Preview
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SUPREME COURT - STATE OF NEW YORK
COMMERCIAL DIVISION
TRIALTERM. PART 44 SUFFOLKCOUNTY
PRESENT: Hon. Elizabeth Hazlitt Emerson
X
ISLAND ENDOSCOPY CENTf,R, LLC, ISLAND INGRAM YUZEK GAINEN CARROLL &
GASTROENTEROLOGY CONSULTANTS, P.C., NOEL BERTOLOTTI, LLP
D'SILVA AND RAJKUMAR MARIWALLA. Attorneys for Plaintiffs Island Endoscopy Center,
LLC, Island Gastroenterology Consultants, P.C.,
Ptaintiffs, and Rajkumar Mariwalla
150 East 42'd Street
New York, New York 10017
-against-
BOND, SCHOENECK & KING, PLLC
Attorneys for Plaintiff Noel D'Silva
RAJIV SAXENA, 225 Old Country Road
Melville, New York ll7 47
Defendant.
x THE BRESKY LAW FIRM PLLC
Attorneys for Defendant
9l-31 Queens Boulevard, Suite 520
Elmhurst, New York 11373
DECISION AFTER TRIAL
In December 2005, the defendant Rajiv Saxena, and the plaintiffs Noel D'Silva and
Rajkumar Mariwalla, all of whom are physicians, formed the plaintiff Island Endoscopy Center,
LLC ("Endo"), a New York Limited Liability Company, to own and operate an ambulatory surgery
center. Doctors Mariwalla, Saxena and D'Silva (cotlectively the "Doctors") are, or have been,
physicians whose practice focuses on gastroenterology.r ln connection therewith, the Doctors
entered into a Limited Liability Company Operating Agreement with Dr. Saxena receiving a
33.349% interest in Endo, and Dr. Mariwalla and Dr. D'Silva each receiving a 33.370 interest.
Prior to forming Endo, Dr. Mariwalla and Dr. Saxena formed the plaintiff lsland
Gastroenterology Consultants, P.C. ("Gastro") in January 1984. Gastro was the entity through
which Dr. Mariwalla and Dr. Saxena practiced medicine, with each initially owning 50% of its
stock. ln September 2012, Dr. Saxena sold all of his shares in Gastro but continued as an employee
until May 15,2014.
1
Since November 30,2020, Dr. Saxena's Iicense to practice medicine has been inactive.
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Over time the relationship among the Doctors began to deteriorate, and in a letter dated
April 16, 2015, sent by Dr. Mariwalla's counsel, Dr. Sa,xena was expelled from Endo retroactive to
July 24,2014, due to his alleged failure or inability to quali$ for or maintain prolessional liability
insurance coverage and his alleged termination or suspension as a Medicare or Medicaid provider.
Subsequently Dr. Saxena received a letter signed by Dr. Mariwalla, in or about November 2015,
notifuing him that pursuant to the terms ofEndo's operating agreement a closing ofthe redemption
and purchase by Endo ofDr. Saxena's membership interest was scheduled for December l, 2015,
with the purchase price purportedly calculated as of May 15,2014. Annexed to the letter was a
Purchase and Redemption Agreement executed by Dr. D'Silva and Dr. Mariwalla. Dr. Saxena did
not appear for the closing, nor did he execute the Purchase and Redemption Agreement.
The plaintiffs commenced this action against Dr. Saxena on April 27,2015. The amended
complaint contains seven causes of action alleging breach ofthe Endo operating agreement, breach
of the implied covenant of good faith and fair dealing, fraud, unjust enrichment, breach offiduciary
duty, declaratory judgment and specific performance. The defendant moved for summary judgment
dismissing the complaint, and the plaintiffs cross-moved for partial summary judgment. By an
order ofthis court dated February 23,2021 the defendant's motion was granted to the extent of
dismissing all ofthe causes of action except the first cause ofaction for breach ofcontract and the
seventh cause of action for specific performance. The motion and cross motion were otherwise
denied.
The court notes that this is one ofmany litigations that have been instituted before it by Dr.
