On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2225-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued Telephonically June 13, 2012
Before Judges A.A. Rodriguez and Reisner.
This case arises from a dispute over a shopping center owned by Nelson's Corner Associates, L.L.C. (hereafter, Nelson's Corner Associates or the L.L.C.). Three members of the L.L.C., defendants Lauren J. Gardner Trust, David Gardner Trust, and Jamie I. Gardner Trust, appeal from the following trial court orders in favor of the remaining members, plaintiffs Martin Heller and Nelson's Corner Trust (the Allen Trust)*fn1 December 17, 2010, granting partial summary judgment declaring Lawrence
W. Gardner's April 27, 2010 letter to be a "Put Offering Notice" and ordering defendants to finalize the sale to plaintiffs of their membership interests in the L.L.C.; February 18, 2011, denying a stay of the December 17 order and confirming the property's fair market value to be as determined by plaintiffs' appraisers; May 9, 2011, denying defendants' motion for reconsideration, a stay of the closing, and related relief; and September 23, 2011, awarding plaintiffs $150,000 in counsel fees. We affirm the orders on appeal.
In 2004, plaintiffs and defendants entered into an Operating Agreement (Agreement) to form Nelson's Corner Associates, a limited liability company in which each party was a designated member. The purpose of the L.L.C. was to manage a shopping center in Hillsborough which Lawrence Gardner and Martin Heller had built decades earlier. By 2004, Gardner had transferred his interest in the shopping center to trusts for his three children. At the time the parties created the L.L.C., plaintiffs owned a combined 66 2/3% membership interest in the L.L.C., and each defendant owned an individual 11 1/9% membership interest or 33 1/3% collectively. Pursuant to the Agreement, defendants appointed Gardner as a designee to act on behalf of each defendant trust. Gerald D. Allen was appointed as the designee for the Nelson's Corner Trust (also known as the Allen Trust). Ibid.
The Agreement contained a mechanism, known as a put offering notice, by which one or members could require the other members to buy out their shares. Under the terms of the Agreement, "upon receipt of the Put Offering Notice, the Responding Member shall be obligated to purchase the Membership Interest of the Initiating Member at the purchase price set forth in subsection (b) of this Section 6.03." The Agreement provided that "closing shall occur thirty-one (31) days following receipt of the Put Offering Notice."
The Agreement set the purchase price at "an amount equal to eighty percent (80%) of the 'net fair market value' of the Company determined in accordance with Section 10 of this Agreement, multiplied by the Membership Interest of the Initiating Member." Section 10.01(b) provided that the "value of such interest in the Company shall be determined as follows: The Members shall jointly appoint two (2) appraisers, which appraisers shall then jointly determine the fair market value of the assets of the Company. All such appraisers shall be members of the American Institute of Real Estate Appraisers." The purchase price "shall be paid by promissory note of the Company in a sum equal to the purchase price and payable on a direct amortization basis over a twenty (20) year period, but to be due and payable ten (10) years from the date of closing," at an annual interest rate "no greater than" twelve percent nor "less than" eight percent.
Section 11.03 provided that, should a dispute arise between Members, "any Member may require arbitration of such dispute," but if the arbitration did not conclude in sixty days the Member had the option of filing a lawsuit instead. Under Section 11.04, "should any litigation be commenced between the parties hereto or their representatives or should any party institute any proceeding . . . , the party prevailing in such litigation shall be entitled to, in addition to such other relief as may be granted, to a reasonable sum as and for his attorneys' fees and court costs in such litigation."
On April 27, 2010, Gardner, on behalf of defendants, sent a letter which on its face served a put offering notice on "Nelson's Corner Associates, L.L.C., c/o The Heller Group," pursuant to Section 6.03 of the Agreement. The letter was delivered to Martin Heller, who was the president of the Heller Group and, under the terms of the Agreement, also served as the L.L.C.'s property managing member. Because the April 27, 2010 letter is central to this dispute, we quote it in full:
Nelson's Corner Associates, L.L.C. c/o The Heller Group 180 Main Street Madison NJ 07940 Dear Martin, After our conversation today, April 27, 2010, I read the procedure on the operating agreement and how it should take place if a partner wishes to sell. Page 17 section 6: Transferability of Membership Interests which designates the requirement in the operating agreement for acceptance of membership interest.
I thought it would be best to write this letter as we do have another partner associated with us in Nelson Corner Associates LLC, which I believe might become an adversary to my request as well as the money amounts that I feel my interest is worth. As per page 19 paragraph 6.03-Put Option. This letter should be construed as a put offering notice.
In our conversation you mentioned a swap as to how the sale price should possibly work for tax purposes. At this time this does not phase me, as the various trusts involved in this sale shall have to work out the tax ramifications that are agreeable by each trust. The 3 trusts involved in the partnership agreement are; Jamie I. Gardner and David B Gardner as trustees of Lauren J. Gardner trust. It seems that in the Amendment Partner Agreement, Lawrence W. Gardner and David B. Gardner have the right to act on behalf of the trust. Hopefully between myself and you, we shall be able to work out a fair price for the 1/3 interest in Nelson's Corner Associates LLC. I do not wish to have to go through the expense of an appraiser, however until you and I agree to establish a value of the buyout, a problem could occur with any of us. Therefore, I would like to discuss with you the ...