Katherine Black Garcia, et al. v. Thomas Williamson, et al.

(Torrance Courthouse: Dept. SWA) August 20, 2026 DEPARTMENT SWA LAW AND MOTION RULINGS Tentative Ruling Judge Eric C. Taylor Torrance/Department A Hearing Date: Monday, January 29, 2024 Case Name: Katherine Black Garcia, et al. v. Thomas Williamson, et al. Case No.: 19TRCV00504 Proceeding: Phase I of Bifurcated Trial on Plaintiffs' FAC Plaintiff: Plaintiffs Katherine Black Garcia, Christopher Black and Henry Black, each of them as Co-Trustees of the Laura Black 101 Trust Defendant: Defendants Thomas D.

Williamson and Sue Shreeve Notice: OK Ruling: Based on the record presented: (a) It was not legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 Exchange as members and/or shareholders concerning the Mobile Home Park Sale or the Torrance Sale of the Properties owned by the Utah LLCs or GBW, and (b) It was legally possible for Defendants to make a distribution of something other than money from an LLC and/or S Corporation which would qualify for a 1031 exchange; and (c) Defendants' conduct in not giving additional advanced notice of the Sales did not make it legally impossible for Plaintiffs to conduct a 1031 Exchange in connection with the Mobile Home Park Sale or the Torrance Sale- namely, because Plaintiffs could not have, in any event, effectuated the exchange on their own.

Based on these findings, Defendants did not breach their duties based on the theories that (a) it was legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 exchange as to either the Mobile Home Park Sale and/or Torrance Sale, which were owned by an LLC or S Corporation, and (b) it was legally impossible for Plaintiffs to complete a 1031 exchange regardless of whether Defendants gave them notice as to the Mobile Home Park Sale and/or Torrance Sale.

Whether Defendants breached their duty to Plaintiffs based on a failure to make an in-kind distribution is left for determination in Phase II of the trial.

* Plaintiffs concede on page 15 of their Phase I brief that Sue Shreeve owed no fiduciary duty herein as she was not a manager of the Utah LLC.

BACKGROUND GBW Investments, Inc. (a California "S-Corp") ("GBW"), Geo Investments, LLC (a Utah LLC) ("GEO", South Willow Mobile Home Park, LLC (a Utah LLC), Meadowbrook LLC (a Utah LLC)("Meadowbrook"), and Rolling Hills, LLC (a Utah LLC)("Rolling Hills")(collectively referred to as the "Entities") hold title to various real estate properties. The Thomas Williamson 101 Trust, The Sue Shreve 101 Trust, The Patricia Bruner 101 Trust and The Laura Black 101 Trust (collectively referred to as the "101 Trusts") each hold a 25% membership interest in the Entities. Defendant Thomas Williamson is the trustee of each of the 101 Trusts and managed each of the Entities.

On June 12, 2018, Thomas, acting with Defendants Sue Shreeve and Michael Brunner, sold three mobile home parks in Utah that were held by the Entities (the "Mobile Home Park Sale") for a total sale price of $60 million. Thomas did not provide notice to Plaintiffs or Laura Black.

On June 13, 2018, Plaintiffs discovered after that Thomas had orchestrated a similar sale in April 2018 of three apartment buildings owned by GBW in Torrance, CA for almost $30 million (the "Torrance Sale"). Plaintiffs also received no notice of the Torrance Sale.

Plaintiffs allege Defendants intentionally concealed the Mobile Home Park Sale and the Torrance Sale from them to prevent Plaintiffs from interfering with the sales. Plaintiffs allege that they were unable to effectuate a 1031 exchange in connection with the Mobile Home Park Sale or the Torrance Sale, because they lacked sufficient notice of the sale. Plaintiffs allege the Mobile Home Park Sale and the Torrance Sale resulted in $7 million of tax liability and other damages to the Laura Black 101 Trust. Had Defendants provided notice to Plaintiffs of the sale, Plaintiffs would have had sufficient time to arrange a 1031 exchange as to their interest and avoided the $7 million in tax liability.

