495 P.3d 693
Or. Ct. App.2021Background
- Dipak Patel owned a 25% interest in two LLCs, Siddhi Hospitality, LLC (Holiday Inn Express) and Riddhi Hospitality, LLC (Comfort Suites), and sued fellow members alleging minority oppression and seeking buyouts; cases were tried to the court.
- The trial court rejected Patel’s oppression and other claims, found the other members could expel him under the operating agreements, and ordered buyouts instead of other relief.
- For Siddhi the court awarded Patel compensation based on the LLC’s book value (award $409,740). For Riddhi the court adopted an expert’s enterprise valuation ($5.5M) but applied 10% minority and 20% marketability discounts to Patel’s 25% share, yielding $990,000.
- Patel appealed, arguing (1) the Riddhi operating agreement did not permit minority or marketability discounts, (2) Siddhi’s buyout should be based on fair market value not book value, and (3) Riddhi’s $300,000 cash reserves should have been included in its fair market value.
- The Court of Appeals held the Riddhi agreement unambiguously required payment equal to the member’s percentage of the fair market value of all LLC assets (so discounts were improper), affirmed the Siddhi book-value buyout, and upheld exclusion of the cash reserves from Riddhi’s asset value.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Riddhi's operating agreement permits applying minority and marketability discounts to a departing member's compensation | Patel: discounts are not authorized; agreement requires percentage of fair market value of all assets | Defendants: court may apply discounts as factual valuation or equitable adjustment; expert support justifies discounts | Court: agreement unambiguous—compensation is member percentage of FMV of all assets; discounts not authorized; reversed and remanded to recalc without discounts |
| Whether Riddhi's $300,000 cash reserves must be included in FMV | Patel: reserves are assets and should be added to FMV | Defendants/expert: reserves are set aside for anticipated capital expenditures and treated as expense, properly excluded | Court: record supports exclusion; reserves are for anticipated liabilities; trial court did not err |
| Whether Siddhi buyout must use book value or fair market value after expulsion | Patel: he was not validly expelled for cause / was oppressed, so should get 25% of FMV | Defendants: operating agreement prescribes book value for departing members when expelled for cause | Court: findings that expulsion was for cause and no oppression are supported; operating agreement controls; book-value buyout affirmed |
| Whether trial court's fact findings (no oppression; valid expulsion) lack evidentiary support | Patel: findings unsupported by record | Defendants: any-evidence standard supports findings | Court: findings are supported by evidence; assignments raising only those factual challenges rejected |
Key Cases Cited
- Yogman v. Parrott, 325 Or 358 (Or. 1997) (establishes contract-construction framework; start with text and context)
- Hekker v. Sabre Construction Co., 265 Or 552 (Or. 1973) (construction of contract is a question of law for the court)
- City of Bend v. Juniper Utility Co., 242 Or App 9 (Or. Ct. App. 2011) (fair market value is a factual determination for the factfinder)
- Saga Enterprises, Inc. v. Coldwell, Banker and Co., 287 Or 169 (Or. 1979) (articulates the any-evidence standard for reviewing factual findings)
- Schlecht v. Bliss, 271 Or 304 (Or. 1975) (acceptance of an award does not bar appeal on adequacy of damages)