Amy forms Best Properties, LLC (BP), to own real estate

Amy forms Best Properties, LLC (BP), to own real estate as a long-term investment. BP acquires a 40,000-square-foot warehouse for $500,000, with the financing arranged for, and guaranteed by, Amy. Later, Carl and Dave become BP members. They sign a “member’s agreement,” which states, “Amy shall own a 50 percent interest in the capital, profits, and losses of BP and shall have 50 percent of the voting rights. Carl and Dave, collectively, shall own a 50 percent interest in the capital, profits, and losses of BP and shall have 50 percent of the voting rights.” BP’s sole asset is the warehouse. When relations among the members become strained, Amy executes a deed transferring the warehouse to Excel, LLC, for $500,000. Excel has two members—Amy, with a 60 percent interest, and Carl, with 40 percent. Neither Amy nor Carl discuss the warehouse transfer with Dave, but Amy mails him a check that purports to represent his 25 percent interest in the warehouse. Dave files a suit against Amy and Carl, alleging that the transfer was unfair. On what basis might the court rule in favor of the defendants? Why might the court decide in Dave’s favor? Explain.