On June 6, 2019, Plaintiffs filed the original complaint in this action. On July 30, 2019, Plaintiffs filed the operative First Amended Complaint alleging (1) breach of fiduciary duty; (2) concealment; (3) conspiracy to commit breach of fiduciary duty; and (4) fraud.

On December 6, 2023, the Court (Judge Luna) issued a ruling on submitted matters as to Plaintiffs' Motion for Summary Judgment, or in the alternative Summary Adjudication. The Court denied Plaintiff's Motion for Summary Judgment. The Court granted summary adjudication on the following issues of duty: (1) Defendants owed Plaintiffs a fiduciary duty as to GBW; and (2) Defendants Thomas and Michael owed Plaintiffs a fiduciary duty as to GEO Investment, LLC, South Willow Mobile Home Park, LLC, Rolling Hills, LLC and Meadowbrook LLC (collectively referred to herein as the "Utah LLCs"). The Court denied the motion for summary adjudication on the issue of whether Defendant Sue owed Plaintiffs a fiduciary duty as to the Utah LLCs.

On December 6, 2023, the Court also issued a ruling on submitted matter as to Plaintiffs' Motion to Bifurcate. The Court granted the Motion to Bifurcate, finding that Phase I of the trial of the action would address the following issues: (i) Whether Sue Shreeve owed a duty to Plaintiffs based on the nature of her involvement, if any, with the Utah LLCs; (ii) Whether Defendants, individually and/or collectively, breached any duty found to be owed Plaintiffs because: (a) it was legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 exchange as to either the Mobile Home Park Sale and/or Torrance Sale of properties owned by an LLC or S Corporation; and/or (b) it was legally possible for Defendants to make a distribution of something other than money from an LLC and/or S Corporation which would qualify for a 1031 exchange; and/or (c) it was legally impossible for Plaintiffs to complete a 1031 exchange based on the notice given them by Defendants as to the Mobile Home Park Sale and/or Torrance Sale.

Phase I of the Bifurcated Trial is now before the Court. Having read the Plaintiffs' Trial Brief and Defendants' Trial Brief, the Court issues the tentative ruling as follows.

DISCUSSION I. Plaintiffs' Trial Brief Plaintiffs concede that Sue Shreeve did not owe Plaintiffs any fiduciary duties with respect to the Utah LLCs. Plaintiffs indicated in a footnote that they did not request that this issue be bifurcated and decided in Phase I.

Plaintiffs argue that it was only Defendants' conduct that made it impossible for them to conduct 1031 Exchanges in connection with the Mobile Home Park Sale and the Torrance Sale. Plaintiffs argue Defendants failed to conduct a direct exchange with the buyers in either Sale, nor did they satisfy the three rules for safe-harbor deferred 1031 Exchanges. Plaintiffs argue Defendants also failed to take the necessary steps for Laura Black 101 Trust to effectuate a 1031 Exchange of its 25% interest independently of the other members. Plaintiffs argue that, as to the Torrance Sale, Defendants decided not to pursue a 1031 Exchange for GBW, never researched the process and never even contacted a qualified intermediary.

Plaintiffs also argue that it was legally possible for Defendants to make non-monetary distributions from the Utah LLCs and/or GBW that would qualify for a 1031 Exchange. Plaintiffs argue they never demanded a distribution in the form of a 1031 Exchange. Plaintiffs contend they were harmed by Defendants' failure to preserve their ability to conduct a 1031 Exchange.

Nevertheless, Plaintiffs argue that neither Utah Code Ann. Sec.48-3a-404(3) or Cal. Corp. Code Sec.17704.04 prohibited Defendants from making a non-monetary distributions with respect to GBW, a California S-Corporation. Plaintiffs argue both the Utah and California statutes do contemplate non-monetary distributions, so long as the part of the asset distributed in kind is fungible and each person receives a percentage of the asset equal in value to the person's share of distributions. Plaintiffs argue the Utah LLC's Operating Agreements also permit distributions to members in kind.

