City of Charleston V LDC Lawsuit
City of Charleston V LDC Lawsuit
City of Charleston V LDC Lawsuit
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COUNTY OF CHARLESTON ) NINTH JUDICIAL CIRCUIT
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CITY OF CHARLESTON, SOUTH ) CASE NO. 2019-CP-10-_________
CAROLINA; JOHN TECKLENBURG, )
and JOSEPH P. RILEY, JR, Individually )
and Derivatively On Behalf of the )
CHARLESTON LDC d/b/a LDC and, )
formerly known as, CHARLESTON )
CITYWIDE LOCAL DEVELOPMENT )
CORPORATION, )
)
PLAINTIFFS, )
)
vs. )
)
CHARLESTON LDC d/b/a LDC and, ) VERIFIED COMPLAINT
formerly known as, CHARLESTON ) (JURY TRIAL REQUESTED)
CITYWIDE LDC; SHARON BRENNAN; )
RICHARD K. YONCE; CAROL S. )
HUBBARD; CHRIS FISHER; and )
BRYAN MCNEAL, JR., )
)
)
DEFENDANTS. )
)
The Plaintiffs, City of Charleston, South Carolina (hereinafter referred to as “the City”),
and Plaintiffs John Tecklenburg and Joseph P. Riley, Jr., individually and derivatively on behalf
of the Charleston LDC d/b/a LDC and formally known as Charleston Citywide Local Development
Corporation, and as representatives of the membership of the corporation, by and through their
undersigned attorneys, submit this Verified Complaint pursuant to Rule 23(b)(1) of the South
Carolina Rules of Civil Procedure and S.C. Code § 33-31-630 and allege upon personal knowledge
as to their own acts, and upon information and belief as to all other matters:
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1. This action arises out of the City of Charleston’s $14.5 million award of Urban
Development Action Grant (UDAG) grant funds from the United States Department of Housing
and Urban Development in 1983, and its agreement to “make available” $10 million of those funds
to the predecessor of the Defendant Charleston LDC d/b/a LDC (hereinafter referred to as
“Defendant LDC” or “LDC”) for the limited purpose of funding the development of an area of
Downtown Charleston known as the Belmond Charleston Place under Title I (“Community
Development”) of the Housing and Community Development Act of 1974. The action seeks to
remedy the Defendant LDC’s unjust and improper retention of $22.8 million in UDAG funds the
Charleston Place developer repaid to the LDC in June of 2016 for its own corporate purposes.
2. The Defendant LDC has refused to comply with the parties’ agreement to use the
repaid funds for additional redevelopment projects within the City of Charleston, such as
development of workforce and affordable housing. Rather, the Defendant LDC has sought to keep
the funds for its own corporate goals. The City seeks a return of the funds so they may be used
for their intended purpose or alternatively seeks an order of this Court requiring Defendant LDC
to use the funds within the City of Charleston at the direction and approval of City Council for the
3. John Tecklenburg also seeks to hold Defendant LDC accountable for violations of
the South Carolina Freedom of Information Act, and its refusal to operate with the transparency
4. This is a member derivative action brought by Plaintiffs John Tecklenburg and Joe
Riley in the name and for the benefit of nominal Defendant Charleston LDC d/b/a LDC formally
known as Charleston Citywide Local Development Corporation against the Executive Committee
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of the Board of Directors and a former executive, namely Sharon Brennan, Richard K. Yonce,
Carol S. Hubbard, Chris Fisher, and Bryan McNeal, Jr. (hereinafter “Executive Committee and
Executive Director Defendants”). This action arises from the Executive Committee and Executive
Director Defendants’ breach of their fiduciary, common law, and statutory duties to the members
PLAINTIFFS
6. John Tecklenburg is a citizen of Charleston County, South Carolina and has served
as Mayor of the City of Charleston since January 11, 2016. Mr. Tecklenburg has served as a
7. Joseph P. Riley, Jr. is a citizen of Charleston County, South Carolina and served as
the Mayor of the City of Charleston from 1975 until January of 2016. Mr. Riley was a founding
member of the LDC’s predecessor and has been a continuous member of the LDC and its
DEFENDANTS
the State of South Carolina, with its principal place of business located at 2 Race Street, Charleston,
South Carolina.
organization” pursuant to the South Carolina Nonprofit Act and under the name the Downtown
Charleston Local Development Corporation. In 1982 the entity changed its name to Charleston
Central Local Development Corporation (“Charleston Central LDC”). In 1990, Charleston Central
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LDC dissolved and the entity Charleston Citywide Local Development Corporation assumed all
assets and liabilities of Charleston Central LDC. (The entities Downtown Charleston Local
Citywide Local Development Corporation are herein jointly the “predecessor entities”).
Defendant LDC purports to have changed its name again in April of 2018 to “Charleston LDC
d/b/a LDC”.
10. To the extent it is determined in this action that LDC did not comply with its bylaws
and the laws of the State of South Carolina when it attempted to change its name, and for purposes
of the causes of action and/or claims brought against LDC, the Plaintiffs’ relevant claims are also
LDC”). Where “Defendant LDC” is used within the causes of action stated below in this
Complaint, that term also refers to and/or otherwise incorporates the Charleston LDC’s
predecessor entities, including but not limited to, Charleston Citywide LDC.
11. Defendant Sharon Brennan was, during all relevant times, an executive officer of
Charleston LDC.
12. Richard K. Yonce holds the position of President of the LDC’s Board of Directors,
13. Carol S. Hubbard holds the position of Vice President of the LDC’s Board of
14. Chris Fisher also holds the position of Vice President of the LDC’s Board of
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15. Bryan McNeal, Jr. holds the position of Treasurer of the LDC’s Board of Directors,
16. The Court has jurisdiction of this action because both Plaintiffs and Defendants are
located within Charleston County, South Carolina and this litigation arises out of actions that took
17. Venue is proper in this Court since all matters giving rise to this litigation occurred
18. In 1979, Joseph P. Riley, Jr., in his role as Mayor of the City of Charleston,
(“Downtown Charleston LDC”) for the benefit of the residents and citizens of the City of
Charleston.
19. The Downtown Charleston LDC’s founding documents state its purpose is to
“further the economic development in the City of Charleston, to promote and assist the growth and
development of business concerns, including small business concerns in the City of Charleston, to
promote and assist the development of residential housing in the City of Charleston.”
20. The Downtown Charleston LDC published its principal objective as seeking to
business and industry for the citizens of the City of Charleston, thereby lessening the burdens of
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21. In 1982, the Downtown Charleston LDC changed its name to the Charleston
Central Local Development Corporation (“Charleston Central LDC”). The Charleston Central
LDC maintained the same stated purpose and principal objective as the Downtown Charleston
LDC. The Charleston Central LDC served no region outside the City of Charleston, and conducted
22. Based on the stated principal objective of the corporation’s predecessor entities,
LDC has received significant financial support for its operations from the City of Charleston. The
City also provided in-kind support to the LDC entities, including but not limited to, allowing the
LDC entities to use at no cost City office space (valued at over $70,000.00 per year), City
23. In 1977 the United States Department of Housing and Urban Development (HUD)
began administering the Urban Development Action Grant (UDAG) program. The Federal
Register states the purpose of the program is to “assist cities and urban counties which are
experiencing severe economic distress to help stimulate economic development activity needed to
aid in economic recovery.” In awarding UDAG funds to cities, HUD intended to create new jobs
and help retain existing ones, especially for low and moderate income persons, improve the tax
base for the city receiving the award, and “begin a process of economic development that will
improve the economic and fiscal position of the cities receiving the grants.”
