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Michael Phelan
Michael Phelan
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Court Rules $2 Million Management Fee Reasonable

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My partner, Aubrey Ford, prevailed last week in a significant commercial litigation trial. Aubrey represented the plaintiffs in the case of G.C.R., Inc., et al. v. James Clayton, pending in the Circuit Court of the County of Chesterfield, Virginia. After a two- day trial, the Court ruled in favor of the plaintiffs in this dispute between the two major shareholders in a real estate development company in Williamsburg, Virginia engaged in a number of real estate projects. Aubrey successfully argued to the Court that payment by the Board of Directors of the company to two of the shareholders/Board members amounting to approximately $2 million in management fees in 2005 and 2006 was “fair to the company” under the relevant Virginia statutes. The other major shareholder argued that payment of this level of management fees was excessive and unfairly depleted his interest in the resulting profits of the company.

Aubrey presented expert testimony regarding the prevailing practices in eastern Virginia for the payment of management fees in such enterprises. This evidence along with the credibility of the witnesses, ultimately carried the day for the plaintiffs. This ruling by the Court should have a significant impact upon Virginia law in the area of conflict of interest transactions among corporate officers and board members. Aubrey achieved an outstanding result for his clients for a reasonable fee. This ruling will allow Aubrey’s clients to continue to receive such management fees in the future.