Plaintiffs also argue Defendants' failure to provide them notice of the Sales made it legally impossible for them to conduct a 1031 Exchange. Plaintiffs argue Defendants admit that they foreclosed Plaintiffs' ability to conduct a 1031 Exchange in connection with the Mobile Home Park Sale by not notifying them of it until the morning it closed. Plaintiffs argue Defendants failure to notify them of the Torrance Sale and Plaintiffs' discovery of the Torrance Sale until it was in escrow prevented them from undertaking any of the necessary and complicated corporation and tax planning required for Laura Black 101 Trust to conduct a 1031 Exchange on its own through a spin-off.

II. Defendants' Trial Brief Defendants argue they had no duty to engage in, or assist in, a 1031 Exchange for the benefit of the Laura Black 101 Trust. Defendants argue that under Ca. Corp. C. Sec.17704.4(c) and Utah Code Anno. 48-3a-404(3), no person has a right to demand or receive a distribution from a limited liability company in any for other than money. Defendants argue Plaintiffs therefore had no right to demand or receive gain, profits or dividends in any form other than money and therefore no right to demand or receive a distribution in the form of a 1031 Exchange.

Defendants argue nothing in the Operating Agreements required the managers, Thomas and Michael to provide advance notice to Plaintiffs of either Sale. Defendants argue Thomas and Michael had the absolute authority and discretion to sell real and personal property as managers of GEO and Meadowbrook. Defendants argue they had authority to make distributions to the members in the manner they deemed advisable under the Operating Agreements. Defendants also argue they had the authority to make certain elections under the tax laws.

Defendants argue Plaintiffs' expert makes clear that in order for the Plaintiffs to have effectuated a 1031 Exchange based on the membership interest of Laura Black 101 Trust independent of the other members, a distribution would have had to have been made in a form other than money. Defendants argue a 1031 Exchange would therefore have been impossible because the distribution would be in a form other than money.

Defendants argue Plaintiffs' FAC is predicated on allegations of rights that do not exist. Defendants argue Plaintiffs had no right to advance notice of the Sales, nor did Plaintiffs have a right to a 1031 Exchange. Defendants argue they had the complete authority and discretion to manage the assets of the Entities, including their sale.

III. Scope of Phase I Proceeding Based on the December 6, 2023 Bifurcation Order (and Plaintiff's concession of no fiduciary duty owed by Sue Shreeve), the Court need only determine whether there was a breach, because (a) it was legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 exchange as to either the Mobile Home Park Sale and/or Torrance Sale of properties owned by an LLC or S Corporation; and/or (b) it was legally possible for Defendants to make a distribution of something other than money from an LLC and/or S Corporation which would qualify for a 1031 exchange; and/or (c) it was legally impossible for Plaintiffs to complete a 1031 exchange based on the notice given them by Defendants as to the Mobile Home Park Sale and/or Torrance Sale.

The Court intended to limit Phase I to purely legal issues. Thus, whether Defendants breached their fiduciary duty by failing to provide notice of the Sales to Plaintiffs or by structuring the sale of the subject Properties as they did is outside the scope of Phase I. Whether these acts violated Defendants' duty of "care, loyalty, honesty, and good faith" (Stevensen 3rd East, LC v. Watts (Utah Ct. App. 2009) 210 P.3d 977, 986), or qualified as a failure to act with "(a) good faith; (b) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (c) in a manner the director or officer reasonably believes to be in the best interests of the corporation." (Utah Code Sec. 16-10a-840(1).) or qualified as "gross negligence, willful misconduct, or intentional infliction of harm on the corporation or shareholders" (Id. at 16-10a-840(4)(a)-(b)) is an issue of fact outside the scope of Phase I of the trial.

As noted by Plaintiffs in their trial brief, even if the Court finds against Plaintiff on the legal issues raised in Phase I, Issue (ii)(a)-(c), Plaintiffs' fiduciary duty cause of action and other claims would proceed to Phase II of the trial as Plaintiffs offer multiple theories of breach. As stated by Plaintiffs in their trial brief, it is the jury that must decide the factual question of whether Defendants breached fiduciary duties by failing to preserve Plaintiffs' ability to enter into a 1031 Exchange for either Sale.

