Van Winkle • Baten Dispute Resolution

Physician was one of approximately 30 members of a limited liability corporation organized to provide surgery and anesthesiology services to a local hospital. The corporation was governed by an operating agreement that provided for the withdrawal and termination of members. The physician filed for bankruptcy and the Trustee in his estate argued that the estate could sell the membership interest for fair market value and also sought reimbursement for substantial distributions made to other members since the bankrupt physician’s termination. The Operating Agreement contained a provision stating that a member’s bankruptcy constituted an offer to redeem the member’s shares for one dollar. The Trustee argued that such provisions were invalid and that certain applications of the Operating Agreement violated the Starks Act.