DOCUMENT 2

ELECTRONICALLY FILED
8/5/2016 3:15 PM
47-CV-2016-901293.00
CIRCUIT COURT OF
MADISON COUNTY, ALABAMA
DEBRA KIZER, CLERK
IN THE CIRCUIT COURT OF MADISON COUNTY, ALABAMA

CHRISTOPHER N. McCUTCHEON, )
individually and derivatively on behalf of )
QBR LLC, )
)
Plaintiff, )
CIVIL ACTION NUMBER:
)
_________________
v. )
)
JOHN S. HORNBUCKLE, )
)
Defendant. )

COMPLAINT
COMES NOW the plaintiff, Christopher N. McCutcheon (“McCutcheon”), both

individually and derivatively on behalf of QBR LLC (“QBR”), and states his claims against the

defendant, John S. Hornbuckle (“Hornbuckle”) as follows:

Parties

1. McCutcheon is an adult resident of Limestone County, Alabama. At all times

relevant to this Complaint McCutcheon owned 49% of QBR.

2. QBR is an Alabama limited liability company with its principle place of business

in Madison County, Alabama. McCutcheon and Hornbuckle are the only members/owners of

QBR.

3. Hornbuckle is an adult resident of Madison County, Alabama. At all times relevant

to this Complaint Hornbuckle owned 51% of QBR.

Jurisdiction and Venue

4. This Court has original jurisdiction over the action because: (1) the derivative

plaintiff QBR is located and doing business in Madison County, Alabama; (2) the defendant

Hornbuckle resides and is doing business in Madison County, Alabama; and (3) the request for

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compensatory damages exceeds $10,000.00. Additionally, this Complaint states derivative claims

under Rule 23.1 of the Alabama Rules of Civil Procedure and therefore certain claims stated herein

are equitable in nature.

Factual Allegations

5. On or around September 2011, Hornbuckle and McCutcheon established QBR and

executed an agreement concerning the operation of QBR (“Operating Agreement”). QBR was

established for the purpose of providing medical diagnostic services to medical providers.

McCutcheon provided the initial capital to start the business and Hornbuckle had the necessary

experience.

6. QBR is a member managed limited liability company and at its inception the

members appointed officers of the LLC.

7. McCutcheon was appointed treasurer, secretary and chief financial officer (“CFO”)

of QBR because he had invested the original capital for the company.

8. Hornbuckle was appointed president and chief executive officer (“CEO”) of QBR

because he had some expertise in the medical diagnostics services area and was going to be

involved in the day-to-day activities. Hornbuckle, as the president, CEO, and majority owner of

QBR, owed duties, fiduciary and otherwise, to the company and its other member, McCutcheon.

9. McCutcheon had an expectation of involvement in the operations of QBR. For

example, McCutcheon, as the individual who had invested the initial capital in the company and

was appointed treasurer, expected to be involved in operational and financial decisions of the

company. The purpose of this involvement was to utilize his financial expertise for the benefit of

QBR and also to protect his investment in QBR. McCutcheon also had an expectation that he

would receive a return on his investment in QBR.

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10. The company began operations in the 2011 timeframe but was not as successful as

the parties had expected. Specifically, Hornbuckle failed to bring business to QBR despite

representations that he could.

11. While QBR was struggling financially, McCutcheon continued to pay the bills of

the company and otherwise invest additional money. For example, in addition to his cash

investment, McCutcheon utilized his personal credit cards, secured and guaranteed solely by him,

to pay bills of the LLC.

12. In or around late 2012 and early 2013, it became evident that the medical diagnostic

industry in which the parties were involved was going to face financial issues. Specifically, the

reimbursement from insurance companies for the testing in which QBR was involved began to

substantially decrease. The result was the income of QBR began to decrease as well. QBR could

not, therefore, financially support both McCutcheon and Hornbuckle as full-time employees.

13. As a result and to help QBR, McCutcheon, without demanding repayment of his

investment, took another full-time job at another company. Nonetheless, during this timeframe,

McCutcheon continued to work at night and on the weekends as the CFO, treasurer, and the

secretary of QBR. McCutcheon also set up a relationship with an accounting firm to assist with

QBR’s day-to-day issues because Hornbuckle had no concept of how to perform accounting.

14. Instead of appreciating McCutcheon’s sacrifices, Hornbuckle began to exercise

more control of the company. Hornbuckle also began to usurp QBR opportunities for his own

benefit, as well as run other business ideas and/or operations through QBR for his own personal

financial gain. Hornbuckle’s actions are contrary to the Operating Agreement.

