Rappaport v. Gelfand
197 Cal. App. 4th 1213
Cal. Ct. App.2011Background
- Rappaport dissociates from GRG/GG, a registered LLP, under UP A section 16701(b).
- 16701(b) provides buyout price equal to the greater of liquidation value or going-concern value as of dissociation date, with interest accrue d.
- Trial court adopted a 'construct' valuing assets as of Oct. 31, 2005 with phased liquidation and then brought value to the date of dissociation.
- Trial court awarded Rappaport 31% of liquidation value plus adjustments, finding Gelfand and Glaser liable personally and GRG/GG liable as well.
- On appeal, appellants challenge the statutory interpretation and seek reversal of individual liability; court agrees on interpretation and reverses individual liability, correcting a minor arithmetic error.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper interpretation of 16701(b) buyout price | Rappaport seeks application of the statute as written, using liquidation or going-concern value as of dissociation. | The court-created asset-by-asset liquidation construct misapplies the statute by valuing over time and then discounting to the dissociation date. | Trial court's interpretation consistent with statute; liquidation value defined and applied properly. |
| Admissibility of expert testimony on valuation and interpretation | Experts offered valuation methodology aligned with the statute and market-principles. | Some testimony impermissibly opined on legal interpretation of the statute. | No abuse of discretion; testimony supported by statutory framework and did not constitute legal opinion. |
| Individual liability of Gelfand and Glaser | Section 16306 allows personal liability for certain LLP debts if agreed to by the partners. | No evidence that Gelfand or Glaser agreed to personal liability; should not be liable individually. | Reversed; individuals cannot be held personally liable absent statutory agreement. |
Key Cases Cited
- Jewel v. Boxer, 156 Cal.App.3d 171 (Cal. App. Dist. 2 1984) (precludes a general exemption for firms from UP A coverage)
- Warnick v. Warnick, 133 P.3d 997 (Wyoming Supreme Court 2006) (liquidation value distinguished from distress sale; two approaches permitted)
- Ameron Internat. Corp. v. Insurance Co. of State of Pennsylvania, 50 Cal.4th 1370 (Cal. 2010) (guides use of extrinsic aids in interpretation of UP A provisions)