24. A key component of the UDAG program was targeting specific municipalities.
Eligible cities are required to compete for action grant awards. HUD encouraged cities to use their
Action Grants as loans to developers to accomplish large scale projects with significant economic
impact for the selected community receiving the award. The UDAG program intended the recipient
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cities to benefit not only from the initial development project but also from developer repayments
arising from the project. The UDAG program intended the repayment to provide the recipient City
25. The intent of the UDAG program was for the awarded funds to continue to benefit
the targeted municipality in perpetuity. The program was designed so that loan repayments for the
initial development will subsequently be provided back to recipient cities for further economic
development activities going forward. “Loan repayments provide the city with funds for future
26. The Mayor of the City of Charleston, Mayor Joseph P. Riley, Jr., worked to obtain
funding through the UDAG program for the benefit of the City of Charleston. The expectation of
significant repayment funds was an important motivating factor for the City to seek the UDAG
award in the first place. Mayor Riley’s efforts were based upon the understanding that any UDAG
funds obtained would benefit the City of Charleston through the stated purposes of the program.
27. In November of 1983, the United States Department of Housing and Urban
Development awarded the City of Charleston an Urban Development Action Grant (“UDAG”) in
the amount of $14,500,000.00 for the development of an area located in downtown Charleston that
28. As part of the City’s successful agreement with the Department of Housing and
Urban Development, (“UDAG Agreement”) the City agreed to “make available” $10,000,000.00
of the UDAG funds for the limited purpose of allowing Charleston Central LDC to lend the UDAG
funds to the developer of the Charleston Place. The Project was also referred to as the “Charleston
Center Project”.
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29. As part of the UDAG Agreement, the Charleston Central LDC represented to the
City of Charleston that it was “desirous of revitalizing depressed areas in the downtown area of
the City of Charleston.” At the time of the Agreement, the Charleston Central LDC’s mission and
stated purpose was solely focused on the economic development of the City of Charleston and no
other areas. The City of Charleston relied upon such representations in making the funds at issue
30. The City chose Charleston Central LDC as the conduit for the UDAG funds because
it operated as an arm of the City. Charleston Central LDC was created by the City’s mayor,
operated out of City offices, and used City employees as its staff.
31. Given the Charleston Central LDC’s representations that it entered into the UDAG
Agreement to serve the City of Charleston, and its stated purpose and mission to serve the City of
Charleston, the City had no reason to suspect that the LDC would possibly one day attempt to keep
the repaid funds for its own benefit and/or use the funds to serve an area beyond the City of
Charleston.
32. The City relied on the Charleston Central LDC’s representations that it solely
served the economic development of the City of Charleston when it decided to make the UDAG
funds available for it to loan to the Charleston Place developer. If the City had known the entity
would attempt to keep the repaid funds for its own benefit and/or use the funds to serve an area
beyond the City of Charleston, the City would not have made the UDAG funds available to the
33. In a 1983 City Council Meeting, Mayor Joe Riley, Jr. presented to Charleston City
Council the expected benefit the City hoped to receive from the developer’s loan repayments after
the project was completed. The minutes from the City Council meeting state: “The Mayor
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estimated to City Council that in some years several hundred thousand dollars would be generated
from this project which could be used for community development activities. These would include
arts programs, housing rehabilitation, infrastructure improvements, the King Street Façade
Improvement Program, public transportation services, park construction and maintenance, parking
programs, revitalization projects, small business assistance, and other eligible community
development activities. The important fact was that the money would be repaid to the City for the
City’s benefit.”
34. The UDAG Agreement purposefully used the phrase “make available” rather than
terms such as “provide” or “give” to describe the City’s obligations towards the UDAG funds.
The City had no intent to permanently give up its right to govern the use of those funds to
Charleston Central LDC or anyone else. The intention of the parties at the time of the UDAG
Agreement was that once the Charleston Central LDC received the loan repayments back from the
developer, the LDC would look to the City of Charleston as the true grant recipient for approval
over how the repaid funds would be used. The intention of the parties at the time of the UDAG
Agreement was that the repaid funds would be used only within the City of Charleston.
35. The parties intended that the City would identify to the LDC the priority for the use
of the repaid UDAG funds, and before the LDC could use the repaid funds, “a public hearing”
would be held and “final approval by City Council would be required”. The parties intended that
the repaid funds would be used at the City’s direction for activities within the City of Charleston
that were eligible under Title I of the Housing and Community Development Act of 1974, as
amended.
36. The City has always been, and remains, the Grant Recipient of the UDAG funds.
The Charleston Central LDC was merely a “conduit” for those funds to receive the repayments
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and thereafter flow back to the City of Charleston. Once the developer repaid the loan in full, the
purpose for the City making those funds available under the UDAG Agreement had been fulfilled,
and the repaid money was to be used at the direction of the City of Charleston through the conduit
37. Charleston Central LDC knew at the time of the agreement that once the developer
repaid the loan, the entity was to look to the City of Charleston as the grant recipient for approval
to use the repaid funds. This obligation was passed on to Charleston Central LDC’s successors in
38. The City of Charleston never relinquished its rights to the UDAG funds. The City
of Charleston simply made those funds available to the LDC for the limited purpose of loaning the
39. Absent the right to direct and approve the LDC’s use of the repaid UDAG funds,
the City would never have made the UDAG funds available to the LDC.
40. In the UDAG Agreement, the LDC acknowledged that “no transfer of grant funds
by the City to [the LDC] shall be or be deemed to be an assignment of grant funds,” and that the
LDC did not “succeed to any rights, benefits or advantages of the City under the UDAG Grant, or
attain any rights, privileges, authorities or interests in or under the UDAG Grant.”
41. The City never relinquished its right to direct and approve the use of the repaid
UDAG funds. The City intentionally avoided a transfer of all rights to the UDAG funds, and by
merely “mak[ing] available” the UDAG funds to Charleston Central LDC for a limited purpose,
the City retained the rights to demand return of the repaid UDAG funds if the LDC failed to comply
with the City’s direction and approval over how those funds should be spent.
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42. In 1984, after receiving the UDAG Grant, the City made available $10,000,000.00
to Charleston Central LDC, and Charleston Central LDC thereafter loaned the UDAG funds to the
43. The Charleston Place was successfully built and opened in 1986.
44. In October of 1990, the Charleston Central LDC dissolved and became the
Charleston Citywide LDC assumed all the assets and liabilities of the Charleston Central LDC and
45. As of October of 1990, the developer of the Charleston Place Hotel (“Developer”)
had made no loan repayments. At that time, the Charleston Citywide LDC asked the City to
negotiate repayment with the Developer since the City would ultimately receive the benefit of the
46. City officials and employees continued to work to negotiate with the Developer for
repayment of the loan. Under the terms of the loan, the Developer was allowed to withhold
repayment until certain conditions were satisfied, including the development of becoming cash
positive. Otherwise, the loan repayment was not due until 2028.
47. Outside of the Charleston Place loan, the LDC’s assets as of 2016 were
approximately $8.8 million, including approximately $2.9 million in cash and just under $1.8
million in loans.
