Lincoln Provision, Inc. v. Aron Puretz, No. 14-1028 (8th Cir. 2015)
Annotate this CaseLincoln, a meat-packing company, and Puretz, an investor, formed Hastings, an Illinois LLC, to bid on cattle-processing plants being sold at a bankruptcy auction. Puretz was to contribute 70% of acquisition and start-up capital; Lincoln 30%, plus management and 40,000 head of cattle per year. Additional details about financing and operations were to be negotiated. To bid, Hastings had to deposit $250,000. Puretz contributed $150,000; Lincoln contributed $100,000. Hastings successfully bid at $3,900,000. Negotiations regarding operations and financing deteriorated. Hastings closed the purchase. Lincoln refused to contribute additional funds and dissociated from Hastings. Under Illinois law, if a member dissociates and the LLC does not dissolve, the LLC must purchase the dissociating member’s distributional interest. Lincoln sought a determination of fair value. The district court held that Lincoln and Puretz each held a 50% interest in Hastings, that the value of Hastings on the dissociation date was $3,900,000, and that Lincoln’s only contribution was $100,000, rejecting Lincoln’s assertions that its identification of the opportunity, business plan, and “sweat equity” had “substantial value.” The court concluded that the value of Lincoln’s interest was $1,950,000, less 30% that Lincoln failed to contribute ($1,170,000), plus return of $100,000, and awarded Lincoln $880,000. The Eighth Circuit reversed. Lincoln and Puretz contemplated that any capital contributed to Hastings would be returned in proportion to their contributions before profits or losses generated by operations were divided equally. Because Lincoln did not make its 30% contribution to capital, it was not entitled to a 30% distribution.
Court Description: Civil case. In action seeking a determination of the fair value of plaintiff's interest in a company, the value of plaintiff's interest was limited to its initial $100,000 earnest money contribution, plus interest from the date of plaintiff's dissociation from the company; reversed and remanded for entry of judgment.
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