6/5/2020 5:10 PM 20CV19819 1 2 a J 4 IN THE CIRCUIT COURT OF THE STATE OF OREGON 5 FOR THE COUNTY OF MULTNOMAH 6 DR. MARK SCHRADER, and SOPHIA LISA SCHRADER, Case No.: 7 COMPLAINT FOR DECLARATORY JUDGMENT, BREACH OF FIDUCIARY DUTY, AND PETITION FOR THE JUDICIAL DISSOLUTION OF SHELTER ISLAND, LLC Plaintifß, 8 VS. 9 l0 V/ALTER KURT SCHRADER, CLAIM NOT SUBJECT TO MANDATORY ARBITRATION Defendant. 11 FEE AUTHORITY: ORS $ 21.160(1Xb) 12 (over $10,000) 13 t4 15 Dr. Mark Schrader and Ms. Lisa Schrader, as a members and managers of Shelter Island, LLC ("Company"), hereby file this complaint for declaratory judgment and breach of I6 fiduciary duty against Congressman Kurt Schrader, and this petition for judicial dissolution t7 under ORS 63.621 and 63.664, and allege as INTRODUCTION 18 19 20 follows: 1. Defendant Kurt Schrader is a member and manager of the Company, which is also 21 owned and co-managed by his brother, Plaintiff Dr. Mark Schrader, and their niece, Sophia 22 Lisa Schrader. The Company owns a vacation home in the Hamptons in New York. V/hile ZJ the Company is governed by an operating agreement that requires that all decisions affecting 24 the property be made on a majority or unanimous basis, Kurt Schrader has usurped control 25 over the Company, in breach of his fiduciary duties to the Company and in violation of the 26 operating agreement's provisions. To exact his despotic demands, he has refused to attend Page 1 - COMPLAINT Olsen Barton LLC 5 Centerpointe Drive, Suite 220 Lake Osrvego, OR 97035 Tel: 503-468-5573 Fax: 503-820-2933 I Company meetings, propounded absurd interpretations of the Company's operating 2 agreement, intentionally overstated the Company's financial condition, incurred unnecessary J a and unauthorized expenses, and has operated the property in violation of law and in breach 4 his fiduciary duties to the Company and the other members. His actions have created a 5 deadlock and forced Mark Schrader and Lisa Schrader to hle this petition for judicial 6 dissolution and seek judicial interpretation of the Company's operating agreement. JURISDICTION AND VENUE 7 2. 8 Jurisdiction is proper under ORCP 4 because section 12.8 of the Operating 9 10 of Agreement states that jurisdiction is proper in Multnomah County. 3. 11 I2 Venue is proper in Multnomah County because ORS 63.664 the Company's 13 registered agent is in Multnomah County and because section 12.8 of the Operating I4 Agreement states that venue is proper in Multnomah County. COMMON ALLEGATIONS 15 t6 4. t7 18 The Company is an Oregon limited liability company and governed by the certain Restated Operating Agreement, dated December 22,2011 19 5. The members of the company are Dr. Mark Schrader, Kurt Schrader, and Sophia Lisa 20 2l ("Operating Agreement"). Schrader. 22 6. 23 The Company is member-managed, with all members also acting as co-managers 24 il/ 25 t// 26 /// Page2 - COMPLAINT Olscn Barton LLC 5 Centerpointe Drive, Suite 220 Lake Oswego, OR 97035 Tel: 503-468-5573 Fax: 503-820-2933 1 7. 2 As stated in section 2.03 of the Operating Agreement, the Company was formed J I "[T]o acquire, own, manage 4 protect the property . . . ." and hold real property . . . in a manner that The Company owns real property located at 11 Bootleggers Alley Shelter Island, NY 6 1 1964 (the "Property"). 9. 8 The Property was built in 1958 and requires substantial capital improvements and 9 10 repairs to remain habitable and rentable. 10. 11 Previously, the Property generated revenue operating as a vacation rental. The 12 13 Property can no longer legally operate as a vacation rental because it requires substantial l4 repairs and upgrades to comply with the local vacation rental permitting Even when operating, the Property is not prof,rtable as a vacation rental because its I6 revenue does not adequately offset its long-term capital, repair, and maintenance obligations. 12. 18 The Property's continuous operating deficit is depleting the Company's cash reserves, I9 20 ordinances. 11. 15 I7 preserve and 8. 5 7 will which will result in the Company becoming insolvent in approximately five years. 13. 21 Because the Property's continuous operating deficit is negatively impacting the 22 23 Company's financial position, frustrating its purpose, and threatening its viability, Mark 24 Schrader advised the other members to sell the Property, and called for a meeting on March 25 2,2020,1o discuss a sale of the Property and the Company's dissolution. 