answer questions, provide information and represent Kentuckians in all these matters.

(Haymaker Development Company, LLC, v. C.M. Gatton is available on Westlaw at 2021 WL 297128.)