48. In June of 2016, the longstanding efforts of Mayor Riley and other City officials to
negotiate repayment resulted in the Developer’s agreement to repay the loan for the Charleston
Place development project. Under the deal negotiated by the City, the Developer agreed to pay
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back the loan principal of $10,000,000.00 in original UDAG funds plus interest calculated at an
49. On June 17, 2016, the Developer paid the Charleston Citywide LDC
$22,818,607.00 to satisfy the loan of the UDAG funds for the Charleston Place development
project.
The Executive Director and Executive Committee’s Plan to Retain the UDAG Funds
50. On June 19, 2016, the headline published in the Post and Courier, the local
Charleston newspaper, stated “City revitalization gets $22.8 million boost.” The June 19, 2016
article continued stating “The city of Charleston has about $22.8 million in new money for
affordable housing and economic development efforts now that Belmond Charleston Place has
paid back a loan that dates to the construction of the luxury lodging.” The June 19, 2016 article
quotes Mayor Riley’s statement that “the City’s loan was well-secured by the luxury property
and was accruing interest.” The article also quotes Sharon Brennan, the executive director of the
Charleston Citywide LDC, who stated “the $22.8 million will be used only within the city limits.
. . .” The article goes on to quote Ms. Brennan's statement that “The city as a whole will benefit
51. Soon after receiving the UDAG repayment, however, Ms. Brennan and the
Charleston Citywide LDC decided to retain the funds and to avoid having to comply with the
direction and approval of the City over the use of the repaid UDAG funds. The enormity of the
UDAG funds caused the Executive Committee and Executive Director Defendants to recognize
the potential to use the $22.8 million in UDAG funds to transform their entity into a much larger
and more powerful corporation. The Executive Committee and Executive Director Defendants
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52. The $22.8 million in UDAG funds “opened up many new possibilities for the LDC,
including the products and services it could offer and the geography it could cover.” The LDC
saw the repaid funds as the resources they needed to become “a $100 million CDFI (Community
Development Financial Institution)”. Expanding the LDC statewide, and growing into a “$100
Million CDFI” would bring personal bring personal attention and influence to the Executive
Committee and Executive Director Defendants, and bolster their personal reputation and careers.
53. Shortly after receiving the $22.8 million in UDAG funds the LDC worked with
outside consultants to develop a strategy to separate from the City of Charleston and retain the
$22.8 million for its own use and benefit and operate state wide. The LDC planned for a “higher
volume of lending” outside the City of Charleston and towards that end, planned to “move out of
its City of Charleston offices, [and] change its Executive Director from a City employee to an
54. As of December 2018, the LDC has used the UDAG funds to fund numerous
55. The LDC’s goal over the next three years is to lend over $23.5 million of the UDAG
56. Unaware of the LDC’s plans to keep the funds for its own use and benefit, the City
sought to work with the LDC to develop the most efficient way to use the funds to benefit the
residents and citizens of the City of Charleston. In response to discussions about how to facilitate
the return of the repaid UDAG funds, the LDC suggested that the City prepare and submit a formal
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57. The City never relinquished its rights to the UDAG funds as the grant recipient
from HUD. The City satisfied its obligation under the UDAG Agreement to make the funds
available to loan to the Charleston Place developer. Since the purpose of making the funds
available had been fulfilled, the LDC should have complied with the direction and approval of the
City over the use of the repaid UDAG funds rather than require the City to submit an “application”
58. As a matter of efficiency and as an attempt to avoid a dispute with the LDC, the
City complied with the LDC’s request for a formal application. On February 21, 2017, the City
submitted a formal application for the return of an initial $10,000,000.00 of the UDAG funds,
which the City planned to use to create affordable and workforce housing in the City.
59. In March of 2017, the LDC Board of Directors voted to return $10,000,000.00 of
the UDAG funds back to the City for the purpose of affordable and workforce housing. The Board
of Directors also imposed a “1%” administrative fee as a condition to the award ($100,000.00).
The LDC planned to require the City pay this “1%” fee as a condition to return the requested
purposefully stalled finalizing the transfer of the $10,000,000.00 to the City as the Board voted
and promised, while they worked on their plans to separate from the City.
61. The City was concerned that the LDC imposed a 1% fee as a condition to returning
the funds, but in the interest of efficiency and avoiding a dispute with the LDC, the City informed
the LDC that it accepted the $100,000.00 fee (i.e. 1% of $10,000,000.00) in order to efficiently
move forward.
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62. In response, the Executive Committee and Executive Director Defendants changed
the terms of the fee to interpret “1%” as “1% annually over a 10 year term” and as a basis to
demand a $1,000,000.00 fee from the City. The City requested justification for the LDC to charge
the City $1,000,000.00, given the LDC presents itself as a nonprofit entity and had previously
promised only a $100,000 fee. To date, the LDC has provided no justification.
63. In October of 2018, the LDC’s Board of Directors voted to “rescind” the Board’s
64. Each and every allegation contained within this Complaint is incorporated and
65. Since its inception, the LDC and its predecessor entities have operated as a non-
profit membership corporation governed by the South Carolina Nonprofit Corporation Act. The
66. As a membership corporation, the members of the LDC had certain rights such as
the power to vote for the board of directors and approve certain actions.
67. As of April of 2018, the LDC had thirty-six (36) members, many of whom were
current or former employees of the City of Charleston. As of April of 2018, both former Mayor
Joe Riley, Jr. and current Mayor John Tecklenburg were members of the LDC and the membership
of the LDC had always been individuals who work and live in and/or around the City of Charleston.
68. Upon information and belief, Executive Committee and Executive Director
Defendants during were responsible for providing the required notice to the members in advance
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69. The Executive Committee and Executive Director Defendants saw the repaid funds
as the resources they needed to expand the LDC statewide and become “a $100 million CDFI
(Community Development Financial Institution)”. Upon information and belief, expanding the
LDC statewide, and growing into a “$100 Million CDFI” would bring personal attention and
influence to Executive Committee and Executive Director Defendants, and bolster their personal
70. Upon information and belief, the Executive Committee and Executive Director
Defendants feared that many of the members understood the history of the UDAG funds and the
City as the intended beneficiary of those funds and would ultimately elect a Board of Directors
who would be in favor using the returned UDAG funds consistent with the direction and approval
of the City of Charleston, or returning the repaid UDAG funds back to the City of Charleston.
71. If the repaid UDAG funds were used consistent with the direction and approval of
the City of Charleston, or returned to the City, the Executive Committee and Executive Director
Defendants would be unable to expand the LDC statewide, and could not achieve “$100 million
CDFI” status which they sought to bolster their personal reputations, attention and influence rather
than use the funds to benefit the citizens of the City of Charleston as they were intended.
72. Upon information and belief, at some point after receiving the UDAG repayment,
the Executive Committee and Executive Director Defendants developed a plan to eliminate the
members who sought to use the repaid UDAG funds to benefit the citizens of the City of Charleston
as intended.
73. Upon information and belief, as part of the strategy of the Executive Committee
and Executive Director Defendants to separate the LDC from the City of Charleston and eliminate
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their fiduciary, statutory, and common law duties to be accountable to the corporate membership,
the Executive Committee and Executive Director Defendants decided to change the LDC’s
74. Under the Internal Revenue Code, “501(c)(3)” is the tax provision that applies to
75. Most individuals who do not work in the corporate tax field are unaware of the
76. Under the Bylaws of the LDC, the entity was required to hold an annual meeting
of the members each April for election of the Board of Directors and other corporate business.
