Legal Update - The Kennedy Case - What Started it All

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Legal Update - The Kennedy Case - What Started it All - Where it is Now?
Monday, November 9, 2020

With what is shaping up to possibly be a major hearing on Tuesday, November 17^th at 9:30 am, we feel like this is a perfect time for any Zoom observers to do their homework: Review the case history and assess its merit. This case originated in the immediate wake of the new Board’s election in February 2020, after which they swiftly but very quietly committed Club money to initiate litigation against a previous Club officer. While terms of the Club’s legal retainer are not known, the resulting amount of activity in this case unquestionably represents a substantial diversion of membership dues money for non-operational purposes. Disclosure of what should be ongoing analysis of cost versus potential benefit is long overdue. What follows is a summary of this case. All members should be fully informed to allow for critical thought and fair consideration. Knowledge of the origin, facts, and analysis of this case is extremely important.

Conception: It is entirely possible the idea for this lawsuit began germinating during the unusually hostile campaign leading up to the Board election on February 12, 2020. The circumstances strongly suggest the presence of an irrational and emotional personal vendetta from the onset. It is not known precisely when the Club retained attorney Edward Holodak, but he was clearly at work by early March 2020. Observant members might have noticed that the March 11, 2020 membership meeting minutes contained a summary of President Ara Yanikian’s address. That summary says Mr. Yanikian disclosed “retaining legal counsel on the transition, liens and debt service.” However, several members who attended that meeting deny the President ever mentioned hiring an attorney for any reason. Club Secretary Greg Gilhooly emailed the meeting minutes with that summary to the membership on March 19, 2020, four days after Mr. Yanikian had emailed all members informing them of his sudden and unexpected resignation.

Birth: March 19, 2020 is, however, a significant date for other reasons. It seems hardly coincidental that, on the same day the Club distributed minutes with seemingly innocuous alleged comments inserted about “retaining legal counsel on the transition, liens and debt service,” the Club simultaneously took the next step toward litigation without any notice to the membership. That was the day that Mr. Holodak sent a “Demand” letter to former Club Treasurer, Carl Kennedy, stating he had been retained by the new Board of Directors as the Club’s counsel. This demand letter is “Exhibit 1” in the Club’s lawsuit in Broward County Court, filed just three weeks later on April 7, 2020.

The Club’s March 19, 2020 Demand Letter from the Club’s new attorney stated that “the new Board of Directors demands that within five (5) days of receipt of this letter, you immediately transfer all documentation belonging to the Corporation to me.” The specific documents demanded are described in this letter, but the Club also made an unusual blanket claim: As a former officer, Mr. Kennedy no longer had “any legal right to retain” any of the documents being demanded. The Club’s attorney made this broad assertion even though many of the documents being demanded had been freely distributed by the Club to all members for years, others were available on the Club’s web site, and others are available from government agencies. Essentially, the Club has spent, and continues to spend, untold sums of membership money to sue another member to recover many documents that are publicly available or were previously distributed to members by the Club itself. Below is a summary of the demands and our brief analysis based on available public record.

The Club demanded the following:

“All check books, financial statements, accounting records, financial records, and bank statements”: In public filings, Mr. Kennedy claims to have provided these materials, but Club satisfaction of Mr. Kennedy’s production appears to remain in dispute.
“Insurance policies”: Based on officer roles described in Article III, Section 3 of the Club’s By-Laws (Duties of Officers), it seems unlikely the Treasurer would ever be sole custodian of insurance policies. The more logical repository for all Club records would be the Secretary, who “shall be the custodian of all records.” While it is reasonable that the Treasurer would issue payments for insurance, the underlying policies would be important records of the Corporation that should be maintained by at least the Secretary, the “custodian of all records” of the Club. As a result, this demand upon the former Treasurer appears improper.
“Membership lists”: While it is true that, when Mr. Kennedy was Club Treasurer, he regularly distributed the current membership lists to all members (an institutional transparency practice we note has been discontinued by the new Board), this was never a requirement of his office described in the By-Laws. Rather, it appears that, somewhere during his six years as Club Treasurer, Mr. Kennedy began doing this as a friendly service to the membership. Again, the Secretary is the “custodian of all records.” The prior Secretary should have transferred all Club records (including membership lists) to the new Secretary in February 2020, but if he did not, Mr. Kennedy cannot be blamed for that failure, or be subjected to Club litigation to make up for the failure of the prior Secretary. The Club seems to be seeking to punish and harass Mr. Kennedy for his years of voluntarily providing a convenience to the Club and membership, not as a function of his elected office.
“Stock certificates”: This demand is strange because Article V of the Club’s By-Laws states clearly that, “no Stock Certificates will be issued.” Whoever drafted this demand had apparently never read the By-Laws or considered the implication contained in a related provision, Article VI, Section 4, which states a member shall only be “deemed” to own one share of Stock. Thus, there are no Stock certificates for the Treasurer to possess, so this is an improper Club demand.
“Correspondences to and from the Corporation to any third party”: In public filings, Mr. Kennedy appears to claim he has provided the correspondence requested, but Club satisfaction of this demand may remain in dispute. However, the office of the Treasurer is not the proper repository for copies of all correspondence to any third party. As mentioned previously, it is the Secretary who “shall be the custodian of all records.” The prior Secretary should have transferred such correspondence to the new Secretary in February 2020, but if he did not, Mr. Kennedy cannot be blamed for that failure or be subject to demands to make up for the failure of the prior Secretary. Even so, the Club appears to remain dissatisfied, and this item may remain in dispute.
“Minutes of all Board of Director meetings”: The Secretary is the Officer responsible for preparing, distributing, and maintaining meeting minutes of the Board of Directors. It should be noted that not once in the last nine months – since February 2020 – has the Club’s Secretary distributed any meeting minutes of the Board of Directors. Thus, the Club is asking a former Treasurer to produce Board meeting minutes from the Secretary, while the current Secretary has consistently failed to produce and distribute the same. To the extent the Club is asking for Board meeting minutes prior to February 2020, the former Treasurer cannot be blamed for the failure of the previous Secretary to provide such records to the successor Secretary. Therefore, on several levels, this demand upon the former Treasurer is entirely improper.
“Minutes of all Shareholder meetings”: Just like the minutes to Board Meetings, the Secretary is the Officer responsible for preparing, distributing, and maintaining minutes of membership (shareholder) meetings. To the extent the Club is asking for membership (shareholder) meeting minutes prior to February 2020, the former Treasurer cannot be blamed for the failure of the previous Secretary to keep and provide such records to the successor Secretary. Therefore, this demand upon the former Treasurer is also entirely improper.
“Any and all shareholder agreements”: This is another odd demand because the By-Laws do not contemplate any “shareholder agreements.” The By-Laws do describe a membership approval process where all applicants must be approved by vote of the Board of Directors (Art. VI, Sec. 2), including execution of a “membership agreement” (“the ‘Contract’”), a document that “shall be held by the Board of Directors in the office of the Corporation.” (Art. VI, Sec. 5). But these provisions are so old, it is a genuine mystery when they were last followed. In any case, any “shareholder agreements” or “membership agreements” would be held by “the custodian of all records,” the Secretary. Therefore, this demand upon the former Treasurer is entirely improper.
“The Corporation by-laws”: This demand is incredibly short-sighted and ignorant. The Club’s By-Laws are publicly available on the Club’s web site, and have been for many years, and for good reason. The By-Laws are the backbone for the regulation and management of the affairs of the Club, including elections, duties of officers, shareholder voting, and membership standards. The By-Laws are so important that all recent membership application forms make clear the importance of member adherence to the provisions of the By-Laws. So it’s common sense that any member can, and should have been able to, retain copies of the By-Laws. Finally, though, if the Club somehow could not find copies of the By-Laws, they should first consult with the “custodian of all records,” the Secretary. This demand upon the former Treasurer is improper on many levels.
“The Articles of Incorporation”: The Club’s Articles of Incorporation are a matter of public record. It is unfortunate that the Club does not publish this document on its own web site, but they are available on our web site, and to the general public by the State of Florida. In any event, the Club Secretary “shall be the custodian of all records.” The Club’s Articles of Incorporation are Club “records.” Therefore, once again, this demand upon the former Treasurer is doubly improper.
“All books and records of the Corporation”: While it is reasonable for the Club to ask the former Treasurer for his financial record books, Mr. Kennedy claims to have satisfied this request. Even so, the Club appears to remain dissatisfied with the books they have received from Mr. Kennedy, and this item may remain in dispute. Again, though, the office of the Secretary “shall be the custodian of all records.” The prior Secretary should have transferred such books and records to the new Secretary in February 2020, but if he did not, Mr. Kennedy cannot be blamed for that failure or be subject to demands to make up for the failure of the prior Secretary.

We have provided facts and analysis about how and when this dispute came into being, as well as point-by-point discussion of the documents demanded. In summary, while the Club has a reasonable expectation that former officers shall facilitate the transfer of the Club’s books and records kept in the normal course of that officer’s duties, many of the demands heaped onto the former Treasurer are onerous, misdirected, improper, and even contrary to reasonable control of the corporation by an informed group of shareholders. Half of the things these new Club officers demanded of Mr. Kennedy, the former Treasurer, are documents that all members have, or should always have, unrestricted access to. Seeking them by way of costly litigation defies even the most basic principles of logic.

This lawsuit has levied unknown costs onto all members. The Board has not properly disclosed the lawsuit to the membership, the source of litigation funds (during the same period when this Board has repeatedly claimed Club financial distress), nor have they explained what constructive outcome is remotely possible with this litigation.

Absent immediate and full disclosure and substantiation of all allegations, it would be entirely appropriate for the membership stand up and pass a motion to demand the Club cuts its losses – to immediately “defund” this destructive misadventure – if the Club is to have any chance to constructively move forward as a going concern with mended fences.

We will update the litigation pages as these cases proceed. Please feel free to continue sending feedback to news-feedback@pompanobeachflyingclub.info or just reply to this newsletter.

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