26 Page 3 - COMPLAINT Olsen Barton LLC 5 Centerpointe Drive, Suite 220 Lake Oswego, OR 97035 Tel: 503-468-5573 Fax: 503-820-2933 t4. I Both Mark Schrader and Lisa Schrader attended the Company's meeting on March 2, 2 J 2020. At the meeting, Mark and Lisa voted to sell the Properly and dissolve the Company, 4 but because the Operating Agreement requires unanimous approval to sell the Property and 5 dissolve the Company, their vote was ineffectual. 15. 6 Kurt Schrader, the only member who actively uses the Property, voiced opposition to 7 8 selling the Property prior to the March 2,2020 meeting. And despite receiving notice of the 9 meeting and knowing its purpose, failed to attend or present a proxy. Upon information and Schrader refused to attend the meeting to avoid voting on the sale of the Property 10 beliei Kurt 1t or dissolution of the Company. 16. 12 Since the meeting, 13 Kurt Schrader has propounded absurd interpretations of the 14 Operating Agreement to justify his refusal to attend the meeting and to intentionally obstruct 15 any further vote concerning a sale of the Property or dissolution of the Company. For 16 example, Kurt Schrader has argued that the co-managers must unanimously agree to hold a t7 meeting, 18 despite knowing that section 11.2.I of the operating agreement states that "the Manager shall call a meeting of the Members," if requested by more than 15% of the t9 members. 17. 20 2l In addition, to permanently prevent the other members or manager from calling a 22 meeting, and to avoid any decisions by a majority (including, under his interpretation, any 23 decision to call a meeting after one has been requested), Kurt Schrader has refused to 24 recognize Ms. Lisa Schrader as a member. Kurt Schrader has claimed that Lisa Schrader 25 cannot vote as a member or act as a manager until she is 21, despite the Operating 26 Agreement's lack of any language to that effect, and contrary to the members' and managers' Page 4 - COMPLAINT Olsen Barton LLC 5 Centerpointe Drive, Suite 220 Lake Oswego, OR 97035 Tel: 503-468-5573 Fax: 503-820-2933 1 prior actions that have recognized her membership status, ability to vote, and act as a 2 manager. a J 18. Finally, to persuade non-member family members from encouraging the Company's 4 5 members to vote to sell the Property and dissolve the Company, Kurt Schrader has 6 intentionally overstated the Company's profit and financial condition and ability to continue 7 as a viable business. 19. 8 Kurt Schrader has also leased the Property in violation of city ordinances to create the 9 10 illusion of an income stream without 11 comply with those ordinances. And despite demanding unanimity over Company decisions, a need to first improve and repair the Property to I2 he has incurred personal expenses over the other members' objections to make repairs to the 13 Property and then sought and received reimbursement for those expenses from the Company. t4 20. Kurl Schrader's actions, misinterpretations of the Operating Agreement, misleading 15 t6 statements concerning the Company's financial status, refusal to attend the Company's t7 meetings, l8 and efforts to obstruct the calling and holding of Company meetings, has created an ineconcilable deadlock. Neither the Operating Agreement nor the Oregon Limited t9 Liability Act provide a method to resolve the deadlock, thus requiring a judicial dissolution 20 and judicial interpretation of the Company's Operating Agreement. 21 FIRST CLAIM FOR RELIEF 22 (Breach of Fiduciary Duty) 2t. 23 Plaintifß Mark Schrader and Lisa Schrader re-allege all prior paragraphs 24 25 restated herein. 26 Page 5 - COMPLAINT Olsen Barton LLC 5 Centerpointe Drive, Suite 220 Lake Oswego, OR 97035 Tel: 503-468-5573 Fa.r: 503-&20-2933 as if fully I 22. As a member and manager of the Company, Kurt Schrader owes a fiduciary duty to 2 J 1 the Company and its members. Those duties require him to act in good faith and in a manner 4 that is in the best interest of the Company, even when the Company's interests are in conflict 5 with his own personal interests. 