Sherwood Park Business Center, LLC. v. Taggart

If a trial court declares a member's expulsion from an LLC and the remaining members exercise their option to purchase the expelled member's share, the interest owed for the purchase begins to accrue on the date the trial court enters its judgment.

Taggert appealed a trial court judgment determining he was to be expelled from Sherwood Park Business Center, LLC (SPBC) and transactions relating to his ownership interest would be unwound. Taggert owned a 25% interest in SPBC. During the time he owned this interest, he diverted a large sum of money from the company. This and other misdeeds eventually led to his expulsion. The trial court declared the effective date of his expulsion as January 1, 2008. Taggert claimed he could not be expelled because he had transferred his share to another LLC before this date. SPBC's operating agreement allowed transfer of an owner's interest to a third party in a limited set of circumstances. Transfer of the interest required either the approval of the other members or the third party be an entity controlled by the transferring member. Taggert had created BT of Sherwood LLC (BT) and proceeded to transfer his interest in SPBC to the new LLC. Taggert's attorney emailed SPBC's attorney a notification of the transfer at that time. However, no documentation of the transfer was provided. Soon after, Taggert transferred ownership of BT to his attorney. This transaction was kept secret. SPBC brought an action to expel Taggert from the LLC and unwind the transactions transferring Taggert's interest. The Court affirmed the trial court's holding that the transfer from Taggert to BT was invalid because no proof of the transaction was given as required by ORS 63.249(6). As a result, Taggert could be expelled from the LLC. This triggered an election to purchase which was exercised by SPBC's members. The Court held the resulting interest in the purchase transaction began to accrue when the trial court entered its judgment, rather than the earlier effective date of Taggert's expulsion. The judgment was the first date from which the members of SPBC had a right to purchase the interest. Affirmed.