Mariwalla, Dr. Saxena, and/or Dr. D'Silva arising from their various relationships with respect to
Island Endoscopy Center, LLC and Island Gastroenterology Consultants, P.C.. Days after this
action was filed Dr. Saxena commenced an action on April 29,2015, against Dr. Mariwalla and
Gastro for breach ofthe Gastro stockholder agreement, among other claims (lndex No.
604522/2015). These actions were followed by: Dr. Saxena's action filed on November 2, 201 5,
against Dr. D'Silva, Dr. Mariwalla, and Endo for breach of the Endo Operating Agreement (Index
No.6l167ll2015); Dr. D'Silva's action filed on January 24, 2022, against Endo, Dr. Mariwalla, and
Dr. Saxena for, inter alia, breach ofthe Endo Operating Agreement (Index No.60147 512022); and,
the January 10,2023 action commenced by Dr. D'Silva against Gastro and Dr. Mariwalla for
fraudulent inducement and breach of contract (lndex No. 6007161202r.'1 After a protracted period
ofdiscovery across all Iitigations involving these parties, which included the appointment ofa
special referee to assist in expediting certain decision making, the parties requested that the court
conduct a trial on the plaintiffs' remaining claims.
A bench trial was held on October 17-21,2022, December 9,2022, and January 6, 2023.
The parties submitted approximately l l6joint trial exhibits, a stipulated statement of facts, and a
2
A sixth action filed on April 3,2017 , a derivative action and proceeding for judicial dissolution of Endoland,
LLC, was brought by Madhu Chandra as Trustee ofthe Saxena Family Trust and as Trustee ofthe Meghna
Saxena-Sarma Family Trust (lndex No. 605955/2017).
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joint statement of issues to be considered. The plaintiffs' case consisted ofthe direct-testimony
affidavits of Dr. Mariwalla, Dr. D'Silva, and Patrice M. Bracken, and the direct testimony of Ross
Kass. The defendant's case consisted ofthe direct testimony affidavit of Dr. Saxena and the direct
testimony of Paula Lacalamita, Craig Bloom, and Nannette Watts. The parties engaged in live
cross-examination and live redirect ofall witnesses except for Patrice Bracken. For purposes of
this litigation Dr. Mariwalla's and Dr. D'Silva's positions are aligned in opposition to Dr. Saxena.
This alignment varies in the other litigations commenced by these parties against one another.
Retuming to the history of their intertwined business relationships, the Doctors formed
several entities related to their medical practice. As noted, in January I 984, Dr. Mariwalla and Dr.
Saxena formed Gastro. In connection therewith they entered into a Stockholder Agreement dated
May 4,1993 ("1993 Stockholder Agreement") (Exhibit 3) which was thereafter replaced by the
Stockholder Agreement dated April 14, 201 I (the "2011 Gastro Death/Disqualification
Agreement") (Exhibit 4) and finally replaced by the Stockholder Agreement dated July 20,2011
(the "201 1 Gastro Stockholder Agreement") (Exhibit 5).
In or about 2004Dr. Saxena, Dr. Mariwalla and Dr. D'Silva (who was at that time an
employee of Gastro) decided to create an ambulatory surgical center (the "ASC'), to be owned and
operated through Endo, so that they and other physicians could perform gastroenterological
procedures in their own center instead of within a traditional hospital setting.2 In furtherance of
their plan, the Doctors entered into a Limited Liability Company Operating Agreement dated as of
December 7, 2005, which was thereafter amended on November 16,2009, and August 1, 201 I (as
amended, the "Operating Agreement") (Exhibits 6, 9 and 10). The Operating Agreement set forth a
number ofprovisions that bear on the issues before the court, each of which will be discussed as
necessary throughout this decision.
In order for Endo to operate the ASC a Certificate of Need ("CON") pursuant to Article 28
of the New York Public Health Law was required. The CON was issued by the New York State
Department of Health in or about 2008. After receipt of the CON the ASC facility was completed
and licensed and the Doctors began performing gastroenterological procedures at the location in
West Islip, New York.