IV. Whether Sue Shreeve owed a duty to Plaintiffs based on the nature of her involvement, if any, with the Utah LLCs Plaintiffs concede that Sue Shreeve did not owe Plaintiffs any fiduciary duty as to the Utah LLCs. (Plaintiffs' Phase I Brief ("Plaintiffs' Brief").) Plaintiffs admit that Sue Shreeve was only a member of the Utah LLCs, not a manager. (Loftus Dec., Ex. C, Separate Statement of Facts, SUF P.P.43-44. The Court finds Sue Shreeve did not owe a fiduciary duty to Plaintiffs based on the nature of her involvement with the Utah LLCs.

IV. Whether Defendants, individually and/or collectively, breached any duty found to be owed Plaintiffs because: (a) it was legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 exchange as to either the Mobile Home Park Sale and/or Torrance Sale, which were owned by an LLC or S Corporation; and/or (b) it was legally possible for Defendants to make a distribution of something other than money from an LLC and/or S Corporation which would qualify for a 1031 exchange; and/or (c) it was legally impossible for Plaintiffs to complete a 1031 exchange based on the notice given them by Defendants as to the Mobile Home Park Sale and/or Torrance Sale.

A. It was legally impossible for Plaintiffs, as members or shareholders of an LLC or S Corporation to conduct a 1031 Exchange as to either the Mobile Home Park Sale and/or Torrance Sale, which were owned by an LLC or S Corporation Based on the Court' December 6, 2023 Order of Bifurcation, the specific issue presented is whether Plaintiffs, in their capacity as members or shareholders, could have conducted a 1031 Exchange in connection with the Mobile Home Park Sale and the Torrance Sale, given that the subject Properties were owned by the Entities. Contrary to Plaintiffs' framing of the issue, the issue presented is not whether Plaintiffs could have reaped the benefit of a 1031 Exchange under some permutation of facts and circumstances.

Plaintiffs' expert on the issue of 1031 Exchanges testifies to multiple ways in which the Laura Black 101 Trust could have benefitted from a 1031 Exchange. However, none of these methods would have allowed for The Laura Black 101 Trust or Plaintiffs to conduct a 1030 Exchange as to the Properties owned by the Utah LLCs or GBW in their capacity as members of the Utah LLCs or shareholders of GBW. Each of the methods identified by Plaintiffs' expert would have required either (1) the Entities to conduct the 1031 Exchange as the legal owners and taxpayers; or (2) to dissolve and distribute ownership of the subject properties to the former members as tenants in common, so that they could conduct their own 1031 Exchange as owners of their share of the distributed Properties. (Loftus Dec., Ex. B, Medinets Dec., P.P.41-49.)

This is because only the taxpayer, i.e. the owner, of a property is entitled to conduct a 1031 Exchange. "There can be no 1031 Exchange unless there is an agreement between the taxpayer and some other party (sometimes called an 'accommodating party') where they agree in advance that they will exchange properties with each other." (Loftus Dec., Ex. B, Medinets Dec., P.19.) "[A] 1031 Exchange must be made between the taxpayer and some accommodating party." (Id. at P.22.) While the Properties were owned by the Entities, only the Entities could have conducted the 1013 Exchange.

This is the precise defect raised by Plaintiff's expert in the putative 1031 Exchange documents that were prepared in connection with the Mobile Home Park Sale: "A QI [qualified intermediary in a 1031 Exchange] must enter into an agreement with the taxpayer. In each case, the taxpayer was the limited liability company that had previously held direct or indirect title to real estate that had already been sold." (Id. at 42.) Because Plaintiffs were not the taxpayers, they had no power to execute the purported exchange documents, nor were they ever authorized on behalf of the LLCs to execute such documents. (Id.)

Based on Plaintiffs' own expert evidence, it was legally impossible for Plaintiffs to conduct a 1031 Exchange as members or shareholders in connection with the Mobile Home Park Sale and the Torrance Sale of the Properties, which were owned by the Utah LLCs and GBW. Plaintiffs fail to establish it was legally possible for them to conduct a 1031 Exchange in connection with the Mobile Park Home Sale or the Torrance Sale for properties owned by the Utah LLCs and GBW.

