Facts

Plaintiff Timothy O'Brien, a licensed California attorney, filed a complaint for involuntary dissolution of AMBS Diagnostics LLC.

Defendant Eric Korsh filed a cross-claim against O'Brien for breach of contract and breach of fiduciary duty.

Cross-complainant AMBS Diagnostics filed a claim against O'Brien for breach of fiduciary duty and intentional interference with prospective economic advantage.

PLAINTIFF/CROSS-DEFENDANT'S CONTENTIONS:
O'Brien argued that Eric Korsh and Edward Panconi breached their respective fiduciary duties as managers of AMBS Diagnostics.

DEFENDANT/CROSS-COMPLAINANT'S CONTENTIONS:
Korsh argued that O'Brien breached the parties' partnership agreement by unilaterally modifying the profit split distribution without prior consent.

AMBS Diagnostics argued that O'Brien diverted business opportunities of AMBS Diagnostics to O'Brien's new competing entity Liberty Diagnostics. AMBS Diagnostics further argued that O'Brien backdated his resignation letter as a manager of AMBS Diagnostics in order to pursue a business opportunity that originally came to AMBS Diagnostics.

Result

The court found that O'Brien breached the partnership agreement with Korsh. The court further found that O'Brien breached his fiduciary duties owed to AMBS Diagnostics and interfered with AMBS Diagnostics' relationship with its physician customer base. Lastly, the court found that O'Brien and Liberty Diagnostics engaged in oppression, fraud and malice and therefore awarded punitive damages in the amount of $677,016 to AMBS Diagnostics. The compensatory award in favor of Korsh on a partnership theory was $73,039, and the award in favor of the company on an LLC fiduciary theory was $487,977, with no determination on O'Brien's allocable share based on his ongoing ownership interest. The company was awarded punitive damages in the amount $125,000.

Other Information

The judgment for dissolution on the complaint was issued in favor of O'Brien, after the cross-defendants elected to not purchase O'Brien's interest in the entity AMBS Diagnostics. The trial court still has to rule on the bond securing the election to remit the pending judgments by the bond amount. Plaintiffs/cross-defendants' motion for new trial was denied on Oct. 23, 2014. The matter is currently under appeal. FILING DATE: Oct. 28, 2011.