15. For example, Hornbuckle started a “hydra facial” company, which was not the

intended purpose of QBR, where Hornbuckle used QBR money to pay his girlfriend an advance

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and rented her space for a spa company. QBR never made any money off of the “hydra facial”

company. Shortly after making these payments, Hornbuckle’s girlfriend resigned and QBR was

never paid back the money. Additionally, Hornbuckle, contrary to the Operating Agreement,

began getting involved in deals personally that were in the line of QBR’s business. Hornbuckle

also took commissions personally from companies for work he was doing in the line and scope of

his employment at QBR. These commissions were owed to QBR but were never paid to QBR.

16. In other words, Hornbuckle breached not only his duty of care but also his duty of

loyalty to QBR. In addition to breaching these duties, Hornbuckle began to exercise more and

more control of the company, began to run the company as his own, and refused to recognize

McCutcheon’s ownership interest in the company. More specifically, even though McCutcheon

invested the initial capital to start QBR, Hornbuckle began to exclude McCutcheon from QBR and

otherwise thwart McCutcheon’s expectation of involvement in the business, as well as his

expectation of return on his investment. These actions include but are not limited to the following:

a. Hornbuckle locked McCutcheon out of the business premises rented by

QBR;

b. Hornbuckle ceased all communication with McCutcheon, including email,

voicemail, and text;

c. Hornbuckle made financial decisions without consulting McCutcheon;

d. Hornbuckle made hiring and other management decisions without

consulting McCutcheon;

e. Hornbuckle held meetings without the proper notification and otherwise

excluded McCutcheon;

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f. Hornbuckle fired the existing CPA firm without consulting McCutcheon;

and

g. Hornbuckle ordered business associates and sub-contractors to not

communicate with McCutcheon.

17. When McCutcheon began to question Hornbuckle’s operation of the company,

Hornbuckle’s paranoia began to mount. Ultimately, Hornbuckle retained counsel to send

McCutcheon a letter. In the letter, it specifically states that Hornbuckle was taking action as a

majority owner to remove McCutcheon as the treasurer, CFO, and secretary.

18. Additionally, counsel for Hornbuckle sent letters to outside entities such as Bryant

Bank informing it that McCutcheon was no longer able to conduct any business on behalf of QBR.

These actions were all in an attempt to exclude McCutcheon from any involvement in the business.

19. The result is that McCutcheon has been totally squeezed out of the operations of

QBR despite the fact that he was the initial investor and is still a 49% owner of QBR.

Futility of Demand

20. McCutcheon readopts and realleges the allegations of paragraphs one through

nineteen above as if set out herein and in full.

21. Alabama Rule of Civil Procedure 23.1 makes it clear that a plaintiff who attempts

to bring a derivative claim must request permission from the “board” to do so unless such a request

would be futile. Some of the claims stated herein are direct claims and therefore do not require a

demand. Some claims, however, are derivative, but as shown below, it would be futile to request

permission from Hornbuckle, the only other member, to assert the derivative claims herein.

22. In other words, it would be futile for McCutcheon to request Hornbuckle, the

majority owner, to sue himself. In addition to the fact that Hornbuckle would be the only

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individual from which McCutcheon could ask permission, there are other facts establishing futility

including the following:

a. McCutcheon tried to communicate with Hornbuckle but Hornbuckle refuses

to communicate with McCutcheon;

b. Hornbuckle has retained counsel to try to make claims against McCutcheon;

c. Counsel for Hornbuckle and Hornbuckle have removed McCutcheon from

his position as officer of the company;

d. Both parties included in this litigation are interested parties. In other words,

there are no disinterested parties to whom the issue of demand could be

presented;

e. Many of the issues of which the plaintiff complains as a result of

Hornbuckle’s personal self-dealing and are not an exercise of legitimate

business judgment;

f. The claims in the Complaint relate to Hornbuckle’s personal actions as an

owner/officer and/or employee of QBR and therefore he cannot be expected

to cause an action to be filed against himself;

g. There are no independent managers, members, or committees who can

assess the derivative claims asserted in this complaint; and

h. The claims asserted, both individual and derivative, could result in a

substantial judgment against Hornbuckle. As such, he cannot properly

assess whether to assert them against himself on behalf of QBR.