B. Based on the evidence, it was legally possible for Defendants to make a distribution of something other than money from an LLC and/or S Corporation which would qualify for a 1031 Exchange Defendants asserted in connection with their prior MSJ that Plaintiffs have "no right to demand anything by way of a distribution other than money." (Defendants' Opposition to MSJ filed on October 23, 2023, 9:22-25.) Defendants relied on Utah Code Annotated section 48-3a-404(3) and California Corporations Code section 17704.04(c) in support of this argument.

Utah Code Annotated Section 48-31-404 is entitled "Sharing of and right to distributions before dissolution." Section 48-31-404(3) provides, "A person does not have a right to demand or receive a distribution from a limited liability company in any form other than money. Except as otherwise provided in Subsection 48-3a-711(4), a limited liability company may distribute an asset in kind only if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person's share of distributions." Utah Code Annotated Section 48-31-404(3) ("Utah Code Sec.48-31-404(3)").

California Corporations Code Sec.17704.04 is the California counterpart to Utah Code Annotated Section 48-31-404(3). Section 17704.04(c) provides, "A person does not have a right to demand or receive a distribution from a limited liability company in any form other than money. A limited liability company may distribute an asset in kind if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person's share of distributions." Ca. Corporations Code Sec.17704.04(c) ("Section 17704.04").

Both Utah Code Sec.48-31-404(3) and Section 17704.04(c) only apply to distributions before dissolution. In the event of dissolution, no person has a right to demand or receive a distribution from a limited liability company in any form other than money. The LLC " may distribute an asset in kind if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal value to the person's share of distributions." Utah Code Sec.48-31-404(3); Section 17704.04.

Plaintiffs argue that, under the aforementioned sections, an LLC "may distribute an asset in kind if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person's share of distributions." Utah Code Sec.48-31-404(3); Section 17704.04(c). Plaintiffs' expert testifies that the conditions for an in-kind distribution could have been satisfied under Utah Code Sec.48-31-404(3) and Section 17704.04(c), i.e. that "each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person's share of distributions." (Loftus Dec., Ex. B, Medinets Dec., P. 43.)

Defendants do not dispute that a nonmonetary distribution was legally possible under either Utah Code Sec.48-31-404(3) and Section 17704.04(c). Based on Defendants' trial brief, their position has never been that a nonmonetary distribution was legally impossible, only that Plaintiffs did not have a right to demand a nonmonetary distribution.

Plaintiffs also cite to portions of the Utah LLC's Operating Agreements that permit distribution to members "in kind." Section 12.6 entitled "Method of Distribution of Assets" states that "To the extent feasible, all distributions in liquidations shall be made pro rate to members in kind." (Loftus Dec., Ex. K, Amended and Restate Operating Agreement of Geo Investments, LLC, Sec.12.6; Ex. L, Amended and Restated Operating Agreement of Meadowbrook, LLC). [1]

Plaintiffs submit no authority as to whether GWB, a California S Corporation, could have made an in-kind distribution to its shareholders under applicable law. As Plaintiffs note, Utah Code Sec.48-31-404(3) and Section 17704.04(c) govern LLCs, not California S corporations. However, again, Defendants have never maintained that it was not legally possible for GBW to make nonmonetary distributions.

Based on the record presented, it was legally possible for Defendants under the circumstances to make a nonmonetary distribution to Plaintiffs. As such, the Court finds that it was legally possible for Defendants to make a nonmonetary distribution that could have qualified for a 1031 Exchange.

However, even if it were legally possible for Defendants to have made a nonmonetary distribution that would qualify for a 1031 Exchange, the relevant question is whether Defendants had a legal duty to make such a nonmonetary distribution, such that their failure to do so was a breach of their fiduciary duty. Plaintiffs fail to cite any authority obligating Defendants, as a matter of law, to make a nonmonetary distribution that would qualify for a 1031 Exchange to the members of the Utah LLC and the shareholders of GBW.