6 23. Kurt has breached his fiduciary duties by acting in is personal interest rather than the 7 8 in the interests of the Company, including by incurring unauthorized expenses, overstating 9 the Company's financials, operating the Property illegally, refusing to attend properly called 10 Company meetings, refusing to recognize Lisa Schrader's status as a manager and member 11 with voting rights, and intentionally misinterpreting the Company's operating agreement. I2 24. As a direct and proximate cause of Kurt Schrader's actions, Plaintiffs should be 13 14 awarded damages from Kurt Schrader in an amount to be established attrial. Plaintiffs 15 reserve the right to amend this Complaint in order to assert a claim for punitive damages. t6 SECOND CLAIM FOR RELIEF t7 (Declaratory Judgment) 18 25. t9 Plaintiffs Mark Schrader and Lisa Schrader re-allege all prior paragraphs as if fully 20 restated herein. 2l 26. 22 There is an actual controversy between the Company's members concerning Ms. Lisa ZJ 11 Schrader's membership and managerial status and the interpretations of the Company's 24 Operating Agreement, including provisions regarding notice of Company meetings, the 25 calling and holdings of meetings, and approval needed (majority of unanimous) to conduct 26 Company business. Page 6 - COMPLAINT Olsen Barton LLC Centerpointe Drive, Suite 220 Lake Oswego, OR 97035 Tel: 5 03-468-5573 Fax: 503-820-2933 5 I 27. Plaintiff brings this action under ORS 28.020. 2 a 28. J Plaintiff 4 5 seeks a declaration concerning the disputed provisions of the Operating Agreement. PETITION FOR JUDICIAL DISSOLUTION 6 29. 7 Plaintiffs Mark Schrader and Lisa Schrader re-allege all prior paragraphs as if fully 8 9 restated herein. 30. 10 Given the Company's financial status and the Property's condition, the Company can 11 I2 no longer fulfill the purpose for which it was formed. 31. 13 I4 15 The Operating Agreement requires a unanimous vote to dissolve the Company; however, the members cannot unanimously agree to dissolve, resulting in a deadlock. 32. 16 t7 In addition, Kurt Schrader has intentionally misinterpreted the Operating Agreement i8 to prevent any vote at all, to ensure a permanent deadlock. 19 33. 20 Neither the Operating Agreement nor the Oregon Limited Liability Act provide a 2I method to resolve the deadlock. 34. 22 Section 9.2 of the Operating Agreement expressly allows for judicial dissolution upon 23 24 the entry of a decree ofjudicial dissolution. 25 26 Page 7 - COMPLAINT Olsen Barton LLC 5 Centerpointe Drive, Suite 220 Lake Oswego, OR 97035 Tel: 503-468-5573 Fa.x: 503-820-2933 35. 1 In addition, under ORS $ 63.661, a court may elect to dissolve anLLC when it hnds 2 J a "that it is not reasonably practicable to carry on the business of the limited liability company 4 in conformance with the articles of the organization or any operating agreement." 36. 5 Even if the deadlock could be resolved, the Property cannot generate sufficient 6 will eventually 7 revenue and 8 continue to operate. exhaust the Company's reserve account and its ability to 9 37. The Company's irreconcilable deadlock, Kuft Schrader's efforts to obstruct any 10 11 voting from taking place, and the Company's financial condition, justif' judicial dissolution I2 because the Company cannot unanimously agree on a way forward, let alone vote, and can 13 therefore no longer 14 Articles of Organization. fulfill its purpose in conformance with its Operating Agreement or 15 16 t7 18 t9 20 2I 22 23 24 25 26 Page 8 - COMPLAINT Olsen Barton Ll,C 5 Centerpointe Drive, Suite 220 Lake Oswego, OR 97035 Tel: 503-468-5573 Fax: 503-820-2933 PRAYER FOR RELIEF 1 V/HEREFORE, Dr. Mark Schrader and Lisa Schrader ask for judgment against Kurt 2 J I Schrader for his breach of fiduciary duties, declaratory judgment, and petition the Court to 4 dissolve the Company, to direct the winding up and liquidation of the Company's business as 5 required by ORS 63.637 , the notification of claimants and enforcement of claim as required 6 by ORS 63.64I, and ORS 63.444, and the distribution of limited liability company assets as 7 required by ORS 63.625, and to grant any other legal or equitable relief as may be necessary. 8 DATED, June 5, 2020. 9 OLSEN BARTON LLC 10 11 t2 00s02 senbarton.com Drive, Suite 220 5 Lake Oswego, OR 97035 Tel: (503) 468-ss73 Fax: (503) 820-2933 Attorneys.for Plaintffi Dr. Mark Schrader And Sophia Lisa Schrader P 13 14 15 16 B I7 18 19 20 21 22 23 24 25 26 Page 9 - COMPLAINT Olsen Barton LLC Drive, Suite 220 5 Centerpointe Lake Oswego, OR 97035 Fax: 503-820-2933 Tel: 503-468-5573