# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 4- 10 28

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Lin co ln Pro vi si on , Inc

.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el le e

v.

Aro n P ur et z

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

PMP , LLC

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t

Has ti ng s Acq ui si ti on , LLC, no m in al de fe nd an t

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of Ne br as ka - Om ah a

__ __ __ __ __ __

Su bm it te d: Octo be r 6, 2 01 4
Fil ed : J an ua ry

5, 2 01 5

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Befo re RI LEY, Chi ef J ud ge , W OLLMAN and BYE, Circ ui t J ud ge s.

__ __ __ __ __ __

W OLLMAN, Circ ui t J ud ge

.A ron Pu ret z an d Has ti ng s Acq ui si ti on , LLC (Has ti ng s)

, ap pe al fr om the dis tr ic t

co ur t’s or de r award in g Lin co ln Pro vi si on , In c. (Lin co ln ), $8 80 ,00 0 pl us in te res t as

1

fai r va lu e fo r Lin co ln ’s own ers hi p i nt eres t i n Has ti ng s. We reve rs e an d re m an d.

In Mar c h 2 0 1 0

, Lin co ln

, an Ill in oi s m eat -p ack in g co m pa ny se ek in g to cu t

pr od uc ti on co st s, an d Pu ret z, a New Yor k real -es ta te in ve st or , fo rm ed Has ti ng s as

an Ill in oi s m em

be r-m an ag ed l i mi t e d li ab il it y co m pa ny (LLC) fo r th e pu rp os e of

bi dd in g on two Neb ras ka cat tl e-p ro ces si ng pl an ts th at were be in g s o l d a t a
ba nk ru pt cy au ct io n. Lin co ln an d Pu ret z ag reed th at Pu ret z wou ld co nt rib ut e 70 % of

th e acq ui si t i o n a nd st art -u p cap it al req ui red fo r th ei r joi nt ve nt ur e an d th at Lin co ln

wou ld co nt rib ut e 30 %. To a c c o un t fo r th e di sp ro po rti on at e cap it al co nt rib ut io ns , Lin co ln ag reed to m an ag e th e pl an ts an d to pr ov id e ro ug hl y 40 ,00 0 he ad of cat tl e pe r

y ear t o b e p ro ces se d a t t he pl an ts

.

Late r in Mar ch 20 10

, Has ti ng s fil ed st an da rd fo rm Ill in oi s Arti c l es of
Org an iz at io n, Arti cl e 7 of whi ch req ui res an LLC to st at e whe th er it is to be m an ag ed
by it s m em

be rs or by a m an ag er. The Has ti ng s Arti cl es st at e, “ The Lim it ed Liab il it y

Co m pa ny ha s m an ag em en t ve st ed in th e m em be r(s ),” an d th en li st Lin co ln an d Pu ret z

as th e co m

pa ny’ s two m em

be rs . The Illi no is st an da rd fo rm Arti cl es di d no t requ ire

Has ti ng s to di sc lo se ot he r de ta il s ab ou t th e co m pa ny’ s f i n a n c in g or op erat io ns

. Lin co ln an d Pu ret z in te nd ed to se t ou t th es e de ta il s in th e co m pa ny’ s op erat in g

ag reem en t o nc e th ey

ha d a gr eed on th e v ari ou s t erm s.

To bi d on th e cat tl e-p ro ces si ng pl an ts in th e up co m in g ba nk ru pt c y a u c t io n,

Has ti ng s was req ui red to m ak e an in it ia l earn es t-mone y d ep os it of $2 50 ,00 0 to an

es cro w acco un t. Pu ret z co nt rib ut ed $1 50 ,00 0 and Lin co ln co nt rib ut ed $1 00 ,00 0 t o

The pa rti es ag reed to su bm it th e cas e to a magi st rat e jud ge un de r 28 U.S.C. 1 § 6 36 (c); he reaf

te r, we refe r to th e m ag is tra te jud ge as t he di st ric t co ur t.

