Corporate – LLC – Membership shares – Appraisal

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Where a defendant majority member of a limited liability company has filed a motion to compel an appraisal of the plaintiffs’ shares, the motion should be allowed despite the plaintiffs’ request for a special master to perform the appraisal.

“The four plaintiffs were minority owners of defendant DBC Pri-Med LLC, which is a Delaware limited liability company. Defendant Diversified Business Communications is the majority member of Pri-Med. In January 2017 Pri-Med called all of Plaintiffs’ membership shares, as expressly permitted in section 13.1(a) of Pri-Med’s operating agreement. This LLC Agreement provided for an appraisal firm to be by the parties to determine the value of any called (or put) shares. That appraisal process has not yet begun because Plaintiffs have refused to agree upon an appraisal firm.

“Pri-Med and Diversified have moved for specific performance of the third-party appraisal provision. Plaintiffs John Mooney and Morgan Wheelock filed a written response stating that they ‘have no objection to an independent appraisal,’ but asking the Court to establish a new process under which a special master would select the appraiser and schedule (and perhaps conduct) evidentiary hearings before the appraiser. Plaintiffs John Squire and Macgregor Investments Corporation filed a written response joining in the arguments by the Mooney Plaintiffs. At oral argument, however, the Squire Plaintiffs suddenly reversed course and asserted for the first time that no appraisal should be conducted, either ever or for now.

“Defendants have the better of these arguments. Under Delaware law Defendants are entitled to enforce the contractual appraisal process, subject only to limited judicial review of the appraiser’s final decision. It would be inappropriate for the Court to arrogate to a special master the power to select the appraisal firm or to schedule or conduct hearings. …”

            Mooney, et al. v. Diversified Business Communications, et al. (Lawyers Weekly No. 09-014-18) (7 pages) (Salinger, J.) (Suffolk Superior Court) (Docket Nos. 1684CV03726-BLS2 and 1784CV03423-BLS2) (Feb. 2, 2018).