Your Business Deserves To Thrive

When a Business Partnership Turns Out To Be Not What Was Expected (Part I)

On Behalf of | Sep 14, 2017 | Disagreement, Multiple Owners

The R. Shawn McBride Law Firm, PLLC, frequently writes about a partnership, LLC, and multi-owner entities.  Mostly we have discussed cases or situations where business partners start out on good terms, have a spirit of teamwork and sincerely eager to start a partnership, only to see their relationship weaken over time due to disagreements over management, ownership, or other issues.  But what if there is no intent to be business partners in the first place?

AerReach Aero Space Solutions, LLC v. Stanford is a recent Texas case involving an allegedly fraudulent scheme aimed at exploiting the business contacts and expertise of a former executive of a high-profile aerospace service company. [1] In AerReach Aero Space Solutions, LLC, Hogan was a senior executive at Pratt & Whitney (“Pratt”), a leading aircraft engine designer, manufacturer, and aviation service provider, for 27 years.  While at Pratt, Hogan met Stanford, Vice President and General Counsel of Principal Aviation Group, LLC (“PAG”), through business, and formed a close relationship.

In 2011, Hogan, Stanford, and Glassman, (Stanford’s business acquaintance) became interested in the possibility of a joint enterprise among themselves.  Allegedly, when Hogan retired and founded an aviation consulting company called AerReach Aero Space Solutions, LLC, in 2012, Stanford asked Hogan to be included as an owner/partner, but Hogan declined because of Stanford’s conflict of interest due to his position at PAG.  Then, Stanford and Glassman formed a Delaware limited liability company called Turbine Asset Holdings, LLC (“TAH”), whose business included dealing with aircraft parts.  In addition, Stanford and Glassman formed another entity called Turbine Asset Holdings Group, LLC (“TAHG”), to continue TAH’s business and to receive 100% of TAH income.

In the meantime, Stanford, Glassman, and Hogan continued to search for a way to work together.  The negotiation resulted in a one-page amendment to TAH’s LLC agreement in 2015, which gave Hogan a 1/3 interest and required him to transfer AerReach’s assets into the company over an unspecified period of time.  AerReach, Hogan, and TAH also agreed not to compete with one another.  The complaint stated that Stanford and Glassman did not disclose to him that TAH was merely a shell company that could never earn a profit because it had pledged 100% of all income to TAHG and, thus, his 1/3 ownership interest in TAH was a ploy to exploit his valuable business contacts.

This post was the first of a two-part series on AerReach Aero Space Solutions, LLC v. Stanford, a recent Texas case involving an alleged business partnership.  In our next post, we will discuss what happened next.

This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity. Ralph Kiesewetter.

About the Author

Shawn McBride — R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Firm, PLLC. Shawn works successful, private business owners in their growth and missions to make a company that stands the test of time. You can email R. Shawn McBride or call 407-517-0064.

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