77. Leading up to the April 4, 2018 annual membership meeting, Executive Committee
and Executive Director Defendants planned to achieve their goal of eliminating the membership
by encouraging the membership to provide proxies to the Board of Directors or the Executive
Director. The Executive Committee and Executive Director Defendants planned to collect proxies
from enough members to hold a vote to eliminate the membership rights of all the corporation’s
members.
78. The Executive Committee and Executive Director Defendants knew that if they
fully informed the membership of their plan to eliminate the membership, a majority of the
members would vote against their plan. The Executive Committee and Executive Director
Defendants circulated misleading proxy forms that omitted important information and asked the
members to return them in advance of the annual meeting. Executive Committee and Executive
Director Defendants also failed to provide timely notice of the planned vote to eliminate
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79. The Executive Committee and Executive Director Defendants knew or should have
known that they omitted facts and information from their communication with the members
leading up to the April 4, 2018 annual membership meeting that a reasonable person would need
80. Upon information and belief, the Executive Committee and Executive Director
Defendants knew and/or feared that if the members had proper notice that a vote to eliminate their
membership rights was set for the April 4, 2018 meeting, a large number of the membership would
81. Neither former Mayor of the City of Charleston, Joseph P. Riley, Jr., nor current
Mayor John Tecklenburg, members of the LDC, received notice of the planned vote to eliminate
82. On April 4, 2018 the LDC held the annual membership meeting with no members
present other than the Board of Directors. No proxies of the members were counted for a vote to
eliminate the membership or change the corporate bylaws, and no vote was held among the
membership to eliminate the membership of the corporation or the change the corporate bylaws.
83. No notice has been sent to the members to notify them of the alleged action taken
at the April 4, 2018 annual member meeting, or to notify them that their membership has been
terminated.
84. On May 23, 2018, Defendant Richard K. Yonce, the President of the Board of
Directors, submitted Articles of Amendment to the South Carolina Secretary of State stating that
twenty-six (27) of thirty-six (36) members voted in favor of the following amendment to the
corporate Articles: “The corporation shall have no members. The corporation is a public benefit
corporation.” The filed Articles of Amendment also stated that zero (0) of thirty-six (36) members
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voted against the amendment. Upon information and belief the misrepresentations contained in
the submission to the Secretary of State were an effort to achieve the goals of the Executive
85. On December 12, 2018, the LDC submitted an application to the IRS seeking
approval as a tax exempt entity under Internal Revenue Code 501(c)(3). A entity receives tax
exempt status under code provision 501(c)(3) if it is a nonprofit corporation with no members.
The LDC’s application submitted to the IRS included corporate Bylaws that had not been adopted
by the membership or the Board of Directors at that time. The Bylaws submitted to the IRS stated
that the LDC had no members. Upon information and belief, the misrepresentations contained in
the submission to the IRS were an effort to achieve the goals of the Executive Committee and
86. The great majority of the LDC’s members had no notice of the purported change in
corporate status or that their rights as members had purportedly been eliminated. One or more of
the members of the Board of Directors have reported to the City that no such vote took place.
87. In response to a FOIA request seeking copies of notices sent to the membership,
the LDC produced a memorandum dated March 8, 2018 purportedly directed to the members that
generally references the April 4, 2018 annual meeting and a potential change of the entity’s tax
status. The memorandum contains no mention of a vote to eliminate membership rights of the
members. Many of the members, including but not limited to Plaintiff Tecklenburg, deny ever
receiving this memorandum. The March 8, 2018 memorandum does not meet the statutory
requirements of the South Carolina Nonprofit Corporation Act. Furthermore, the March 8, 2018
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88. The LDC sent no additional notice to the members within the time required by its
Bylaws or under the South Carolina Nonprofit Act. The LDC failed to give the members
sufficient advance notice, and failed to give the members the opportunity to respond and oppose
89. On March 8, 2018, the Executive Committee and Executive Director Defendants
purportedly mailed proxy forms to the members. The proxy allegedly distributed to the members
fail to provide the members with material information and/or provides them with materially
misleading information thereby rendering the members unable to cast an informed vote, by proxy
90. In Response to a FOIA request seeking copies of notices sent to the membership,
the LDC produced a memorandum dated March 29, 2018 purportedly directed to the members,
which included a copy of the alleged resolution the change the entity to a non-member non-profit
corporation. Many of the members, including but not limited to Plaintiffs Riley and Tecklenburg,
deny ever receiving this notice. The March 29, 2018 memorandum does not meet the statutory
time requirements of the South Carolina Nonprofit Corporation Act, or the time requirements
under the corporation’s Bylaws. Even if the March 29, 2018 memorandum was received by
members, by virtue of the date listed on the memorandum it was necessarily received after any
proxies were signed. Accordingly, no member had notice of the planned action prior to signing
any proxy purportedly used at the April 4, 2018 Annual Member meeting. The March 29, 2018
memorandum does not provide sufficient advance notice of the contents of the alleged Resolution
so that members could review and understand the proposed changes, including the elimination of
the membership.
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91. The Executive Committee and Executive Director Defendants also failed to follow
the procedures in the LDC’s bylaws and the procedures required under the S.C. Nonprofit
Corporation Act to terminate the corporation’s membership, including the termination of the
92. The Executive Committee and Executive Director Defendants also failed to follow
the procedures required under the S.C. Nonprofit Corporation Act to amend the articles of the
corporation.
Demand Allegations
93. The present LDC Board of Directors consists of Richard K. Yonce, President, Carol
Hubbard, Vice President, Chris Fisher, Vice President, Bryan McNeal, Jr., Treasurer, Yvonne D.
Evans, Assistant Secretary, Richard T. Jerue, Director, Grant M. McAnulty, Director, Otha
Meadows, Director, Clay Middleton, Director, Casdell E. Singleton, Director. On March 13, 2019,
Plaintiffs Tecklenburg and Riley served a demand letter on the present Board of Directors. The
March 13, 2019 demand letter sets forth the relevant allegations contained in this Complaint and
submits a demand pursuant to S.C. Code § 33-31-630 and Rule 23(b)(1) of the South Carolina
Rules of Civil Procedure. The March 13, 2019 letter demands that the Board of Directors initiate
litigation against the Executive Director and Executive Committee for breach of their fiduciary
duties to the members, and to invalidate the vote held at the April 4, 2018 Annual Membership
Meeting that resulted in the termination of the membership. As of the date of this filing the Board
94. The demand was also a futile, wasteful, and useless act. The Executive Committee
of the Board of Directors participated in, approved and/or permitted the wrongs alleged herein to
occur, participated in efforts to conceal or disguise the wrongs from LDC members, or recklessly,
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knowingly, and/or negligently disregarded the wrongs complained of herein and therefore are not
disinterested parties.
95. As the Executive Committee of the Board of Directors, the individuals had specific
duties he or she owed to LDC and its members, including, but not limited to Plaintiffs Tecklenburg
and Riley. In breach of these specific duties, Executive Committee of the Board of Directors, as
more fully detailed herein, participated in, approved, and/or permitted the wrongs alleged herein
to occur, participated in efforts to conceal or disguise those wrongs from LDC’s members, or
96. In order to bring this suit, the Executive Committee of the Board of Directors would
be forced to sue themselves, which they will not do, thereby rendering the demand on the directors
futile.
97. Plaintiffs Riley and Tecklenburg, and upon information and belief other members
of LDC, have vigorously disputed and opposed the complained-of actions of the Executive
Committee and Executive Director Defendants with no success in changing these conditions.