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-th e to ta l am ou nt

. Has ti ng s th erea fte r su bm it te d a su cces sf ul bi d of $3 ,90 0,0 00 fo r th e

two pl an ts

.

Mea nwh il e, ne go ti at io ns be twee n Lin co ln an d Pu re t z reg ard in g th e fu tu re

op erat io n an d on go in g fin an ci ng of Has ti ng s be ga n to de te rio rat e, an d th e m em be rs

were un ab le to se tt le on te rm s f o r t h e c o mpan y ’s op erat in g ag reem en t. Alt ho ug h

Lin co ln

, Pu ret z, an d th ei r res pe ct iv e at to rn ey s ex ch an ge d nu m ero us em ai ls an d dr aft

o p erat in g ag reem en ts

, th ey co ul d no t ag ree on se ve ral m ajor is su es , in cl ud in g t h e

m em be rs ’ res pe ct iv e sh ares of pr of it s an d lo ss es , au th or it y fo r da y -to -d ay

m an ag em en t de ci si on s, an d th e pr oc ed ur es fo r cal cu la ti ng th e va lu e of th e m em be rs ’

res pe ct iv e own ers hi p in te res ts in th e co m pa ny. The m em

be rs m et on Ju ne 21

, 20 10

, in a fin al at te m

pt to res ol ve th e i r d i f

f e r e nc es

. Not es pr ep ared to su m m ari ze th e
di sc us si on s at th is m eet in g d es cri be th e is su es up on whi ch th e m em be rs ap pa ren tl y

ag reed

, in cl ud in g th at th e m em be rs ’ cap it al co nt ri b u t i o ns wou ld be rep ai d in fu ll

be fo re th e co m

pa ny’ s pr of

it s an d lo ss es were di vi de d eq ua ll y be twee n th e m em be rs

.

Afte r se ve ral de la y s, Has ti ng s fin al ly clo se d o n t he pu rch as e o f th e p la nt s o n

Ju ne 30

, 20 10

. Bec au se of th e m em be rs ’ in ab il it y to res o l v e t h e ir di sa gr eem en ts

ab ou t th e fin an ci ng an d op erat io ns of th e co m pa ny, Lin co ln refu se d to co nt rib ut e it s

ag reed -u po n 30 % of th e pu rch as e pr ic e fo r th e pl an ts

. Pu ret z was th eref or e req ui red

to pa y th e en ti re $3 ,90 0,0 00 pu rch as e pr ic e, ex cep t fo r th e $1 00 ,00 0 fro m Lin co ln ’s

co nt rib ut io n t o t he esc ro w acco un t t ha t was cred it ed to th e p ur ch as e p ric e.

On Ju ly 2, 20 10

, Lin co ln ’s at to rn ey se nt a le tt er to Pu ret z’s at to rn ey st at in g th at

Lin co ln was di ss oc ia ti ng f r o m Has ti ng s. Und er th e Ill in oi s Lim it ed Liab il it y

Co m pa ny Act (th e Act)

, 80 5 Ill

. Co m p. St at

. §§ 18 0/ 1- 1 to 18 0/ 60 -1

, if a m em be r of

an LLC di ss oc ia te s and th e LLC do es no t di ss ol ve , th e LLC is req ui red to pu rch as e

th e di ss oc ia ti ng m em

be r ’s d i s t rib ut io na l in te res t un de r th e te rm s ag reed to by th e

LLC’ s m em

be rs

. Ill

. Co m

p. St at

. § 18 0/ 35 -6 0( a). If th e LLC do es no t pu rch as e th at

in te res t as req ui red

, th e di ss oc ia ti n g m em be r m ay fil e su it ag ai ns t th e LLC, an d a

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-co ur t th en de te rm in es th e fai r v a l u e o f th e di ss oc ia ti ng m em be r’s di st rib ut io na l

in te res t in th e LLC. Id

. § 18 0/ 35 -6 0( d) -(e)

