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Namerow v. Pediatricare Associates, LLC

Superior Court of New Jersey, Chancery Division, Bergen

September 28, 2018

DAVID M. NAMEROW, M.D., Plaintiff,

          Approved for Publication October 21, 2019

          Robert Novack, for plaintiff (Bressler, Amery & Ross, PC, attorneys).

          Steven D. Gorelick, for defendants (Garfunkel Wild, PC, attorneys).

          JEREJIAN, P.J.CH.

         This matter comes before the court by way of defendants' PediatriCare Associates, LLC, Scott W. Zucker, M.D., Jeffrey M. Bienstock, M.D., and Melissa Chism, M.D. ("defendants") application for partial summary judgment filed on September 4, 2018, by their attorneys, Garfunkel Wild, PC. Plaintiff David M. Namerow, M.D. ("plaintiff"), by his attorneys Bressler, Amery & Ross, filed opposition to defendants' motion for partial summary judgment, as well as a cross-motion for partial summary judgment, on September 18, 2018.


         The parties entered into an original Operating Agreement on January 1, 2000, to form PediatriCare as a limited liability company, with the purpose of owning and operating a medical practice. On March 12, 2001, the parties entered into the Amended and Restated Operating Agreement (the "Agreement"), which was the operative document governing the relationship.

         Pursuant to the Agreement, a member has the right to retire once the member has reached the age of sixty (60) and has provided twenty-five (25) years of membership or service to the practice. Section 9.9 of the Agreement (titled "Retirement of a Member") provides that the "retirement purchase price" is calculated in accordance with Section 10 of the Agreement (titled "Determination of Value"). The specific language of Section 10 is determinative, and is cited here in full:

The total value of the company ("company value") shall be the last dated amount set forth on the Certificate of Agreed Value, attached hereto as Exhibit G and made part hereto, executed by the members. The members shall exercise their best efforts to meet not less than once per year for the purpose of considering a new value but their failure to meet or determine a value shall not invalidate the most recently executed Certificate of Agreed Value setting forth the company value then in effect. If the parties fail to agree on a revaluation as described above for more than two (2) years, the company value shall be equal to the last agreed upon value, adjusted to reflect the increase or decrease in the net worth of the company, including collectible accounts receivable, since the last agreed upon value. The value of a member's interest ("Value") shall mean the company value multiplied by the percentage interest held by said member and being purchased hereunder, less any indebtedness that the selling or disabled member, the Decedent, or a member departing for any other reason contemplated hereunder may have to the company or to the other members, whichever the case may be.

         The most recent Certificate of Agreed Value attached to the Agreement stated the "value of the company" at $2.4 million, and was signed by Dr. Namerow, Dr. Zucker, Dr. Bienstock, and Dr. Chism, dated January 1, 2000.

         Plaintiff announced his intention to retire in January 2016, triggering application of Section 10 of the Agreement. Plaintiff's retirement marks the first time that a member of the practice has retired, and thus the first time that PediatriCare has attempted to apply the Section 10 provision of the Agreement with a Certificate of Agreed Value greater than two years old.

         In March of 2016, the parties, as members of PediatriCare, engaged Butzel, Karadimas, Carrabba, Testin, LLC ("BKCT") to perform a fair market valuation for the purpose of assisting the LLC in the matter of business and succession planning. The 2016 BKCT appraisal employed the fair market valuation methodology. In October of 2016, defendants engaged the Coker Group, a healthcare consulting firm, to provide a fair market valuation of the practice for the purposes of determining the retirement purchase price in relation to plaintiff's retirement. Defendants requested the Coker Group use the fair market valuation methodology. The parties are in agreement that the two 2016 fair market valuations were for the purpose of reaching a settlement as to a voluntarily negotiated buy-out number. The parties are also in agreement that no voluntary buy-out number was ever reached.

         Section 25 of the Agreement provides:

This Agreement may be amended only by the vote of at least eighty percent (80%) of the percentage interests of the members of the company; except, however, other than by application of Sections 5 and 6, the Percentage Interests of the members may ...

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