Facts

Plaintiff William Smith and defendant owned defendant Ventura Investors Group LLC (VIG) 50/50. When plaintiff moved abroad, defendant seized the LLC for his own benefit. Defendant was paying himself large "management" fees in violation of the LLC's Operating Agreement. He told professionals working for the LLC that the LLC belonged to him and to ignore plaintiff.

Plaintiff filed for dissolution, but defendant demurred, claiming the LLC Operating Agreement barred dissolution.

Defendant then appointed his business associate, Joel Farkas, as the LLC's lawyer, to oppose the dissolution at the expense of the LLC. Farkas ignored plaintiff's protest that this forced him to fund Arakelian's opposition, and refused requests to recuse himself.

On Motion, Judge Jane Johnson recused Farkas and barred the LLC from spending more jointly owned money to oppose dissolution. Arakelian unsuccessfully sought a writ of supercedeas, then appealed the Order. The Court of Appeals later affirmed the order disqualifying Farkas, holding that the LLC should not be taking sides in the dissolution.

Meanwhile, Judge Joseph Kalin entered a preclusion sanction against Arakelian for his discovery abuse, preventing him from contesting dissolution at trial, and imposed monetary sanctions against Arakelian.

The case was then transferred to Judge Michael Johnson, who issued another monetary sanction against defendant and his lawyer.

Facing trial, the Defendant exercised his statutory right to a buyout under Cal Corp Code Section 17351. Judge Johnson rejected an argument the Defendant had waived his buyout right by delaying it for almost two years.

The appraised value of $700,000 was issued by a unanimous appraisal, joined in by even the Defendant's selected appraiser. The Defendant then moved to "vacate the appraisal", and start the process over. The Defendant claimed errors with the valuation, including the appraiser's decision to value the main asset, a building, as the value of the LLC. Judge Johnson denied the Motion to Vacate in July 2012.

The Plaintiff then moved for fees and costs as the prevailing party pursuant to a fee clause in the Operating Agreement. The Defendant then filed a motion for fees and costs, claiming that he was the prevailing party, since he had "defeated" dissolution by obtaining an order allowing him to exercise a statutory buyout.

PLAINTIFF'S CONTENTIONS:
Plaintiff claimed that he was entitled to dissolution of the LLC under Corporations Code Section 17352, or a buyout of his interest; and that defendant was not entitled to defend the action using the funds of the LLC. Plaintiff further claimed that by forcing defendant to exercise a buyout after two years of litigation, plaintiff was the prevailing party.

DEFENDANT'S CONTENTIONS:
Defendant claimed that plaintiff was barred from a buyout by the terms of the Operating Agreement, which agreed not to allow a "dissolution event"; and plaintiff was in default of the Operating Agreement. Defendant further claimed that defendant was the prevailing party, since he had "defeated" plaintiff's request for dissolution.

Result

Plaintiff was paid for his 50 percent interest in the LLC and paid $700,000, and awarded $96,000 in fees and costs against Gary Arakelian. Judge Michael Johnson decided that the Plaintiff was the prevailing party, since he had only sought to be paid for his 50 percent interest, and had not sought dissolution for its own sake.