. As no te d ab ov e, Lin co ln an d Pu ret z ha d

ne ve r ex ecu te d an op erat in g ag reem en t th at de sc rib ed th e m et ho d fo r cal cu la ti ng th e

va lu e of a m em

be r’s own ers hi p in te res t in Has ti ng s. The refo re, i n v o ki ng fed eral

di ve rs it y juri sd ic ti on , Lin co ln fil ed th is la wsu it ag ai ns t Has ti ng s s e e k i n g a
de te rm in at io n o f th e fai r va lu e o f it s i nt eres t i n t he co m pa ny. 2

The di st ric t co ur t he ld a fo ur -d ay be nc h tri al

. Lin co ln arg ue d th at th e fai r va lu e

of it s di st rib ut io na l in te res t in Has ti ng s was “ ha lf t h e va lu e of Has ti ng s,” whi le

Has ti ng s arg ue d th at th e fai r va lu e o f Lin co ln ’s di st rib ut io na l in te res t was

“ $1 00 ,00 0— th e am ou nt [Lin co ln ] co nt rib ut ed to th e acq ui si ti on of th e [p ]lan ts .” The

di st ric t co ur t fo un d th at “ [Lin co l n ] a n d Pu ret z each h[ e]ld a 50 % in te res t in

Has ti ng s,” th at Lin co ln di ss oc ia te d fro m Has ti ng s on Ju ly 2, 20 10

, an d th at th e va lu e

of Has ti ng s on th e di ss oc ia ti on da te was $3 ,90 0,0 00 —t he am ou nt pa id fo r th e pl an ts

in th e ba nk ru pt cy au ct io n. The di st ric t co ur t al so fo un d th at

, be cau se th e pl an ts were

ne ve r op erat io na l an d Lin co ln ne ve r pr ov id ed m an ag em e n t s e r v ic es or cat tl e fo r

pr oc es si ng , Lin co ln ’s on ly co nt rib ut io n to Has ti ng s was th e $1 00 ,00 0 it co nt rib ut ed

to th e es cro w acco un t. In reac hi ng th is co nc lu si on , th e d is tri ct co ur t reject ed

Lin co ln ’s as se rti on s th at its id en ti fic at io n of th e bu si ne ss op po rtu ni ty, gu id an ce in th e
bi dd in g pr oc es s, de ve lo pm en t of a bu si ne ss pl an , an d ge n e r al “ swe at eq ui ty” ha d

“ su bs ta nt ia l v al ue ” fo r whi ch it sh ou ld rece iv e cre di t.

Bas ed on th es e fin di ng s, th e di st ric t co ur t fir st ack no wled ge d th at award in g

Lin co ln it s requ es te d rel ie f—5 0% of th e $3 ,90 0,0 00 to ta l va lu e of Has ti ng s— whe n

Lin co ln fai le d to co nt rib ut e th e cap it al

, m an ag em en t se rv ic es , an d cat tl e it ag reed to

co nt rib ut e “ wou ld res ul t i n an in eq ui ta bl e win df al l” to Lin co ln

. Nev ert he le ss , th e

Lin co ln al so su ed Pu ret z in di vi du al ly, b ut th os e cl ai m s were di sm is se d, an d 2

Lin co ln do es no t ch al le ng e th at de ci si on on ap pe al

. PMP

, LL C

, a l s o na m ed as a de fen da nt

, is act ua ll y na m ed PKMP Co

., LLC, a Neb ras ka LLC fo rm ed by Pu ret z th at

was ne ve r se rv ed an d was no t i nv ol ve d i n t he laws ui t.

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-di st ric t co ur t ul ti m at el y co nc lu de d th at th e fai r va lu e of Lin co l n ’s di st rib ut io na l

in te res t in Has ti ng s was 50 % of th e $3 ,90 0,0 00 va lu e of th e co m pa ny ($ 1,9 50 ,00 0)

, le ss th e 30 % o f th e $3 ,90 0,0 00 pu rch as e pr ic e th at Lin co ln fai le d to co nt rib ut e at

cl os in g ($ 1,1 70 ,00 0)

, pl us a ret ur n of th e $1 00 ,00 0 Lin co ln co nt rib ut ed to th e es cro w

acco un t. The di st ric t co ur t th eref or e en te red an o r d e r award in g Lin co ln $8 80 ,00 0
pl us in te res t fr om

th e Ju ly 2, 20 10 , dat e o f Lin co ln ’s di ss oc ia ti on

.