Utah Code Sec.48-31-404(3) and Section 17704.04(c) explicitly deny that members have a "right" to such nonmonetary distributions before dissolution. Both sections use discretionary language ("may") regarding in kind distributions of an LLCs assets, and even then, such discretion can only be exercised in favor of in kind distributions of an asset when certain conditions are met. (Utah Code Sec.48-31-404(3) and Section 17704.04(c).)

The LLC Operating Agreements do not obligate the LLC to make in kind distributions of LLC assets. Section 12.6 explicitly states that "distribution of specific assets shall be solely determined by the Managers." (Loftus Dec., Ex. K, Sec.12.6; Ex. L, Sec.12.5.) Section 12.6 only require that distributions in liquidations be made "pro rate to the Members in kind" " [t]o the extent feasible. " None of this language imposes any legal duty on Defendants as a matter of law to make distributions of any specific kind, much less nonmonetary distributions that are subject to a 1031 Exchange.

In order to establish breach of duty based on Defendants' failure to make nonmonetary distributions subject to a 1031 Exchange, Plaintiffs are required to establish that Defendants had a fiduciary or legal duty to do so. Even though it was legally possible for Defendants to make nonmonetary distributions subject to a 1031 Exchange, this would not necessarily establish that the failure to make nonmonetary distributions subject to a 1031 Exchange breached Defendants' fiduciary duty to Plaintiffs.

C. A 1031 Exchange by Plaintiffs was not legally impossibly regardless of any lack of notice to them of the Sales, because Plaintiffs were never the taxpayers who would qualify for the Exchange of the Properties As discussed in connection with Section I(A) above, it was never legally possible for Plaintiffs to conduct a 1031 Exchange in connection with the Mobile Home Park Sale and/or the Torrance Sale, because Plaintiffs were not the taxpayers or owners of the Properties sold in either of the Sales. As such, no lack of notice made Plaintiff's use of 1031 impossible. It was simply never possible from the beginning.

D. Based on these findings, Defendants did not breach their duties based on the theories that (a) it was legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 exchange as to either the Mobile Home Park Sale and/or Torrance Sale, which were owned by an LLC or S Corporation and/or (b) it was legally impossible for Defendants' lack of notice to Plaintiffs to affect a 1031 exchange by Plaintiffs. Whether Defendants breached their duty to Plaintiffs based on a failure to make an in-kind distribution is left for determination as a question of fact in Phase II of the trial.

"Like the fiduciary duties of general partners or corporate officers, a limited liability company manager's fiduciary duty [to the LLC] arises from the corporate relationship itself, independent of any contractual duties." (Stevensen 3rd East, LC v. Watts (Utah Ct. App. 2009) 210 P.3d 977, 986.) Generally, breach of fiduciary duty causes of action for damage to a corporation or an LLC is a derivative claim belonging to the corporation or LLC and not to stockholders or members individually. (Richardson v. Arizona Fuels Corp. (Utah 1980) 614 P.2d 636, 640.) Any fiduciary duty owed to shareholders or members of a corporation or LLC is owed to the shareholders or members collectively and not individually. (Pond v. Equitable Life and Cas. Ins. Co. (Utah Ct. App. 1994) 872 P.2d 1070, 1072.)

However, a plaintiff (as a stockholder or member) may bring an individual cause of action for breach of fiduciary duty against an officer or manager where "the [primary] injury is one to the plaintiff as a stockholder [or member]" for direct damages, which is not linked to an injury to the corporation or LLC. (GLFP, Ltd. v. CL Management, Ltd. (Utah Ct. App. 2007) 163 P.3d 636, 640.) [2]

As discussed in the December 6, 2023 Submitted Ruling on Plaintiffs' MSJ, the Court found Defendants Thomas and Michael owed a fiduciary duty to Plaintiffs based on Defendants' status as "managers, directors, and/or officers" of the Entities. (December 6, 2023 Ruling on Submitted Matter-MSJ, p. 8). A manager of an LLC owes a duty of "care, loyalty, honesty, and good faith." (Stevensen 3rd East, LC, supra, 210 P.3d at 989.) The Utah Revised Business Corporation Act ("URBCA") imposes similar duties and requires officers duties to act in "(a) good faith; (b) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (c) in a manner the director or officer reasonably believes to be in the best interests of the corporation." (Utah Code Sec. 16-10a-840(1).)