98. Plaintiff Tecklenburg incorporates and realleges each and every allegation
99. Defendant LDC is a “public body” as defined at S.C. Code §30-4-20(a). Defendant
LDC has received and, upon information and belief, continues to receive federal, state and local
funds pursuant to grants and other means. Defendant LDC and its predecessors have also received
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“in-kind” support from the City of Charleston through use of City office space, equipment and
personnel. Based on the foregoing, Defendant LDC is a public body subject to FOIA.
100. On October 31, 2018, counsel for Plaintiff Tecklenburg sent Defendant LDC a
FOIA request seeking review and/or production of several documents, including, but not limited
to, documents and/or materials related to the formation of Defendant LDC, its current and past
bylaws, its Board’s meeting minutes and agendas, correspondence and other documents or
materials received from the City of Charleston as it relates to the UDAG grant and funds at issue,
101. On December 21, 2018, counsel for Plaintiff Tecklenburg sent a second FOIA
request to Defendant LDC, which sought inspection and/or production of additional public records,
including, but not limited to, the following: LDC member meeting minutes for certain periods of
time; audio and/or video recordings of LDC Board of Directors meetings and member meetings
for certain time periods; minutes from any LDC committee meetings; documents related to the
Defendant LDC’s adoption of its current bylaws; notices provided to LDC members in advance of
certain meetings; and certain IRS documents and/or forms concerning the LDC.
103. Plaintiff Tecklenburg sought the requested public information, records and
documents in order to fully understand the purported basis for Defendant LDC’s actions related to
104. Defendant LDC failed to provide requested documents and, therefore, has violated
FOIA.
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105. As a result, Plaintiff Tecklenburg has been deprived of the ability to review the
publicly available documents, records and recordings requested, and has been prejudiced and
delayed in his investigation into the events and/or actions of Defendant LDC by same.
106. Additionally, upon information and belief, on several occasions during the time
period of March 2018 through March 2019, and previously, Defendant LDC also failed to provide
adequate written public notice of the entity’s monthly meetings (and to make them open to the
public) and failed to meet the agenda posting requirements for regularly scheduled and/or special
meetings required under Section 30-4-80 of FOIA. As a result, Defendant LDC has therefore
107. A violation of FOIA is an irreparable injury for which no adequate remedy at law
exists, and Defendant LDC's violation establishes the appropriate threshold for injunctive relief
108. Under S.C. Code § 30-4-100 (FOIA) and S.C. Code §§ 15-53-10 et seq. (the
Uniform Declaratory Judgments Act), Plaintiff Tecklenburg has been irreparably harmed as a
matter of law by these actions of Defendant LDC and Plaintiff Tecklenburg is entitled to an order
from this Court declaring the Defendant LDC in violation of FOIA, requiring Defendant LDC to
comply with FOIA, and also for the Plaintiff Tecklenburg to recover his costs and reasonable
attorneys’ fees in seeking the requested documents and recordings, and enforcing Defendant
109. Plaintiff City of Charleston incorporates and realleges each and every allegation
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110. Based on the foregoing allegations, Plaintiff City of Charleston conferred a non-
gratuitous benefit on the Defendant LDC by “making available” to Defendant LDC UDAG funds
awarded to the City of Charleston for the sole purpose of funding a loan to the developer of the
Charleston Place within the City of Charleston. Repayments were to provide the City with funds
111. Defendant LDC has realized the benefit of these funds in the form of the UDAG
112. Defendant LDC has retained these funds to serve its own interests, including to
expand statewide, grow the LDC to a “$100 million CDFI” and to fund projects outside of the City
113. Defendant LDC has retained that benefit under inequitable circumstances, as the
benefit in justice and in equity belongs to Plaintiff City of Charleston. Defendant LDC has taken
undue advantage of its limited role as conduit to the UDAG funds. Defendant LDC’s retention of
the $22.8 million in UDAG funds is unjust because the City retains its rights as the grant recipient
of those funds, and should in equity receive the benefit of the UDAG repayments.
114. Defendant LDC has been unjustly enriched by retaining these UDAG initial grant
funds and UDAG loan repayments and refusing the direction and approval rights of the Plaintiff
City of Charleston and/or refusing to limit their use only for eligible projects within the City of
Charleston, and these actions are at the expense of Plaintiff City of Charleston, as well as its
115. Consequently and as a direct and proximate result of this unjust enrichment,
Plaintiff City of Charleston has suffered damages in the amount of approximately $22.8 million,
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FOR A THIRD CAUSE OF ACTION
(Promissory Estoppel)
(Against Defendant LDC by Plaintiff City of Charleston)
116. Plaintiff City of Charleston incorporates and realleges each and every allegation
117 Defendant LDC made representations to the City of Charleston that it solely served
the economic development of the City of Charleston, and that its purpose for receiving the UDAG
funds made available by the City was to serve the City of Charleston. The City reasonably relied
on Defendant LDC’s representations when it decided to make the UDAG funds available for the
Defendant LDC to loan to the Charleston Place developer. If the City had known Defendant LDC
would attempt to keep the repaid funds for its own benefit and/or use the repaid UDAG funds to
expand its service area statewide and for projects beyond the City of Charleston, the City would
not have made the UDAG funds available to the Defendant LDC.
118. Plaintiff City of Charleston’s reasonable reliance on the truth of Defendant LDC’s
unambiguous assurances was expected and foreseeable by Defendant LDC. Defendant LDC knew
the Plaintiff City of Charleston relied on its representations when it made the UDAG funds
detriment. When Plaintiff City of Charleston selected the Defendant LDC as the conduit for the
Charleston Place transaction, the City expected the repayments from the developer to be used
within the City at the City’s direction. Instead, Defendant LDC refuses to return the funds to the
Plaintiff City of Charleston, refuses to limit the use of the funds use for projects within the City of
Charleston, and refuses the reasonable direction and approval of the Plaintiff City of Charleston
over the use of the repaid UDAG funds. Defendant LDC has used the UDAG funds for its own
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benefit and to grow statewide. As such, Plaintiff City of Charleston will not have the repaid UDAG
120. Refusal to enforce the Defendant LDC’s representations to the City would result in
significant injustice.
121. As a result of Plaintiff City of Charleston’s reasonable reliance on the promises and
assurances made by Defendant LDC, and as a direct and proximate result of Defendant LDC’s
refusal to return the funds to the City, and refusal to limit the use of the funds to Title I projects
within the City of Charleston, the City has suffered significant damages of approximately $22.8
122. Plaintiff City of Charleston incorporates and realleges each and every allegation
123. Defendant LDC has in hand $22.8 million repaid by the developer of the Charleston
124. Defendant LDC has taken undue advantage of its limited role as conduit of the
UDAG funds for the transaction with Plaintiff City of Charleston and the developer of Charleston
Place by attempting to retain the $22.8 million and use it for its own purposes.
