The case was centered around West Lake, Calif.-based Specialty Surgical Center of Thousand Oaks, who implemented an operating agreement which included a provision that allowed the removal of members to protect the business from internal threats.
The plaintiff became a target of this provision after allegedly abandoning his duties while continuing to collect profits. The ASC board then unanimously voted to terminate his ownership interest. The plaintiff sued the ASC, alleging breach of fiduciary duty and other claims.
The court found that the involuntary buyout was protected by California’s business judgment rule, solidifying “the rights of limited liability companies to govern themselves in accordance with their operating agreements,” according to the report.