23. As a result, it is evident that a demand under Rule 23.1 would be futile.

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Breach of Agreement
(Derivative & Individual)

24. McCutcheon readopts and realleges the allegations of paragraphs one through

twenty-three above as if set out herein and in full.

25. Hornbuckle has violated many provisions of the Operating Agreement, which has

resulted in financial harm to McCutcheon, as well as QBR.

26. Among other things, Hornbuckle has breached the Operating Agreement by,

including but not limited to, (1) expelling McCutcheon from the operations of QBR; (2) self-

dealing without proper permission from QBR or its other member; (3) using the assets of the

company for his own personal benefit; (4) using used information of the company for his own

benefit; (5) improperly usurping opportunities of the company; and (6) entering into personal

business transactions to the exclusion of QBR.

27. Hornbuckle has also breached numerous duties that are imposed on the LLC

through the Code of Alabama, including but not limited to (1) the duty of good faith and fair

dealing; (2) the duty of care; and (3) the duty of loyalty to the company. These duties, while extra-

contractual, may be deemed part of the parties Operating Agreement.

28. As a result, Hornbuckle’s violation of these duties are a breach of the Agreement.

WHEREFORE, the above premises considered, McCutcheon requests this court to enter a

judgment in his favor, individually and derivatively, and against Hornbuckle. The amount of the

judgment, including both compensatory and punitive damages, shall be determined by the trier of

fact.

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Breach of Fiduciary Duty

(Derivative & Individual)

29. McCutcheon readopts and realleges the allegations of paragraphs one through

twenty-eight above as if set out here and in full.

30. Hornbuckle, as an owner, managing member, and officer of QBR, has a duty of

good faith and fair dealing, duty of loyalty, and a duty of care that he owes to QBR, as well as

McCutcheon individually.

31. Hornbuckle, as described above, has breached all of these duties both to the

company and to McCutcheon individually, which has resulted in financial losses for the company,

as well as to McCutcheon individually.

WHEREFORE, the above premises considered McCutcheon requests this court to enter a

judgment in his favor, individually and derivatively, and against Hornbuckle. The amount of the

judgment, including both compensatory and punitive damages, shall be determined by the trier of

fact.

Breach of Fiduciary Duty/

Oppression and Squeeze Out
(Individual)

32. McCutcheon readopts and realleges the allegations of paragraphs one through

thirty-one above as if set out here and in full.

33. Hornbuckle has a duty of good faith and fair dealing to the minority member,

McCutcheon. Hornbuckle also has certain fiduciary duties to McCutcheon, the minority member.

These duties include the duty of loyalty and the duty of care as defined in the Code of Alabama

and otherwise.

34. Hornbuckle’s actions, as described above, are oppressing in nature and designed to

squeeze McCutcheon out of QBR. Specifically, Hornbuckle’s breach of the duties listed above

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was directed at McCutcheon and intended to deny McCutcheon of his expectation of his return on

his investment, as well as his expectation of being involved in the operation of the company.

35. Hornbuckle’s actions, as described in detail above, also violate his other fiduciary

duties, such as his duty of care and duty of loyalty, to the minority member which have specifically

resulted in McCutcheon’s oppression and squeeze out of the operations and his diminished

investment return from QBR. Specifically, as a minority member of an LLC, McCutcheon has an

expectation of that the majority member will consider the minorities’ interest when acting and will

not violate the fiduciary duties owed to the other members discussed above.

36. Hornbuckle’s actions, as described in detail above, have denied McCutcheon of his

expectations, which has resulted in financial harm to McCutcheon individually.

WHEREFORE, the above premises considered, McCutcheon requests this court to enter a

judgment in his favor and against Hornbuckle. McCutcheon requests for the judgment to include

compensatory and punitive damages. The total amount of the judgment shall be determined by

the trier of fact.

THE PLAINTIFF HEREBY DEMANDS TRIAL BY JURY.

Respectfully submitted this 5th day of August, 2016.

s/G. Bartley Loftin, III

G. Bartley Loftin, III (LOF009)
BRADLEY ARANT BOULT CUMMINGS LLP
200 Clinton Avenue West, Suite 900
Huntsville, AL 35801-4900
Telephone: (256) 517-5100
Facsimile: (256) 517-5200
Email: [email protected]

Attorney for Plaintiff

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SERVICE ON DEFENDANT BY CERTIFIED MAIL:

John S. Hornbuckle
243 Pine Street
New Hope, AL 35760

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