The issues underlying this litigation began with events that occurred in or about 201 I . Dr.
Saxena testified that in March of 201 I he underwent coronary bypass surgery and while he was
recovering in the hospital Dr. Mariwalla retained counsel to prepare the 201 1 Gastro
Death,/Disqualification Agreement (Exhibit 4) which addressed the death or disqualification ofa
shareholder of Gastro, as well as the ownership, management, control/withdrawal and purchase ofa
shareholder's interest. Dr. Saxena alleged that these provisions benefitted Dr. Mariwalla but were
to Dr. Saxena's detriment. Dr. Saxena testified that, nevertheless, he signed the amendment while
he was recovering from his bypass surgery.
2Dr. Saxena testified
at length regarding the actions that he took to create and develop the ASC.
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Although Dr. Saxena retumed to work at Gastro iollowing his recovery from bypass
surgery, Dr. Mariwalla testified that Dr. Saxena began to work less by limiting both his hours and
the types ofactivities that he would undertake on behalf of Gastro.r Dr. Saxena alleged that in
September of 2012 Dr. Mariwalla notified him that he intended to invoke the buy-out provisions of
the 2011 Gastro Stockholder Agreement. Dr. Saxena alleged that Dr. Mariwalla showed him a
letter addressed to Dr. Saxena along with a document relating to Endo entitled "Unanimous Written
Consent" C'UWC), which Dr. Mariwalla told him had already been signed by Dr. D'Silva. Dr.
Mariwalla then told Dr. Saxena that he would also sign the UWC unless Dr. Saxena agreed to sell
his shares in Gastro to Dr. Mariwalla. Dr. Saxena testified that Dr. Mariwalla claimed that he had
the right to terminate Dr. Saxena's employment with Gastro and to purchase, pursuant to the
provisions of paragraph 17 ofthe 201 1 Gastro Stockholder Agreement, his shares in Gastro. More
specifically, Dr. Mariwalla claimed Dr. Saxena's billings or "Stockholder Collections" (as defined
'17
in paragraph of such Agreement) had fallen below the stated minimum during a period of 24
months, as set forth therein, causing Dr. Saxena to be deemed a "Less Productive Stockholder" (as
defined in the 20'l I Gastro Stockholder Agreement). Dr. Mariwalla claimed these conditions gave
him the right to purchase all ofDr. Saxena's shares in Gastro. Dr. Saxena believed that upon Dr.
Mariwalla's purchase of his shares in Gastro, Dr. Mariwalla and Dr. D'Silva would then exercise
their rights under the Operating Agreement to expel him from Endo. The UWC shown to Dr.
Saxena related to Endo, and it purported to expel him from Endo for Specific Cause pursuant to $
10. 1 (|(iii) of the Operating Agreement for, among other things, the failure to remain a shareholder
and/or professional employee of Gastro. Accordingly, by Dr. Mariwalla exercising his rights under
the 201I Gastro Stockholder Agreement, Dr. Saxena could be expelled from Endo based on
provisions set forth in Section 10.1 ofthe Operating Agreement. Dr. Saxena alleges that Dr.
Mariwalla said that he would not move forward with the UWC to expel him from Endo if Dr.
Saxena agreed to sell his shares in Gastro. Dr. Saxena noted that because his expulsion from Endo
would occur prior to September 8,2012,he would receive substantially less for his interest in Endo
because the terms in the Operating Agreement limited the purchase price paid to a member if that
member withdrew or was expelled prior to the"altemative price date," which is defined as three (3)
years after the date patients are first cared for at Endo. Patients were first seen at Endo on
September 8, 2009, which accordingly, set the altemative price date as September 8, 2012.
Consequently, Dr. Saxena testified that he felt compelled to agree to sell his shares in Gaslro, and
on or about September 2012 he sold his shares in Gastro to Dr. Mariwalla. Dr. Mariwalla and Dr.
D'Silva never moved lorward with the UWC to expel Dr. Saxena from Endo.
