Judge Cherol J. Nellon, Case Number: 21STCV02577, Date: 2024-10-09 Tentative Ruling

Judge: Cherol J. Nellon, Case: 21STCV02577, Date: 2024-10-09 Tentative Ruling

Case Number: 21STCV02577 Hearing Date: October 9, 2024 Dept: 14

Case Background

This is an action for negligence, fraud, breach of fiduciary duty, constructive fraud, elder abuse, involuntary dissolution, an accounting, and declaratory relief. Plaintiffs allege that they are shareholders of a business called Alliance Industrial Refrigeration Services, Inc. (AIRS) and an LLC of the same name (AIRS LLC). Defendants Golding and Merrell, two other shareholders, purchased an investment property that would be leased to AIRS and deprived AIRS of the opportunity to own the property. The shareholder Defendants also failed to offer Plaintiff Lohr an opportunity to obtain membership in AIRS LLC. Plaintiffs allege Defendants used AIRS LLC to enrich themselves to the detriment of AIRS and Plaintiffs and to commit bankruptcy fraud.

On January 21, 2021, Plaintiffs Kathy Lohr and Taylor Winslow, successor trustee of the Katherine Jo Winslow 2019 Living Trust filed their Complaint against Defendants AIRS, AIRS LLC, Grant Golding, Daniel Jordan, and Richard Jones.

On September 3, 2024, Defendants Golding filed this motion to stay the dissolution of AIRS LLC to permit Golding to proceed with his right to buyout the membership interest of Plaintiff Winslow under Cal. Corp. Code, section 17707.03(c)(1). The motion is unopposed.

Instant Pleading

Defendant Golding moves to stay dissolution proceedings for AIRS LLC to allow him to exercise his right to buy out Plaintiff Winslow’s membership interest in AIRS LLC.

Decision

The motion to stay the dissolution proceedings of AIRS LLC filed by Defendant Grant Golding is DENIED without prejudice. The parties are ordered to meet and confer on the fair market value of Winslow’s share of AIRS LLC.

Discussion

Defendant Golding moves to stay the dissolution proceedings of AIRS LLC under Cal. Corp. Code, section 17707.03(c). The section provides that in a suit for judicial dissolution, the other members may avoid the dissolution of the limited liability company by purchasing for cash the membership interests owned by the members so initiating the proceeding at their fair market value. (Cal. Corp. Code, section 17707.03(c)(1).) If the parties cannot agree upon the fair market value of the membership interests and the purchasing party supplies a bond, the court shall stay the dissolution proceeding and fix the fair market value of the membership interests owned by the moving parties. (Id. at subd. (c)(2).) Subdivision (c)(3) provides the procedure a court must follow to issue a decree fixing the fair market value of the ownership interest.

Here, Golding’s counsel testifies that Golding currently holds an 83.34% interest in AIRS LLC. (Brethen Decl., ¶3.) On August 22, 2024, Golding’s counsel informed Winslow’s counsel that Golding was exercising his statutory right to buy out Winslow’s interest in AIRS LLC and requested that Winslow stipulate to staying this action. (Id., ¶¶4,5.) Golding provides a proposed schedule for the buyout process.

Although Golding is entitled to buy out Winslow’s interest in AIRS LLC, the Court notes that the parties have made no attempt to determine the fair market value of Winslow’s ownership interest. Golding provides no evidence that he and Winslow cannot determine the fair market value themselves. Section 17707.03(c)(2) provides that the parties may seek a stay to fix the fair market value of the ownership interest at issue if the parties cannot agree upon the fair market value of the interest. Here, the parties must make an attempt to make the determination on their own before seeking a judicial decree fixing the amount. Therefore, Golding’s motion to stay dissolution proceedings is DENIED without prejudice.

Conclusion