Dixie Management Files Suit Against Joe Kleine, Other Commerce Park Developers

The ongoing drama over at one-time development powerhouse Dixie Management & Investment LP has gone to another level.

DMI CEO Ben Israel filed suit Feb. 28 against his partners in Joyce Street LLC alleging, among other things, civil conspiracy and defamation for attempting a hostile takeover of the company.

The group developed the 70,000-SF, 4-building Commerce Park I in northeast Fayetteville and the investors sued by Israel are Dr. David Cannon, Owen Bushaw, both of Springdale, and former NBA and University of Arkansas basketball star Joe Kleine.

According to the suit, on Jan. 14, 2007, the three defendants, represented by Bushaw, asked Israel to relinquish his voting rights in the LLC and quit managing the properties.

“We feel it is time for a change,” Bushaw wrote to Israel. “Our ability to refinance this project is nonexistent with you as a voting member. David, Joe and myself are united in this matter. We hope you understand our request is not personal, but a business decision.”

Bushaw, Cannon and Kleine represent 57.1 percent of the LLC. Bushaw and Cannon put up $150,000 cash each when the LLC was formed in July 2000. Kleine bought in for $200,000 cash. B.W. Dykes of Fayetteville was an original investor for $167,000, but he divested his interest in the company in 2004.

Israel’s initial investment was to secure the $1.27 million loan to begin construction of Commerce I on Nov. 9, 2000. He also got a $472,000 loan in August to purchase the 5 acres for the project.

Dixie attorney Derrick Davidson, who manages Commerce I through Davidson Real Estate Partners LLC, filed the suit.

The suit states Israel refused his partners’ request to cede control, spurring their attempt to, “bully … intimidate and threaten Plaintiffs, along with their attorney, into complying with their demands.”

The breaking point according to the suit was a Feb. 15, 2008, on behalf of the other partners. The letter stated they had adopted a resolution revoking DMI’s authority to manage the LLC and cautioned Davidson to “refrain from assisting in acts [on behalf of the LLC].”

According to the suit, the letter further threatened that the partners would “pursue all legal remedies to penalize and correct the past acts of DMI.”

The suit also alleges that Bushaw “alienated” Israel from Cannon and Kleine by “lying to them about Plaintiffs’ conduct in relation to management of the LLC … accusing Mr. Israel of legal maneuvers to create a new real estate company to collect management fees for himself as an act of self-dealing.”

The suit is asking for damages including loss of past and future profits.

Another lawsuit, this one against Israel, is the loose thread that may unravel the complete picture of his company.

In a Sept. 10, 2007, article on Dixie’s woes, we told you Israel still hadn’t paid The Event Group Inc. of Fayetteville for his 2006 company Christmas party.

The tab was $7,134, a paltry sum for a company that reported $45.7 million in revenue that year. But the bill was never paid and a judgment in The Event Group’s favor by Washington County Circuit Court Judge Mary Ann Gunn was entered on Feb. 5. Dixie agreed to pay the bill, plus 6 percent annual interest dating to Dec. 9, 2006, and attorney fees of $783.

Dixie also agreed to provide to the court within 45 days of the filing with a full, verified schedule of “all Defendant’s properties, both real and personal, including monies, bank accounts, credits and [personal property] in action held by Defendant.”

That should be an interesting read.