The Doctors continued to practice together until 2014 when the next series ofevents
underpinning this litigation occurred. On April 15,2014, Dr. Mariwalla delivered a handwrinen
note to Dr. Saxena that stated "this shall serve to notii/ you that your employment with [Gastro]
will terminate effective as of May 15,2014...." (Exhibit 21). Between April 15, 2014 and May 15,
3
Although Dr. Saxena does not fully agree with this description, he acknowledged that his heart condition required
him to reduce his workload.
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2014,Dr. Saxena continued to treat patients at Gastro and perform procedures at Endo. The parties
agree that Dr. Saxena's last day at Gastro was May 15,2014. Just prior to his last day, on May 14,
2014, Dr. Saxena's counsel sent a letter to Dr. Mariwalla disputing his purported termination
(Exhibit 22). The Doctors, through counsel, engaged in the extensive exchange of correspondence,
including the previously mentioned April 16, 2015 letter expelling Dr. Saxena from Endo, and the
letter signed by Dr. Mariwalla and received by Dr. Saxena in or about November 2015, scheduling
the closing for the purchase ofDr. Saxena's membership interests in Endo for December 1, 2015.
That letter included a calculation of the purchase price as of May 15,2014, and was accompanied
by a document titled "Purchase and Redemption Agreement" ('PRA'), which relerenced the
aforementioned December l, 2015 closing. Dr. Saxena commenced new litigation on November 2,
2015 (Soxena v D'Silva, et al.,lndex No. 611671/15) and on November 30, 2015, emergency relief
was granted by Justice Garguilo as Special Term prohibiting the sale of membership interests in
Endo, which, by stipulation, remained in effect pending further order ofthis court.
In this litigation the plaintiffs make two claims: first, the plaintiffs allege that they are
entitled to specific performance under the terms of Section 10 of the Operating Agreement which
would require Dr. Saxena to surrender his membership interest in Endo for purchase; second, the
plaintiffs allege that they are entitled to recover distributions previously made to Dr. Saxena to
which he was not entitled.a More specifically, the plaintiffs claim that Dr. Saxena had withdrawn
from Endo in accordance with the provisions of $ 10.1 (e)(i) of the Operating Agreement on May
15,2014 and that the purchase price ofDr. Saxena's membership interest should be determined as
ol such date. Further, the plaintiffs argue that if Dr. Saxena did not withdraw, then he was expelled
for cause pursuant to the provisions of $ 10.1 (e)(ii) and (D(ii) ofthe Operating Agreement because
he failed to remain on the medical staff of Endo, and./or failed or was unable to qualify for
professional liability insurance coverage, and/or he was suspended or terminated as a Medicare or
Medicaid provider. Finally, the plaintiffs argue that if none ofthe foregoing apply, Dr. Saxena was
expelled in accordance with $ l0.l (e)(ii) because in the discretion ofall remaining members the
explusion was in the best interest of Endo.5
In response, Dr. Saxena claims that he is currently a member ofEndo because he did not
withdraw and his purported termination was ineffective. Atthough Dr. Saxena acknowledged in his
testimony that he did not treat patients or perform procedures since May 15, 2014, that he requested
his malpractice carrier to suspend his coverage due to disability (Exhibit 29), that he requested
Good Samaritan Hospital grant him a leave ofabsence for active staffprivileges (Exhibit 28), and
signed a letter canceling his malpractice policy in which he stated ',1 am completely and
4
Dr. Saxena did not assert any counterclaims against plaintiffs but has asserted direct claims in ScLxena v
Moriwalla, er al (lndex No. 604522/2015) and saxena v D'silva, et ol. (lndex No. 611671lzol5) .
5
As pointed out by Dr. Saxena the plaintiffs' position has evolved over the course of this litigation by the addition
ofthe withdrawal argument and the best interest argument, after originally proceeding on th'e for cause basis.
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permanently retiring from the practice of medicine effective luly 24,2014" (Exhibit 4l), he argues
that those circumstances did not constitute a "Withdrawal" as defined in the Operating Agreement.
