Pryor Cashman Client Wins Summary Judgment Appeal in Care One Case
Pryor Cashman Partner David Rose, with the assistance of Associate Jacob Orgel, successfully argued an appeal before the Superior Court of New Jersey, Appellate Division, on behalf of client and noted health care executive Jeffrey Rubin in Care One. LLC, et al v. Adina Strauss and Jeffrey Rubin.
The matter concerned an attempt by Care One, LLC to repurchase membership interests in the company at depressed values and the proper valuation standard to be used “for determining the amount to be paid when removing members through a purchase of their membership interests.”
The court reversed as erroneous the decision of the Superior Court, Chancery Division in favor of the Care One parties, and affirmatively granted summary judgment in favor of Mr. Rubin on his breach of contract claim, determining that Care One was obligated to pay “fair value” not the lesser amount of “fair market value” for Mr. Rubin’s interest in the company. Read the full decision using the link below.
The impact and effects of this case are significant for companies operating as Delaware limited liability companies (LLCs), as well as for investment funds structured using LLCs, establishing under Delaware statutory and decisional law, that when the operating agreement of a member-managed LLC is silent on compensation to removed members, the members must be compensated based on the “fair value” of their interests, and not based on the lesser standard of “fair market value.” The decision also makes clear that removed LLC members must receive “fair value” for their interests regardless of whether they are an active manager of the LLC or a passive member.