Additionally, the statute requires that plaintiff prove the breaches constituted "gross negligence, willful misconduct, or intentional infliction of harm on the corporation or shareholders." (Id. 16-10a-840(4)(a)-(b). The additional requirement set out by the Utah Code is not required for LLCs. (Rawcliffe v. Anciaux (Utah 2017) 416 P.3d 362, 368-369 "[T]he common law assists in defining the scope of the duty, as long as the . . .common law does not conflict with any statutory guidance on the scope of that duty."]) [3]

As discussed above, based on the evidence, (a) it was not legally possible for Plaintiffs to conduct a 1031 Exchange as members and/or shareholders as to the Mobile Home Park Sale or the Torrance Sale of the Properties owned by the Utah LLCs or GBW, and (c) it was not legally impossible for Plaintiffs to conduct a 1031 Exchange in connection with the Mobile Home Park Sale or the Torrance Sale due to Defendants' failure to provide Plaintiffs' notice of the Sales.

Based on these findings, Defendants did not breach their duties based on the theories that (a) it was legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 exchange as to either the Mobile Home Park Sale and/or Torrance Sale, which were owned by an LLC or S Corporation; and/or (b) it was legally impossible for Plaintiffs to complete a 1031 exchange based on the notice given them by Defendants as to the Mobile Home Park Sale and/or Torrance Sale.

The Court finds it was (b) legally possible for Defendants to make a distribution of something other than money from an LLC and/or S Corporation which would qualify for a 1031 Exchange. Whether Defendants breached their fiduciary by failing to make a nonmonetary distribution that would qualify for a 1031 Exchange is a question of fact that must be resolved in Phase II of the trial as a question of fact.

CONCLUSION Based on the record, (a) it was not legally possible for Plaintiffs to conduct a 1031 Exchange as members and/or shareholders as to the Mobile Home Park Sale or the Torrance Sale of the Properties owned by the Utah LLCs or GBW and (b) it was not legally impossible for Plaintiffs to conduct a 1031 Exchange in connection with the Mobile Home Park Sale or the Torrance Sale due to Defendants' failure to provide Plaintiffs' notice of the Sales - namely because Plaintiffs could not have effectuated that exchange on their own, but (c) it was legally possible for Defendants to make a distribution of something other than money from an LLC and/or S Corporation which would qualify for a 1031 exchange.

Based on these findings, Defendants did not breach their duties based on the theories that (a) it was legally possible for Plaintiffs, as a member or shareholder of an LLC or S Corporation, to conduct a 1031 exchange as to either the Mobile Home Park Sale and/or Torrance Sale, which were owned by an LLC or S Corporation and (b) it was legally impossible for Plaintiffs to complete a 1031 exchange regardless of any notice given them by Defendants as to the Mobile Home Park Sale and/or Torrance Sale.

Whether Defendants breached their duty to Plaintiffs based on a failure to make an in-kind distribution is left for determination in Phase II of the trial.

[1] The Court found that all four of the Utah LLCs were governed by identical operating agreements in its ruling on December 6, 2023 ruling Plaintiffs' MSJ. (December 6, 2023 Ruling on Submitted Matter (MSJ), p. 5.)

[2] The Court found in its December 6, 2023 Submitted Ruling on Plaintiffs' MSJ that Utah law applied to this dispute. (December 6, 2023 Ruling on Submitted Matter-MSJ, pp. 5-6, "Choice of Law"). The citation of applicable law governing duty duplicates the citation of applicable law in the December 6, 2023 Submitted Ruling on Plaintiffs' MSJ. (Id. at pp. 6-7.)

[3] The citation of applicable law governing scope of duty duplicates the citation of applicable