Dr. Saxena argues that the language ofthe Operating Agreement regarding Withdrawal does not
pertain to his continuing ability to treat patients, and that to interpret such language in that way
would violate the Federal Anti-Kick-Back Statute which Endo, as an owner ofan ASC, is subject
to. The record reflects that in addition to not treating patients, Dr. Saxena also did not participate
in any other activities related to the business affairs of Endo after May 15,2014. Dr. Saxena argues
that his failure to participate did not constitute a Withdrawal, and instead Dr. Saxena puts forth two
arguments: first, that he was not required to perform any services in order to retain his membership
in Endo; and second, that even if he was required to perform services, he was prevented lrom
participating in the business affairs ofEndo. As for a termination under $ 10.1 (e)(ii) and/or 10.1
(t) of the Endo Operating Agreement, Dr. Saxena argues that such termination was ineffective
because it was not based on facts and, therefore, it was invalid. Further, he argues that references
to his termination being in the best interest olEndo is a pretext, as it was not part of the plaintiffs'
original pleadings and was introduced late in the litigation to support claims that could not be
substantiated. Finalty, Dr. Saxena argues that if cause for termination did exist, the plaintiffs lailed
to follow the provisions ofthe Operating Agreement necessary to compel the surrender ofhis
membership interest. As such, he remains a member of Endo and was, and continues to be, entitled
to the same rights and privileges as Dr. Mariwalla and Dr. D'Silva through today's date. In the
altemative, if the court finds that Dr. Saxena's termination was proper, he requests that the court
determine the date his membership interests ceased and the amount of the purchase price for such
interest.
As previously mentioned this matter is just one of many actions commenced by the parties.
The court observes that all ofthe parties could have, and should have, done many things differently
and their actions have added to the complexity, uncertainty and cost across all matters pending in
the Supreme Court. Tuming first to the plaintiffs' claims regarding specific performance under the
Operating Agreement requiring Dr. Saxena to surrender for purchase his membership interest
pursuant to $ 10.1 (a) ofthe Operating Agreement, the court finds that the plaintiffs have met their
burden and directs that such purchase be completed at a price and on the terms hereinafter
described. The court finds that the credible evidence set forth in the record demonstrates that Dr.
Saxena acted in a manner that constituted a Withdrawal as defined in $ 10.1 (e) of the Operating
Agreement. The court recognizes, as the defendant has argued, that the plaintiffs have put forth a
number oftheories, including that plaintiffs had the right to terminate Dr. Saxena for a variety of
reasons and that these theories have evolved tkoughout the litigation. However, in reaching its
determination the court has relied on the provisions of Section 10 ofthe Operating Agreement. The
court has examined the plain language of Section 10 and notes that $ l0.l (e)(i) defines the term
Withdrawal as "a termination of a Member's relationship with the LLC or its business operations
for any reason . . .". Pursuant to such language, which the court finds is clear on its face, the
Operating Agreement does not permit passive investment. Rather, the Operating Agreement
requires a member to have a continuing relationship with the business operations ofEndo, whether
that relationship is as a practicing physician, or in some other capacity. In addition to the express
provisions ofsection 10, this theme ofa member's interest being conditioned on a continuing
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relationship with the LLC runs throughout the Operating Agreement. Accordingly, the correct
interpretation ofthis provision is that each member must contribute to the business ofEndo or such
member will be deemed to have withdrawn. The language in $ 10.1 (e)(i) makes clear that
cessation ofparticipation "for any reason" constitutes a Withdrawal. By executing the Operating
Agreement every member agreed that all members must participate in the affairs of the LLC and, as
previously stated, that passive investment would not be permitted. Further, upon a withdrawal each
member obligated himself to surrender for purchase his membership interest in accordance with $
10 of the Operating Agreement. Additionally, $ l0.l (c) goes so far as to say that if a member fails
to sell his interest to the LLC, the membership interest shall be deemed to have been sold to the
LLC. Moreover, pursuant to $ 10.2 (c) each member irrevocably appointed the other members as
their attomey-in-fact in order to compel a sale if the withdrawing member refuses to surrender his
membership interest. Such language, together with the phrase "for any reason," further establishes
that Withdrawal is not dependant on the individual member's desire or intent to withdraw, but
rather on the member's behavior with respect to Endo.
