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Home New Cases Force 10 Agency Services LLC Demands Over $100M from Insiders for Alleged Mismanagement, Gross Negligence and Breach of Fiduciary Duty in the Westwind Manor Resort Association Bankruptcy

Force 10 Agency Services LLC Demands Over $100M from Insiders for Alleged Mismanagement, Gross Negligence and Breach of Fiduciary Duty in the Westwind Manor Resort Association Bankruptcy

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March 3, 2021, Southern District of Texas – Plaintiff Force 10 Agency Services LLC, in its capacity as the Creditor Trustee of the Warrior Creditor Trust in the jointly administered cases of Westwind Manor Resort Association, Inc., et al., (the “Debtor LLCs”) commenced a lawsuit against insider defendants for breach of fiduciary duty.

One of the defendants, Flaherty, was the manager of the Debtor LLCs. Flaherty supposedly controlled the Debtor LLCs directly or indirectly and made all management decisions. The complaint alleges that Flaherty violated his duty of care and loyalty by operating the Debtor LLCs in a grossly negligent or reckless manner and engaging in willful misconduct through complete mismanagement and knowing violations of the law. These actions allegedly were the direct and consequential cause of significant harm that led to the financial collapse of the Debtor LLCs and injury to the LLCs and the LLC investors. 

The complaint further claims that after engaging in extensive and repeated breaches of fiduciary duty, Flaherty continued to engage in wrongdoing against the Debtors. Flaherty supposedly diverted all funds to himself or non-debtor Flaherty entities. The funds involved were in the neighborhood $33 million-plus value of all other interests in property and funds transferred to the non-debtor Flaherty entities. 

In its complaint, the Creditor Trustee urges the court to rule against the defendants for actual damages, including direct and consequential damages for $33.4 million; exemplary or punitive damages; damages in the amount equal to all of the capital raised by each Debtor LLC, totaling approximately $105 million; damages in the amount equal to each LLC investors investment in the LLCs, totaling about $105 million; actual damages and declaratory relief as to ownership of the gold coins. The Trustee also seeks return of all property converted by defendants directly and through the usurpation of corporate opportunities, including the mineral interests in one of the projects and ownership of certain defendant entities.

The case is In re Westwind Manor Resort Association, Inc., case number: 19-50026 in the United States Bankruptcy Court for the Southern District of Texas. Bankruptcy Judge David R Jones is administering the case. Force 10 Agency Services, LLC is represented by Clifford Hugh Walston from Walston Bowlin, LLP

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Jones & Associates

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