Has ti ng s fil ed a m ot io n t o c o r r ect th e jud gm en t an d fin di ng s of fact

,

co nt en di ng , am on g ot he r th in gs , th at th e di st ric t co ur t ha d fai le d to gi ve effe ct to th e

m em be rs ’ un de rs ta nd in g th at cap it al wou ld be ret ur ne d in pr op or ti on to th e m em be rs ’

res pe ct iv e co nt rib ut io ns be fo re pr of it s an d lo ss es were di vi de d eq ua ll y

. The di st ric t

co ur t de ni ed th e m ot io n, co nc lu di ng th at th e “ ev id en ce d[ id ] no t su pp or t a f i n di ng

th at th e pa rti es ag reed th at cap it al co nt rib ut io ns wou ld be ret ur ne d in th e pr op or ti on

of th e pa rti es ’ res pe ct iv e co nt rib ut io ns be fo re d i s tri bu ti on of pr of it s” an d th at it s

“ va lu at i o n o f [Lin co ln ’s] di st rib ut io na l in te res t was pr op er an d co ns is te nt wit h th e

Act an d th e ev id en ce pr es en te d.” Has ti ng s no w ap pe al s, arg ui ng th at t h e di st ric t

co ur t erre d in de te rm in in g th e fai r va lu e of Lin co ln ’s di st rib ut io na l in te res t, in

refu si ng to co ns id er Has ti ng s’s st a te -la w de fen se s, an d in cal cu la ti ng th e da te of

Lin co ln ’s di ss oc ia ti on fro m Hast in gs

.

“ [W] e rev ie w th e di st ric t co ur t’s f a c t f i n d in g fo r cl ear erro r, an d we rev ie w
le ga l co nc lu si on s an d m ix ed qu es ti on s of la w an d fact de no vo .” Eck ert v. Tit an Tire

Co rp ., 51 4 F.3 d 80 1, 80 4 (8 th Ci r. 20 08 ). “ [W] e wil l ov ert ur n a fact ua l fin di ng on ly

i f i t i s no t su pp or te d by su bs ta nt ia l ev id en ce in th e reco rd

, if it is ba se d o n a n

erro ne ou s vi ew of th e la w, or if we are le ft wit h th e de fin it e an d fir m co nv ic ti on th at

an erro r was m ad e.” Ri ch ard so n v. Su gg , 44 8 F.3 d 10 46

, 10 52 (8 th Ci r. 20 06 ).

Has ti ng s co nt en d s th at de te rm in at io n of th e fai r va lu e of Lin co ln ’s di st rib ut io na l

in te res t is a m ix ed qu es ti on of la w an d fact su bjec t to de no vo rev ie w, an d Lin co ln

co nt en ds th at th e de te rm in at io n i s a f in di ng of fact su bjec t to rev ie w fo r cl ear erro r.

W e ne ed no t de ci de whi ch st an da rd ap pl ie s, be cau se ev en if rev ie wed un de r th e m or e

-5

-rig or ou s cl ear- erro r st an da rd

, th e di st ric t co ur t’s de te rm in at io n of th e fai r va lu e of

Lin co ln ’s di st rib ut io na l i nt eres t i n Has ti ng s was m is ta ke n. 3

