Celebrity Business Divorce: Sour Grapes in Brangelina Vineyard Fight…and It Could Have Been Prevented

02.24.22

Brad Pitt sued Angelina Jolie in California State Court last week, claiming that her sale of a 50% stake in their jointly-owned winery business to a company controlled by Russian oligarch, Yuri Shefler, violated the couple's agreement not to sell any interest in the business without the other’s consent. The case is a cautionary tale for attorneys drafting transfer restrictions for a closely-held business or joint venture.

In happier times (2008), "Brangelina" bought the Chateau Miraval in the South of France which included both a winery business and a residence where the couple and their extended family made a home.

Pitt and Jolie split the ownership 60-40, and each created a California limited liability company to hold shares of Qiumicum S.a r.l. (a Luxembourg company and title owner of the Miraval property). Pitt's company, Mondo Bongo LLC, initially held 60% of the Quimicum shares, and Jolie's company, Nouvel LLC, 40%. Pitt later transferred another 10% to Nouvel, leaving the soon-to-be divorced celebrity couple equal but indirect 50/50 owners of Quimicum.

The transfer restrictions in Quimicum's Articles of Association were typical for such documents. Section 5.4.3 was apparently designed to protect each owner's right to "pick their partner," stating that a transfer of Quimicum shares by either Mondo Bongo or Nouvel would require the consent of the other owner (the agreement of "at least three-quarters of the corporate share capital"). Additionally, Section 5.4.2 incorporated by reference a right of first refusal from Luxembourg's law on commercial companies.

Simple enough, right? Wrong.

Jolie filed for divorce in 2016 but the celebrity couple continued their joint ownership of Chateau Miraval through their ownership of Quimicum. Then, in the first half of 2021, they began discussing a partial buyout, and later a complete buyout, of Jolie’s interest in Quimicum.

However, in June 2021, Jolie "abruptly" terminated the buyout discussions, with her representatives cryptically announcing that she was "free to pursue any other transactions that we would deem appropriate to undertake.”

Pitt may have suspected that "something was up" in September of 2021, when he consented to lifting the Automatic Temporary Restraining Orders that had been in place since the beginning of the divorce proceedings. The court stipulation he signed made it clear that "he was not consenting to the sale of Nouvel LLC or any of the assets thereof (the Quimicum shares)."

Clear enough, right? Wrong.

About a month later, Tenute del Mondo, a company controlled by Yuri Shefler, issued a press release announcing that it had purchased Jolie’s stake in Miraval/Quimicum. Pitt alleges that he was given no notice of the sale, the buyer, or even the fact that Jolie was discussing a sale of Nouvel.

Pitt's complaint names both Jolie and her holding company, Nouvel LLC, as defendants, and alleges that Jolie violated her agreement not to sell Quimicum shares to a third party without Pitt's consent.

But did she? Maybe not.

Jolie structured the transfer of her Quimicum shares as a sale of her holding company, Nouvel LLC, rather than as a direct sale of the Quimicum shares Nouvel owned. The problem for Pitt is that while the share transfer restrictions in Quimicum's Articles of Association clearly require his consent before Nouvel could sell its Quimicum shares (actually, Mondo Bongo's consent), there is no provision in the Articles, nor, apparently, in any written agreement between Jolie and Pitt, that would prevent her from unilaterally selling 100% of Nouvel LLC itself - which would have the effect of indirectly transferring the ownership and control of her 50% interest in Quimicum.

If there had been such a provision in writing, it's hard to believe Jolie would have sold her interest to Shefler, or that Shefler himself would have closed on the purchase. And if they had proceeded with a sale under such circumstances, doing so would have given Pitt and Mondo Bongo a straightforward, clean breach of contract claim.

Instead, without a clear written agreement prohibiting the transaction structure Jolie and Shefler ultimately utilized (a sale of her holding company), Pitt's Complaint had to be based on theories and claims far more difficult to plead and prove, specifically, claims for:

(i) Tortious Interference With Contract (Jolie’s sale of Nouvel intentionally interfered with Mondo Bongo's contract rights under the Articles of Association);

(ii) Breach of the Covenant of Good Faith and Fair Dealing (Nouvel itself circumvented the transfer restriction it had agreed to);

(iii) Breach of an Implied-in-Fact Contract (the facts implied that Pitt and Jolie agreed not to sell their respective holding companies without the consent of the other); and

(iv) Breach of a Quasi-Contract (in making significant investments in the business, Pitt detrimentally relied on Jolie's agreement not to sell her interest to a third party).

Pitt may well prevail in the litigation against his ex. He certainly has heavyweight corporate counsel - Wachtell Lipton's New York office. And based on the allegations of the Complaint alone, it does seem from both the transfer restrictions in the Quimicum Articles of Association and the parties’ conduct that Pitt and Jolie probably did intend that neither could sell their Quimicum ownership stake to a third party without the consent of the other.

But due to the narrowly drafted transfer restrictions, Pitt is likely looking at significant motion practice, including the defense of motions to dismiss one or more of these claims, probably followed by extensive discovery, a long slog to trial and an uncertain outcome, all the while stuck with a partner (Yuri Shefler) he did not choose, and with whom he already has significant disagreements over the management and future of Miraval's winery business.

Messy, to say the least.

TIP: When drafting stock transfer restrictions, be sure to include language that covers every possible way that the parties could transfer ownership and control of the shares, both directly and indirectly. If that had been done here, it seems unlikely that Angelina Jolie would have been able to complete a sale of her stake in the Miraval winery without first obtaining Brad Pitt’s consent.

Jerry Holisky concentrates his practice on ownership and management disputes – sometimes called “business divorce.” In a wide range of contested transactions over the past 25 years, he has represented majority owners and management as well as employees and individuals in “bet the company” transactions and litigation.



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