Dr. Saxena has argued that to interpret membership to require active participation in Endo
would violate the Federal Anti-Kick-Back Statute (the "statute"). While recognizing that Endo and
its members are subject to such statute, the court finds that by interpreting $ I 0 of the Operating
Agreement to require members to have a continuing relationship and continued involvement with
the business operations ofEndo as a condition ofcontinued membership does not violate the
statute. First, as demonstrated by Exhibits 8 and 12, the Operating Agreement was submitted to,
and reviewed by, the New York State Department of Health, which is the licensing body lor the
ASC, and although they rendered comments and requested changes to certain provisions, they made
no requests that the Doctors alter $ 10. Further, all members affirmed to the New York State
Department of Health that the Operating Agreement did not violate the Anti-Kick-Back Statute
(Exhibit l2A). The language of $ 10 makes no reference to any set of specific duties or activities
and makes no mention ofpracticing medicine or performing procedures, but rather requires any
participation in the business (emphasis supplied). Accordingly, the language of Section 10, on its
face, does not violate the statute.
Perhaps more importantly, an analysis ofExhibits 76-78, which consist of"no action"
letters and Advisory opinions, makes clear that requiring a member to remain active and engaged
in the business operations ofEndo does not violate the purpose, intent or letter of the Federal Anti
Kick-Back statute. The stated purpose of the statute is to prohibit remuneration that is paid
purposefully to induce or reward referrals ofservices payable by federal health care providers. The
focus ofthe statute is to prevent overuse and unnecessary surgeries. Further, the statute specifically
permits a physician-owned ASC such as Endo, where physicians will treat their patients at centers
and receive financial gain in retum. Requiring each member to have a continuing retationship with
Endo and continue to remain involved the business affairs does not run afoul ofthe statute.
Further, Dr. Saxena concedes that even if he was unable to treat patients, as a continuing member
ofthe medical staffofEndo he could serve on Endo's committees, participate in the Federal and
State inspection processes ofEndo, oversee the care provided by the physicians and the functioning
ofthe non-physician staff at Endo, oversee bitling and collections policies, and ensure that Endo
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was functioning in conformity with all applicable Federal and State regulations.
In this case, the record reflects that Dr. Saxena began to limit his participation in the
practice of medicine by working only 2-3 days a week, and when he was not in the office he was
generally unavailable to cover calls from his patients or calls from the hospitals, and did not take on
night or weekend call duty, all olwhich negatively impacted the practice. The court credits Dr.
Mariwalla's testimony that Dr. Saxena wanted to stop working, and that when he confronted Dr.
Saxena with the handwritten note terminating his employment Dr. Saxena did not object. Further,
Dr. Saxena's behavior during the period from April 15, 2014 through May 15,2014, as well as his
subsequent actions regarding his hospital privileges and medical malpractice policy (Exhibits 28-
29) manifested his Withdrawal in accordance with the provisions of g 10. Dr. Saxena never
expressed any desire during that time to continue seeing patients. nor did he express any desire lo
continue at Endo in any other capacity. Even if Dr. Saxena was unable to perform procedures or
see patients as he had in the past, he could have maintained his relationship with the business of
Endo by contributing in other ways. While Dr. Saxena alleged that he was prevented from making
such a contribution, there is no evidence that Dr. Saxena attempted to pursue any other role in the
business affairs ofEndo, despite conceding that he could have continued as a member ofEndo's
medical staff by providing various other services even if he was unable to treat patients. While Dr.
Saxena points to correspondence between lawyers disputing his right to enter and treat patients at
Endo's facility, the court has held the operative language in g l0.l (e)(i) is not linked to the practice
of medicine. None of the testimony or documentary evidence establishes that Dr. Saxena sought
any type of a continuing role in the business aflairs ofEndo, nor did he act on the offer by Dr.