Und er th e Act, on ce a di ss oc ia ti ng m em be r fil es s u it se ek in g a jud ic ia l

de te rm in at io n of th e fai r va lu e of hi s di st rib ut io na l in te res t, th e co ur t m us t cal cu la te

th e fai r va lu e of th e in te res t aft er ta ki ng in to acco un t al l “re l ev an t ev id en ce,”

in cl ud in g, fo r ex am

pl e, th e va lu e of th e LLC as a go in g con cern an d an y ag reem en t

be twee n th e m em

be rs fix in g th e pr ic e or sp eci fy in g a fo rm ul a fo r cal cu la ti ng th e pr ic e

of a di st rib ut io na l in te res t in th e LLC. See 80 5 Ill

. Co m p. St at

. § 18 0/ 35 -6 5( a). An

LLC’ s op erat in g ag reem en t “ go ve rn [s ] rel at io ns am on g th e m em be rs ,” bu t “ [t]o th e

ex te nt th e op erat in g ag reem en t do es no t ot he rwis e pr ov id e, [th e] Act go ve rn s” th os e
rel at io ns

. Id

. § 18 0/ 15 -5

. In ad di ti on , “ pr in ci pl es of la w an d eq ui ty su pp le m en t [th e]

Act.” Id. § 18 0/ 1- 43

.

Acco rd in g to th e di st ric t co ur t, be cau se th e “ ev id en ce sh ow[ ed ] th at [Lin co ln ]

ha d a 50 % in te res t in Has ti ng s,” Lin co ln was en ti tl ed to 50 % of th e va lu e of Has ti ng s

aft er an ad jus tm en t fo r Lin co ln ’s 30 % cap it al -co nt rib ut io n sh or tfa ll an d it s $1 00 ,00 0

co nt r ib ut io n to es cro w. Has ti ng s arg ue s th at co nt rary to th is de te rm in at io n, th e

ev id en ce su pp or te d a co nc lu si on th at th e m em be rs ag reed to a pr op or ti on al ret ur n of

cap it al pr io r to an y di st rib ut io n of pr of it s an d lo ss es , ev en th ou gh th ey ne ve r fin al iz ed

an op erat in g ag reem en t. W e ag ree. The ev id en ce at tri al cl earl y es ta bl is he d th at th e

m em be rs co nt em

pl at ed a pr op or ti on al ret ur n of cap it al act ua ll y co nt rib ut ed an d th at

an y “ 50 % in te res t” Lin co ln ha d was li m it ed to di st rib ut io ns of pr of it s an d lo ss es aft er

th e pr op or ti on al ret ur n of cap it al co nt rib ut io ns

. Of co ur se , be cau se Lin co ln refu se d

Bec au se we ag ree wit h Has ti ng s th at th e di st ric t co ur t erre d in cal cu la ti ng th e 3

v a l u e of Lin co ln ’s di st rib ut io na l in te res t in th e co m pa ny an d be cau se we gr a n t
Has t in gs ’s req ue st fo r rel ie f in th e fo rm of a rem an d wit h “ in st ru ct io n[ s] to va lu e [Lin co ln ’s] di st rib ut ion al int er es t at $100

, 000, ” w e need no t co ns id er Has ti ng s’s ot he r
arg um en ts on ap pe al

.

-6

-to m ak e it s in it ia l 30 % c on tri bu ti on to cap it al , P ur et z act ua ll y co nt rib ut ed 10 0% of

th e cap it al to Hast in gs , les s Li nc ol n’s $ 10 0,0 00 pa y m en t t o t he esc ro w acco un t.

Ji m St ev en s, Jr ., Li nc ol n’s pr es id en t, co nf irmed th at th e m em

be rs “ ag reed to

al l” th e te rm s de sc rib ed in th e no te s fro m th e Ju ne 20 10 m eet in g, in cl ud in g th at “ cas h

pu t in to fu nd in g th e op erat io n wil l be pa id ba ck pr io r to th e 50 -5 0 pr of it sp li t.” One

of Lin co ln ’s ke y em

pl oyees, who was al so p r e s e n t at th e Ju ne 20 10 m eet in g,

c o nf irmed th at th is was th e m em be rs ’ un de rs ta nd in g, te st ifyin g, “ [M]on ey wa s

co m in g in 70 /3 0, th en th at was go in g to be pa id ou t th at sa m e way un ti l th ey go t th ei r

in ve st m en t ba ck

. . . . So [Pu ret z] go t [h is ] 70 pe rcen t ba ck be fo re it was 50 /5 0 sp li t.” 4

