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Court upholds $10M judgment for Rhoades McKee
The state Court of Appeals upheld this month nearly all of an $8 million jury verdict, plus interest and fees, in the case of Michael Ward, et al. v. Kevin Flynn, Renovo Services, LLC and Emerald Ventures, Inc.
The case, which was originally tried in 2010, regarded the 2007 sale of a local company, Renaissance Recovery Solutions, which was found to have involved underhanded tactics, according to an announcement by the law firm Rhoades McKee, which represented the plaintiffs.
Michael Ward, a passive investor in Renaissance, filed the lawsuit shortly after the March 2007 transaction and was later joined by Robert Tinucci, another passive investor, as a co-plaintiff.
Ward and Tinucci complained that the shareholders of the company were not informed of the transaction until after it had been consummated.
Ward and Tinucci further claimed that Kevin Flynn, a Chicago-based businessman, obtained the interest through improper side deals, use of economic threats and manipulation of the board of directors.
Through such improper tactics, Ward and Tinucci claimed that Flynn obtained Renaissance’s interest for far less than its appropriate value.
Warner Norcross attorneys Richard Kay and Molly McManus provided trial counsel to Flynn and James Brady, a Dykema Gossett attorney, handled the appeal.
“The case, really, at its essence, is about strong-arm tactics that were utilized to pressure board members to vote through what they knew to be a bad deal,” said Paul McCarthy, attorney at Rhoades McKee. “The litigation was required to, number one, set aside the bad deal and then to have the jury value the true interest of the company.”
Kent County Circuit Court Judge Dennis Leiber found that the 2007 transaction was void under the Renaissance’s bylaws.
The six-member jury found that Flynn, and his companies, wrongfully and intentionally interfered with Renaissance’s interest and aided and abetted in the improper sale of the interest at a fire-sale price, accomplished through underhanded tactics, including bribes, threats, the appointment of Flynn agents to Renaissance Recovery Solution’s board of directors and, ultimately, sending “notice” of the proposed sale to shareholders with less than 24 hours notice.
As a result, it awarded $8 million in damages for the value of Renaissance’s interest, which reached nearly $10 million with additional costs and fees.
The verdict was reported to be the largest verdict in Michigan in 2010 and is one of the largest in Kent County history. West Michigan is typically known for modest verdicts, making this outcome stand out.
“The most important point was that a jury of average citizens from West Michigan stood up and said that you cannot engage in underhanded conduct, stealing a company in West Michigan, and get away with it,” said Bruce Courtade, attorney at Rhoades McKee.
McCarthy added, “The other thing that I think is notable about the case is that we were able to unwind the transaction all together and have the jury re-value the interest, and it was very complicated from a financial standpoint.”
The Court of Appeals upheld all but $383,000 of the original verdict.
“There were four counts of the complaint that went to the jury,” Courtade said. “What the Court of Appeals said is that when they went back and looked at the record there was one count, called tortious interference with a business relationship or expectancy, that the Court of Appeals felt was not supported by the evidence, sufficient to survive appeal, and the value of that count was $383,500, but that the remaining counts were fully supported by the record.”
In an odd twist of events, Flynn is now deceased, dying in an accident just days before the appeal was returned.
The defendants, a personal representative of Flynn’s estate, have 42 days from the date of the opinion, Aug. 15, to seek leave to appeal the Court of Appeals decision before the Michigan Supreme Court, according to Rhoades McKee.
The defendants’ attorney, Brady, noted that the parties were currently working to resolve the case and said he could not comment further.
Rhoades McKee said the initital case and its appeal were a team effort and included "significant contributions" by its attorneys Stephen J. Hulst and Gregory G. Timmer.