H B & C Associates v. McKenna, Long & Aldridge CA1/1

I. BACKGROUND

Airport Boulevard Realty LLC (ABR) was formed in 1995. In 2004, ABR owned a parcel of property in Napa, California, consisting of land ABR had already developed and an adjacent undeveloped parcel. ABR decided to begin the process of developing a new hotel on a portion of the undeveloped parcel, and sought investors to contribute cash and hotel development experience. One of the prospective cash investors was John Challas. Following negotiations with Challas and other investors, the participants in the hotel project agreed to an amended operating agreement for ABR under which the original members of ABR would continue to be members but four new investors, including Challas, would become new members of ABR. At some point before the amended operating agreement became effective in June 2005, Challas indicated he would be executing the agreement on behalf of HBC, a limited liability company owned by members of his family. Philip Jelsma, a Luce Forward partner was retained to draft the amended operating agreement.3 It is disputed in this litigation whether Luce Forward represented ABR in this transaction and in later giving legal advice pertaining to it, or instead…