Mariwalla that he come back to the practice, which was extended to him sometime in May or June
of2014. Rather, it was Dr. Saxena's position that he could remain a shareholder without a
continuing contribution, which the court has already concluded is inconsistent with the plain
meaning of Section 10.
Accordingly, the cou( finds that Dr. Saxena did in fact withdraw in accordance with the
provisions of the Operating Agreement and his withdrawal was effective May 15,2014. The court
notes that Section 10 ofthe Operating Agreement lays out the lormula for the purchase, and the
court directs that the parties follow this formula in calculating the purchase price.
The court notes the direct-testimony ofRoss Kass in support ofthe plaintiffs' claim to
recover distributions made to Dr. Saxena after his withdrawal. The court reserves decision on this
claim which will be addressed further at the scheduled hearing.
Dr. Saxena argues that even if the court finds that there is a basis for the plaintiffs to acquire
Dr. Saxena's membership interest, such transfer should be deemed void as the plaintiffs failed to
strictly adhere to the procedures set forth in the operating Agreement. In particular, Dr. Saxena
relies on Section 7 (Prohibition Against Transfer ofLLC Interest), Section 10 (Disposition of
Shares Upon withdrawal), and more particularly section 10.2, which contemplates a closing and
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delivery of a promissory note. In opposition the plaintiffs argue that they attempted to comply by
scheduling a closing for December l, 2015, and delivering written notice thereofto Dr. Saxena.
The plaintiffs further note that Dr. Saxena commenced litigation and moved by Order to Show
Cause for a TRO, which was granted by the Honorable Jerry Garguilo, and which, among other
things, prohibited them from selling any membership interest in Endo. As noted, such TRO has
been carried forward by stipulation ofthe parties which this court has always interpreted as staying
the sale of membership interest.
As for Dr. Saxena's arguments regarding Section 7 of the Operating Agreement, the court
notes that this Section does not apply to the case at bar, which is covered by Section 10. As
previously noted, transfers of membership interests pursuant to Section 10 are selfexecuting.
Although Section l0 contemplates a closing, Section 10.1 (a) makes clear that upon a Withdrawal
such member, or its legal representative, shall sell and the remaining member must purchase or
dissolve the LLC, thereby ensuring that a Withdrawing Member's Interest will be purchased or sold
and value received therefor. Section 10.1 (c) emphasizes the mandatory nature ofthe sale by
providing that if a member fails to sell his interest the interest is deemed to have been sold to the
LLC, and 10.2 (c) provides that each member inevocably appoints the other members as agent and
attomey-in-fact to complete the closing if the Withdrawing member fails or refuses to complete the
closing. Accordingly, there is no doubt that the members agreed that the sale was self executing.
As for the remaining provisions of Section 10.2 which required the LLC to deliver a promissory
note, Dr. Saxena sought and received an order ofthis court that clearly and fairly was interpreted to
stay the closing. As Dr. Saxena did not petition this court for relieffrom the stay, the court declines
to deem the transfer void.
As for Dr. Saxena's argument regarding the failure ofthe plaintiffs to follow corporate
formalities, the couft notes that this failure was the custom and practice ofthe LLC. As the LLC
was member managed, it was their responsibility to adhere to appropriate corporate formalities.
Accordingly, it is
ORDERED that on or before October 12,2023 the parties shall jointly prepare and email to
the court a proposed judgment in accordance with the formula set out in Section I 0 of the
Operating Agreement, requiring Island Endoscopy Center, LLC to pay Dr. Saxena for his
membership interest, less interest; and it is further
ORDERED that the parties are directed to appear in-person on October 17 ,2023, at l0:3 0
a.m., for a continued hearing on the issues including the calculation of interest, the plaintiffs' claim
to recover distributions made to the defendant after withdrawal, and the mechanics of payment.
DATED: September 21, 2023
J. S.C.
HOiI. ELIZAEEITI I{AZLTT EMERSOT{
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