125. The $22.8 million belongs, in equity and good conscience, to Plaintiff City of
Charleston as the grant recipient of the UDAG funds and should not, in equity and good
126. The $22.8 million the LDC has in hand should be returned to Plaintiff City of
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FOR A FIFTH CAUSE OF ACTION
(Conversion)
(Against Defendant LDC by Plaintiff City of Charleston)
127. Plaintiff City of Charleston incorporates and realleges each and every allegation
128. The City retained its rights and interest in the repaid UDAG funds as the grant
recipient of the UDAG funds. The $22.8 million repaid by the developer to Defendant LDC is
capable of being identified. The City did not give Defendant LDC permission to retain the repaid
129. As a direct and proximate result of Defendant LDC’s refusal to comply with the
Plaintiff City of Charleston’s direction and approval over how the repaid UDAG funds should be
used, and as a direct and proximate result of Defendant LDC’s refusal to subsequently return the
UDAG initial grant funds and UDAG loan repayment funds to the Plaintiff City of Charleston,
Defendant LDC is wrongfully withholding Plaintiff City of Charleston’s funds from its possession
with the intent to permanently deprive Plaintiff City of Charleston of the use and benefit of the
funds. In wrongfully withholding Plaintiff City of Charleston’s property, Defendant LDC has
converted these funds for its own use without Plaintiff City of Charleston’s permission.
130. As a direct and proximate result of Defendant LDC’s aforesaid actions and bad
faith refusal to return wrongfully retained funds to Plaintiff City of Charleston or otherwise make
available the UDAG loan repayments for Title I projects within the City of Charleston, Plaintiff
City of Charleston has incurred and is entitled to damages and costs in the amount of approximately
$22.8 million dollars, plus pre-judgment interest, punitive damages, and other amounts as to be
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131. At all relevant times alleged herein, Defendant LDC acted willfully, wantonly, and
with conscious disregard for the rights and obligations of Plaintiff City of Charleston, such that
Plaintiff City of Charleston requests the trier of fact award Plaintiff City of Charleston additional
132. Plaintiff City of Charleston incorporates and realleges each and every allegation
133. By merely “making available” the UDAG funds to the LDC for a limited purpose,
the City retained the right to demand return of the repaid UDAG funds if the LDC failed to comply
with the City’s direction and approval over how the repaid UDAG funds should be spent.
134. As a direct and proximate result of Defendant LDC’s refusal to comply with the
Plaintiff City of Charleston’s direction and approval over how the repaid UDAG funds should be
used, and as a direct and proximate result of Defendant LDC’s refusal to subsequently return the
UDAG initial grant funds and UDAG loan repayment funds to the Plaintiff City of Charleston,
Defendant LDC is wrongfully withholding Plaintiff City of Charleston’s funds from its possession
with the intent to permanently deprive Plaintiff City of Charleston of the use and benefit of the
funds.
135. Defendant LDC retains the UDAG initial grant funds and UDAG loan repayments
136. Based on the foregoing, the City’s UDAG program funds, including the UDAG
loan repayments, have been and still are in the possession and control of Defendant LDC.
Defendant LDC has and intends to take these UDAG program funds for its own use and benefit,
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and for the use and benefit of others besides Plaintiff City of Charleston, thereby depriving the
137. The City has always been, and remains, the Grant Recipient of the UDAG funds.
The Charleston Central LDC was merely a “conduit” for those funds to receive the repayments
and thereafter flow back to the City of Charleston. Once the Charleston Place project developer
repaid the loan in full, the purpose for the City making those funds available under the UDAG
Agreement had been fulfilled, and the funds should have been returned to the City.
138. By virtue of its actions, Defendant LDC holds these funds as constructive trustee
for the benefit of the City. Plaintiff City of Charleston requests that Defendant LDC be directed
to immediately return possession of the UDAG program funds, including UDAG loan repayments,
139. As a direct and proximate cause of Defendant LDC’s conduct, Plaintiff City of
Charleston has suffered and will continue to suffer damages in an amount to be determined at trial.
140. Plaintiff City of Charleston incorporates and realleges each and every allegation
141. This is an action for a declaratory judgment pursuant to the Uniform Declaratory
Judgment Act of South Carolina, as set forth in § 15-53-10 et seq., of the South Carolina Code of
Laws, 1976, as amended, for the purpose of determining the rights, status or other legal relations
between the parties arising under the agreements, representations, statute(s), instrument, contract,
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142. A justiciable controversy exists between the parties regarding their rights, status,
and other legal relations concerning the UDAG program grant funds awarded to and received by
143. Plaintiff City of Charleston is informed and believes it is entitled to a decree from
a. For an Order of the Court declaring that UDAG funds received by the Defendant
LDC pursuant to loan repayments from the developer of the Charleston Place,
which arose from funds awarded to and received by the City of Charleston in 1983
and the City “made available” to Defendant LDC for the sole purpose to fund a loan
Charleston, as the City, not LDC, is the UDAG grant recipient and rightful of owner
of these funds;
b. In the alternative, for an Order of the Court declaring that UDAG funds received
by the LDC pursuant to loan repayments from the developer of the Charleston
Place, which arose from funds awarded to and received by the City of Charleston
in 1983 and the City “made available” to Defendant LDC for the sole purpose to
fund a loan to the developer of the Charleston Place, must be used by Defendant
LDC at the direction and approval of the City of Charleston to fund Title I projects
within the City of Charleston within a minimally reasonable time period following
the City’s request for funds for a specific Title I project; and
c. For an Order of the Court awarding costs in this action, as is equitable and just,
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(Against Defendant LDC by Plaintiff City of Charleston)
144. Plaintiff City of Charleston incorporates and realleges each and every allegation
action for breach of contract against Defendant LDC based on the UDAG Agreement.
146. This claim arises out of the City of Charleston’s Agreement and understanding with
Defendant LDC related to its limited role as conduit for the UDAG grant funds made available by
the City of Charleston for a limited purpose. In the UDAG Agreement, the LDC acknowledged
that “no transfer of grant funds by the City to [the LDC] shall be or be deemed to be an assignment
of grant funds,” and that the LDC did not “succeed to any rights, benefits or advantages of the City
under the UDAG Grant, or attain any rights, privileges, authorities or interests in or under the
UDAG Grant.”
147. As part of the UDAG Agreement, the Defendant LDC represented to the City of
Charleston that it was “desirous of revitalizing depressed areas in the downtown area of the City
of Charleston.” At the time of the Agreement, the Defendant LDC’s mission and stated purpose
was solely focused on the economic development of the City of Charleston and no other areas.
148. The City relied on the Defendant LDC’s representations that it solely served the
economic development of the City of Charleston when it decided to make the UDAG funds
available for the LDC to loan to the Charleston Place developer. If the City had known the entity
would attempt to keep the repaid funds for its own benefit and/or use the funds to serve an area
beyond the City of Charleston, the City would not have made the UDAG funds available to
Defendant LDC.
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149. Under the terms of the Agreement, the City of Charleston agreed to “make
available” $10 million in UDAG funds the City had received from HUD for the limited purpose
of allowing Charleston Central LDC to lend the UDAG funds to the developer of the Charleston
Place.
150. That Defendant LDC, expressly and/or impliedly, agreed to return the UDAG grant
funds received by the City back to the City upon repayment of the loan by Developer to LDC; or,
in the alternative, to use such UDAG grant funds and loan repayment funds only for Title I projects
151. The parties use of the term/phrase “make available” rather than “give” or “provide”
indicates and/or necessarily implies that the parties intended the $10 million in UDAG funds that
the Plaintiff City of Charleston made available to Defendant LDC would be returned to Plaintiff
City of Charleston upon full repayment of the loan by the developer. At the point the fund had
been repaid, the purpose for Plaintiff City of Charleston making the funds available had ended and
Plaintiff City of Charleston retained the right to have the funds returned under the agreement.