In an em ai l to Lin co ln ’s at to rn ey aft er th e Ju ne 20 10 m eet in g, Has ti ng s’s at to rn ey

so ug ht co nf

irmatio n th at th e m em

be rs ag reed th at pr of

it s an d lo ss es wou ld be di vi de d

“ a f t e r r e t ur n of th e fu nd s” co nt rib ut ed to cap it al

. In res po ns e, Lin co ln ’s at to rn ey

co nf irmed th at un de rs ta nd in g, st at in g th at th e ag reem en t was th at “ [i]nv es te d cap it al

, wit ho ut in te res t, was to b e r e tu rn ed 70 /3 0 as in ve st ed .” The pr op os ed op erat in g

ag reem en t dr aft ed by Lin co l n ’s own at to rn ey st at ed th at if th e co m pa ny was
di ss ol ve d, “ an y cap it al in ve st ed in cas h an d no t pr ev io us ly ret ur ne d

. . . to acq ui re th e

as se ts sh al l be r e f

u n d e d i n th e sa m e pr op or ti on s of [7 0/ 30 ], res pe ct iv el y in ve st ed ,”

an d th at on ly “ [a]fter al l cap it al ha s be en ret ur ne d in th e am ou nt or ig in al ly in ve st ed ”

wou ld fu nd s fro m op erat io ns or up on li qu id at io n “ be pa id on a 50 /5 0 ba si s.” In de ed

, in Lin co ln ’s Ju ly 2, 20 10

, di ss oc ia ti on le tt er, Lin co ln ’s at to rn ey de m an ds “ th e va lu e

of [Lin co ln ’s] eq ui ty” in Has ti ng s an d st at es th at “ th e eq ui ty Lin co ln is owe d

. . . . is

The te st im on y at tri al of

te n refe rred to th e m em

be rs ’ or ig in al un de rs ta nd in g 4

th at th ere wou ld be a 70 /3 0 pr op or ti on al ret ur n of cap i ta l co nt rib ut io ns pr io r to an
eq ua l di vi si on of pr of

it s an d l o s s e s

. Thi s ret ur n of cap it al wou ld ha ve be en
ap pr op ria te ha d Lin co ln m ad e it s in it ia l 30 % co n t r i b u ti on to cap it al as or ig in al ly

co nt em pl at ed by th e m em

be rs

. In st ead

, be cau se Lin co ln ul ti m at el y refu se d to m ak e it s 30 % co nt rib ut io n an d Pu ret z was req ui red to co nt rib ut e 10 0% of t h e c ap it al to
Has ti ng s, Li nc ol n i s n ot en ti tl ed to a di st rib ut io n o f 30 % of Has ti ng s’s ca pi ta l.

-7

-ha lf th e va lu e of th e co m pa ny le ss th e de bt

, aft er ret ur n of cap it al to bo th in ve st or s.”

Thi s ev id en ce es ta bl is he s th at th e m em be rs un de rs to od th at th ei r res pe c t i v e cap it al

co nt rib ut io ns wou ld be ret ur ne d in th e am ou nt act ua ll y co nt rib ut ed be fo re pr of it s an d

l o s se s were di vi de d eq ua ll y

. Perh ap s m os t im po rta nt ly, Lin co ln pr es en te d n o

ev i d en ce in di cat in g th at Pu ret z ag reed to co nt rib ut e 70 % of th e cap it al to Has ti ng s

in ex ch an ge fo r th e rig ht to rece iv e on ly 50 % of th e cap it al in rep ay m en t of hi s

in ve st m en t. The ev id en ce d oe s n ot su pp or t s uc h a co nc lu si on

.

