The dispute centers on NNN Capital Fund I, LLC (Cap Fund), a short-term real estate lending fund formed in 2008 that fell into distress during the recession. In 2011, Todd A. Mikles, then president of Cap Fund's manager, arranged for SSMF Liquidation, LLC, an entity he controlled, to purchase the fund's nonperforming loans at a discount.
In 2017, Cap Fund members Tyrone Wynfield and Mary Jo Saul sued Mikles and his entities, claiming breach of fiduciary duty and fraud. They purport to act as the fund's court-appointed "liquidating trustees." After years of litigation, an arbitrator awarded Cap Fund $20,972,601 in compensatory and punitive damages in January 2024. The Orange County Superior Court confirmed that award in June 2024.
The appellate majority, in an opinion authored by Justice Sanchez and joined by Acting Presiding Justice Moore, concluded that neither Wynfield nor Saul was lawfully authorized to bring those claims. The court noted that the ballots used to elect Wynfield as liquidating trustee—and later Saul after Wynfield's death in December 2019—explicitly called for a court to appoint them to that role. However, neither Weiss nor Wynfield ever applied to the Delaware Court of Chancery or any other court to dissolve Cap Fund. More critically, when votes from transferee members who lacked voting rights under Cap Fund's operating agreement were excluded, Wynfield received only 44 percent of the eligible vote and Saul only 37 percent. Both figures fell below the 50 percent threshold required by the operating agreement.
The majority framed the case as a collision of two foundational legal principles: "The first is that jurisdiction is never waived and can be raised at any time, including for the first time on appeal. The second is that an arbitration award can only be challenged on very limited grounds and must be upheld if those grounds do not exist, even if the award is based on an error of law."
Faced with that tension, the court sided firmly with the jurisdiction principle, concluding that if Wynfield and Saul lacked standing, the trial court and arbitrator alike never had authority to hear the case. "A lack of subject matter jurisdiction would similarly prevent the court from adjudicating any motion to compel arbitration," the opinion stated.
Justice Bancroft dissented sharply, warning that the majority's rule would have sweeping and unworkable consequences. "Taken to its logical conclusion, the rule announced by the majority today would permit an unhappy party to challenge any judgment (whether the result of a jury trial, a bench trial, or a dispositive motion) based on a bare contention of lack of standing, on the ground that the court never had jurisdiction over the matter in the first place," Bancroft wrote. "No authority supports this attack on the finality of judgments, or of binding arbitration awards to which the parties agreed."
The dissent noted that Appellants themselves moved to compel arbitration and argued standing before the arbitrator, then failed to file a timely petition to vacate the award. Bancroft argued that the broad arbitration clause in Cap Fund's operating agreement gave the arbitrator full authority to decide standing as a contested issue, making those findings not subject to judicial override.
On remand, the Orange County Superior Court must vacate both the order compelling arbitration and the order confirming the $20.9 million award. The court must then hold an evidentiary hearing to determine whether Wynfield and Saul were validly elected under Cap Fund's operating agreement.
If they were not, and no authorized representative can be substituted, the court must dismiss the action. This effectively wipes out the award entirely and raises significant questions about whether standing disputes in arbitration are ever fully insulated from judicial review.