152. Indeed, the intention of the parties at the time of the UDAG Agreement was that
once the Charleston Central LDC received the loan repayments back from the developer, the LDC
would look to the City of Charleston as the true grant recipient for approval over how the repaid
funds would be used. The intention of the parties at the time of the UDAG agreement was that the
repaid funds would be used only within the City of Charleston. The parties intended that the City
would identify to the LDC the priority for the use of the repaid UDAG funds, and before the LDC
could use the repaid funds, “a public hearing” would be held and “final approval by City Council
would be required”. The parties intended that the repaid funds would be used at the City’s direction
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for activities within the City of Charleston that were eligible under Title I of the Housing and
153. The parties intended for the full $22.8 million in repayment funds from the
Developer to be used for Title I projects within the City of Charleston and/or for such projects
approved by the City of Charleston. The City had no intent to permanently transfer ultimate rights
to govern the use of those funds to Charleston Central LDC or anyone else.
154. That there also exists implied covenant of good faith and fair dealing in the
Agreement.
155. City of Charleston has complied with the Agreement in all respects.
156. That upon repayment of the loan funds by Developer to LDC and upon the terms
in the Agreement between LDC and the City to “make available” funds for LDC’s use in loan to
Developer for Charleston Place project, and despite request/demand by City of Charleston, LDC
has refused/failed to return the repaid UDAG funds to recipient City of Charleston, thereby
157. Failure of the LDC to use the repaid funds at the City’s direction for eligible
activities within the City of Charleston and/or return the repaid funds to the City is in breach of
the covenant of good faith and done for an improper purpose and is contrary to the parties’
Agreement.
158. Due to the breach of the Agreement by LDC, City of Charleston has suffered
irreparable harm and monetary losses, in an amount to be determined by the trier of fact. Plaintiff
City of Charleston has suffered and continues to suffer damages; loss of use of funds, as well as
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159. By entering into the Agreement with the City and receiving the City’s UDAG funds
awarded to it by HUD, and other in-kind support from the City, the LDC and its predecessors
assumed obligations of trust, confidence, and utmost good faith to Plaintiff City of Charleston. By
virtue of having assumed these obligations, Defendant LDC owed the City of Charleston a duty of
good faith and fair dealing, obligating LDC to place the City’s interests equal with or ahead of its
own respective interest and to do nothing to deprive the City of Charleston the use and/or benefit
160. Upon information and belief, the Defendant LDC and its Board of Directors sought
to protect LDC’s own interests and breached its obligations to act fairly and in good faith towards
161. Upon information and belief, by engaging in the foregoing conduct, LDC purposely
deprived the City of the rights and benefits under the parties’ agreement.
162. Upon information and belief, LDC’s conscious and deliberate conduct is consistent
with the egregious and unfair practice by LDC in refusing to effectuate its obligation/duty under
the agreement.
163. Failure to remit said funds or otherwise restrict use of the sums at issue to activities
directed by City Council for Title I projects within the City of Charleston constitutes a breach of
contract and has damaged the Plaintiff City of Charleston in an amount to be proven at trial.
164. Upon information and belief, the LDC, by and through its officers, directors and/or
managing agents, authorized or ratified the wrongful acts of LDC as herein described.
165. As a direct and proximate result of the breaches by Defendant LDC, Plaintiff City
of Charleston has been injured and has suffered, and continues to suffer, damages in an amount to
be proven at trial.
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FOR A NINTH CAUSE OF ACTION
(Promissory Estoppel as to Defendant LDC’s 2017 Promise to return $10million to City of
Charleston)
(Against Defendant LDC by Plaintiff City of Charleston)
166. Plaintiff City of Charleston incorporates and realleges each and every allegation
167. Plaintiff City of Charleston asserts a cause of action for promissory estoppel against
Defendant LDC based on the promise formed when the LDC Board approved the City’s receipt of
168. In March of 2017, the LDC Board of Directors voted to return $10,000,000.00 of
the UDAG funds to the City for the purpose of affordable and workforce housing with a 1%
administrative fee ($100,000.00). The vote of LDC’s Board in March of 2017 was a promise to
the City unambiguous in its terms as no other terms, conditions or qualifications were added.
169. Plaintiff City of Charleston reasonably relied on the LDC’s representations based
on LDC’s March 2017 vote to return to Plaintiff City of Charleston $10,000,000.00 of UDAG
funds with a 1% administrative fee ($100,000.00), for use in Title I projects within the City of
Charleston.
170. Plaintiff City of Charleston relied on Defendant LDC’s promise to its detriment. In
reliance on the vote of Defendant LDC’s Board of Directors in March of 2017 to Plaintiff City of
Charleston $10,000,000.00 of UDAG funds with a 1% administrative fee ($100,000.00), the City
expended valuable resources planning projects that it would fund with the promised $10
million. Plaintiff City of Charleston further relied on the LDC’s promise to its detriment by
forgoing other opportunities to obtain the necessary funding for affordable housing projects and
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171. In October 2018, however, the LDC Board of Directors voted to “rescind” the
Board’s previous vote to return $10,000,000.00 of UDAG funds to Plaintiff City of Charleston
(less the 1% (i.e. $100,000.00) administrative fee), thereby breaking the promise to the City. As
such, Plaintiff City of Charleston will not have these UDAG program funds available for Title I
projects within the City of Charleston as initially promised and assured by LDC.
172. Plaintiff City of Charleston’s reasonable reliance on the truth of the unambiguous
assurances made by Defendant LDC in or around March 2017 was expected and foreseeable by
Defendant LDC. The Board of Directors for Defendant LDC had the ultimate authority to take
action to return the $10,000,000.00 in UDAG funds back to Plaintiff City of Charleston, and their
vote was final approval for the action. Thus, Defendant LDC knew Plaintiff’s reliance was
173. Refusal to enforce the Defendant LDC’s promise to Plaintiff City of Charleston
174. As a result of Plaintiff City of Charleston’s reasonable reliance on the promises and
assurances made by Defendant LDC, and as a direct and proximate result of Defendant LDC’s
refusal to provide the $10,000,000.00 in UDAG fund repayments (less the 1% administrative fee,
i.e. $100,000.00) to the City, Plaintiff City of Charleston has suffered and continues to suffer
175. Plaintiffs Tecklenburg and Riley incorporate by reference and reallege each and
every allegation contained within this Complaint as if fully set forth herein.
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176. As directors and/or officers of the Corporation, Executive Committee and
Executive Director Defendants owe fiduciary, statutory and common law duties of care and loyalty
to the Corporation’s members, including Plaintiffs Tecklenburg and Riley, as well as to the
Corporation. The fiduciary, statutory and common law duties of the Executive Committee and
Executive Director Defendants include obligations to exercise good business judgment, to act
prudently in the operation of the Corporation’s affairs, to discharge their actions in good faith, to
act in the best interest of the Corporation and to put the interests of the Corporation and the
177. The Executive Committee and Executive Director Defendants breached their
fiduciary, statutory and common law duties by, among other things, failing to comply with the
178. The Executive Committee and Executive Director Defendants breached their duties
by, among other things, negligently, recklessly and intentionally violating the Corporation’s
governing corporate documents and applicable law in an attempt to disenfranchise the members
of the Corporation and entrench themselves as directors of the Corporation’s board at the expense
of the members and at the expense of the Corporation’s charitable mission, purpose and intent.