Lin co ln arg ue s th at th e di st ric t co ur t co rrec tl y rel i e d o n Arti cl e 7 of th e

Has ti ng s Arti cl es of Org an iz at io n as th e be st ev id en ce th at each m em be r ha d a “ 50 %

in te res t in Has ti ng s” fo r al l pu rp os es —i nc lu di ng fo r pu rp os es of cal cu la ti ng th e fai r

va lu e of a m em

be r’s di st rib ut io n a l in te res t. W e di sa gr ee. The Arti cl es m erel y

es ta b l i s h th at Has ti ng s was to be fo rm ed as a m em be r-m an ag ed LLC an d th at

m an ag em en t was to be ve st ed in it s two m em be rs , Lin co ln an d Pu ret z. The Arti cl es

can no t be read to es ta bl is h th e m em be rs ’ eco no m ic in te res ts in th e co m pa ny. Lin co ln

al so arg ue s th at it c o n tri bu te d th e bu si ne ss pl an up on whi ch th e joi nt ve nt ur e was
ba se d an d th at th is pl an , al on g wit h it s “ swe at eq ui ty” an d ot he r no n

- mo ne ta ry

co nt rib ut io ns , were va lu ab le as se ts en ti tl in g Lin co ln to 50 % of th e va lu e of Has ti ng s. Aga in

, we di sa gr ee. The di st ric t co ur t di d no t cl earl y err in as si gn in g no va lu e to th e
bu si ne ss pl an , t o Lin co ln ’s “ swe at eq ui ty,” or to it s un pe rfo rm ed pr om is es of

m an ag em en t se rv ic es an d cat tl e fo r pr oc es si ng —p art ic ul arl y gi ve n th at Has ti ng s was

ne ve r op erat io na l. The di st ric t co ur t pr op erl y fo un d th at Lin co ln ’s on ly co nt rib ut io n

to Hast in gs was t he $1 00 ,00 0 d ep os it ed in th e es cro w acco un t.

Co ns id eri ng th e ev id en ce ou tl in e d a b o v e—a s well as th e ab se nc e of an y

ev id en ce to th e co nt rary—we co nc lu de th at th e di st ric t co ur t cl earl y erre d in fin di ng

th at “ th e ev id en c e [ d i d ] no t su pp or t” a de te rm in at io n th at th e pa rti es ag reed to a

p r o p o rti on al ret ur n of cap it al co nt rib ut io ns

. The ev id en ce pr es en te d at tri a l

es ta bl is he d th at Lin co ln an d Pu ret z co nt em pl at ed th at an y cap it al th ey co nt rib ut ed to

Has ti ng s wou ld be ret ur ne d to th em in p r o po rti on to th ei r res pe ct iv e co nt rib ut io ns

-8

-be fo re an y pr of it s or lo ss es ge ne rat ed by th e c o mpan y ’s op erat io ns were di vi de d

eq ua ll y

. Bec au se Lin co ln di d no t m ak e it s ag reed -u po n 30 % co nt rib ut io n to cap it al

, it was no t en ti tl ed to a 30 % di st rib ut io n. The ev id e n c e p r e s e n te d at tri al al so

es ta bl is he d th at Lin co ln ’s on ly co nt rib ut io n to Has ti ng s was it s $1 00 ,00 0 de po si t in

th e es cro w acco un t. Th us , th e di st ric t co ur t’s va lu at io n de te rm in at io n was no t

su pp or te d by su bs ta nt ia l ev id en ce, an d we are “ le ft wit h th e d efi ni te an d fir m

co nv ic ti on th at an erro r was m ad e.” Ri ch ard so n, 44 8 F.3 d at 10 52

. W e th eref or e

rev ers e th e jud gme n t of th e di st ric t co ur t award in g Lin co ln $8 80 ,00 0 pl us in te res t,

an d we rem an d wit h in st ru ct io ns to en te r an or de r award in g Li nc ol n $ 10 0,0 00 pl us

in te res t fr om

th e Ju ly 2, 20 10 , dat e o f Lin co ln ’s di ss oc ia ti on fro m Hast in gs

.

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