Pourmoradi

I. INTRODUCTION

Plaintiffs,1 owners of a 50 percent membership interest in a limited liability company, filed an action under Corporations Code section 17707.032 for judicial dissolution of the company. Defendants,3 who owned the other 50 percent interest, sought to avoid dissolution by exercising their statutory right to purchase plaintiffs’ interest for fair market value. Following the required appraisal process, the trial court ascertained and fixed the value of plaintiffs’ interest and entered an alternative decree that ordered: (1) defendants to buy plaintiffs’ interest for the appraised value, but without the recommended reduction for lack of control or marketability; or, in the alternative, (2) the immediate dissolution of the company. On appeal, defendants contend that the trial court erred by applying a “fair value” standard—instead of the required “fair market value” standard—to fix the purchase price of plaintiffs’ interest. We conclude the court abused its discretion by applying the wrong statutory valuation standard. We therefore reverse the alternative decree and remand with instructions.

Plaintiffs are John and Andrea Pourmoradi, as trustees for the…