Fiscal Funding v. Dones CA1/3

I.

BACKGROUND1

In 1998, Grigsby loaned $719,000 to Strategic Urban Development Alliance (SUDA), a real estate transaction management firm founded by Alan Dones and John Guillory. In exchange, Fiscal Funding, an entity created and controlled by Grigsby, received a 20 percent interest in SUDA. In 2003, Dones, Guillory, and Grigsby, on behalf of Fiscal Funding, executed the SUDA Operating Agreement and appointed themselves as members and managers of the organization. The Operating Agreement includes a provision allowing the prevailing party in litigation among SUDA’s members to recover attorney’s fees. In March 2008, Fiscal Funding filed an arbitration action against Dones, Guillory, and SUDA. Among other things, Fiscal Funding alleged that it had been wrongfully frozen out of the management of the company, and that Dones and Guillory misappropriated SUDA funds for personal use. Grigsby eventually assumed legal representation of Fiscal Funding, and Dones and Guillory moved to disqualify him on the ground that he had acted as SUDA’s counsel of record on many of the issues being litigated in the arbitration. The arbitrator granted the motion. Fiscal Funding subsequently filed a…