Such actions are in contravention to those reasonably believed to be in the best interest of the
Plaintiffs and the Corporation. Furthermore, such failures are outside the scope of care with which
179. Executive Committee and Executive Director Defendants further breached their
fiduciary, statutory, and common law duties by making misleading statements and omitting
material facts and information in required communications with the Plaintiffs Tecklenburg and
Riley, and other members of the corporation with such acts being grossly negligent and willfully
38
perpetuated with malice, bad motives or reckless indifference to the best interests of the Plaintiffs
Tecklenburg and Riley and other Corporation members, as well as the Corporation. Such actions
are in contravention to those reasonably believed to be in the best interest of the Plaintiffs
Tecklenburg and Riley and the Corporation. Furthermore, such failures are outside the scope of
care with which an ordinarily prudent person would exercise in a like position in similar
circumstances.
180. Executive Committee and Executive Director Defendants further breached their
fiduciary, statutory, and common law duties by submitting to the South Carolina Secretary of State
and the Internal Revenue Service ultra vires Articles of Incorporation and Bylaws, by operating
the corporation ultra vires as a non-member corporation, and by failing to hold a vote of the
181. Plaintiffs Tecklenburg and Riley and other Corporation members have been
damaged by the breach of the fiduciary, statutory and common law duties of the Executive
Committee and Executive Director Defendants, with such breach resulting in the actual and
182. Plaintiffs Tecklenburg and Riley incorporate by reference and reallege each and
every allegation contained within this Complaint as if fully set forth herein.
183. As part of the strategy of the Executive Committee and Executive Director
Defendants to separate the LDC from the City of Charleston and eliminate their fiduciary duty to
be accountable to the corporate membership, the Executive Committee and Executive Director
Defendants decided to change the LDC’s “nonprofit status from a 501(c)(4) to a 501(c)(3).”
39
184. Leading up to the April 4, 2018 annual membership meeting, the Executive
Committee and Executive Director Defendants planned to achieve their goal of eliminating the
membership by encouraging the membership to provide proxies to the Board of Directors or the
executive director. The Executive Committee and Executive Director Defendants planned collect
proxies from enough members to hold a vote to eliminate the membership rights of all the
corporation’s members.
misleading proxy forms that omitted important information and asked the members to return them
in advance of the annual meeting. The Executive Committee and Executive Director Defendants
also failed to provide timely notice of the planned vote to eliminate membership rights in order to
186. The Executive Committee and Executive Director Defendants knew or should have
known that they omitted facts and information from their communication with the members
leading up to the April 4, 2018 annual membership meeting that a reasonable person would need
187. Plaintiffs John Tecklenburg and Joseph P. Riley, Jr., and upon information and
belief, many other LDC members, received no notice of the planned vote to eliminate membership
188. Upon information and belief, the LDC members that did receive the misleading
notice and proxies, and signed the proxy, would not have signed the proxy if the Executive
Committee and Executive Director Defendants had properly notified and informed them of the
true nature of the vote intended at the April 4, 2018 annual membership meeting.
40
189. No notice has been sent to the members to notify them of the alleged action taken
190. The Executive Committee and Executive Director Defendants did not possess the
authority to eliminate the membership rights and/or to convert the LDC from a 501(c)(4) to a
501(c)(3), amended Articles of Incorporation and amended Bylaws, among other alleged actions
191. Based on the foregoing, the alleged vote to eliminate the membership rights and/or
to convert the LDC from a 501(c)(4) to a 501(c)(3), amended Articles of Incorporation and
amended Bylaws, among other alleged actions at the April 4, 2018 Annual Membership meeting
192. Plaintiffs seek the court’s declaration that the alleged vote to eliminate the
membership rights and/or to convert the LDC from a 501(c)(4) to a 501(c)(3), amended Articles
of Incorporation and amended Bylaws, among other alleged actions at the April 4, 2018 annual
193 Plaintiffs seek the court’s declaration that the LDC remains a membership
corporation subject to the corporate bylaws and articles of incorporation that were in place
194. Plaintiffs Tecklenburg and Riley incorporate by reference and reallege each and
every allegation contained within this Complaint as if fully set forth herein.
195. Based on the foregoing allegations, Plaintiffs Tecklenburg and Riley seek the
Court’s injunction requiring the above named Defendants to operate as a member corporation,
41
requiring the Defendants to follow the bylaws and articles of incorporation that were in place
196. These Plaintiffs further seek dissolution of the present Board of Directors and
installation of an interim independent Board of Directors, and/or a vote of the membership for a
JURY DEMAND
WHEREFORE, Plaintiff City of Charleston prays for the following relief in its favor
against Defendant:
(i) For judgment against Defendant LDC and in favor of Plaintiff City of Charleston
(ii) For an Order of the Court declaring that UDAG funds received by the LDC
pursuant to loan repayments from the developer of the Charleston Place, which
arose from funds awarded to and received by the City of Charleston in 1983 and
the City “made available” to Charleston Central LDC for the sole purpose to fund
a loan to the developer of the Charleston Place, should be returned to the City of
Charleston, as the City, not LDC, is the UDAG grant fund's recipient and rightful
(iii) In the alternative, for an Order of the Court declaring that UDAG funds received
by the LDC pursuant to loan repayments from the developer of the Charleston
Place, which arose from funds awarded to and received by the City of Charleston
42
in 1983 and the City “made available” to Charleston Central LDC for the sole
purpose to fund a loan to the developer of the Charleston Place, must be used by
LDC at the direction and approval of the City of Charleston to fund Title I- projects
within the City of Charleston within a minimally reasonable time period following
(iv) For an Order of the Court awarding costs in this action, as is equitable and just,
(v) For all available damages caused to Plaintiff City of Charleston by Defendant LDC;
(vi) For costs incurred by this action, including attorneys’ fees and expenses;
(viii) For prejudgment and post judgment interest to the maximum amount allowed by
law; and
(ix) For such other and further relief as the Court and/or trier of fact may deem just and
proper.
(i) For judgment against Defendant LDC and in favor of Plaintiff John Tecklenburg
records” that remain outstanding and that Defendant LDC has failed to timely
43
b. Awarding Plaintiff Tecklenburg his attorneys’ fees and costs of litigation of the
c. For such other and further relief as the Court and/or trier of fact may deem just
and proper.
a. LDC Board Defendants breached their fiduciary duties to Plaintiffs and other
LDC members;
b. The alleged actions at the April 4, 2018 Annual Membership Meeting were
c. Requiring that Defendants LDC and Board Defendants take steps to formally
(ii) Dissolution of the present LDC Board and installation of an interim independent
Board of Directors and/or a vote of the membership for a new Board of Directors;
(iii) For all available damages caused to Plaintiffs Tecklenburg and Riley, and LDC
(iv) For costs incurred by this action, including attorneys’ fees and expenses;
(v) For such other and further relief as the Court and/or trier of fact may deem just and
proper.
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YOUNG CLEMENT RIVERS, LLP
By:
Brian L. Quisenberry, Esq. S.C. Bar # 73637
E-mail: [email protected]
Stephen L. Brown, Esq. S.C. Bar # 66468
E-mail: [email protected]
Stephanie N. Ramia, Esq. S.C. Bar #100217
E-mail: [email protected]
P.O. Box 993, Charleston, SC 29402-0993
25 Calhoun Street, Suite 400, Charleston, SC 29401
Telephone: (843) 724-6641
Fax: (843) 579-1331
Dated:
45