Filed 9/1/21; Certified for Publication 9/22/21 (order attached)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

BERNICE CHENG,

Plaintiff and Appellant,

v.

COASTAL L.B. ASSOCIATES, 

LLC, et al.,

Defendants and 

Respondents.

 B303519

 (Los Angeles County

 Super. Ct. No. BC680509)

APPEAL from an order of the Superior Court of Los 

Angeles County, Dennis Landin, Judge. Affirmed.

Robert D. Feighner for Plaintiff and Appellant.

Einwechter & Hyatt and John P. Einwechter for 

Defendants and Respondents.

* * * * * *
2

This action concerns the purchase of minority interests in a 

California limited liability company pursuant to Corporations 

Code section 17707.03, subdivision (c).1 The subject limited 

liability company, Clary Associates, LLC (the LLC), is owned 

equally by siblings Bernice Cheng (appellant), Arlene Cheng 

(Arlene), Caroline Cheng Jones (Caroline), and Diana Cheng 

(Diana).2 Appellant challenges the trial court’s order confirming 

a majority appraisers’ award valuing the parties’ respective 25 

percent interests in the LLC at a discounted fair market value of 

$623,979 and setting a final buyout price of $621,954.

We affirm the trial court’s order.

BACKGROUND

Involuntary dissolution action and election pursuant to 

section 17707.03

Appellant filed an action for involuntary dissolution of the 

LLC in October 2017. Respondents moved for an order staying 

the dissolution action and electing to purchase appellant’s and 

Arlene’s interests in the LLC pursuant to section 17707.03. The 

parties thereafter stipulated to an order staying the dissolution 

action and appointing three appraisers to determine the fair 

market value of their respective 25 percent interests in the LLC 

“using generally accepted appraisal and reporting methods and 

standards” under section 17707.03. The parties stipulated that 

“[t]he term ‘fair market value’ shall be defined as commonly 

1 All further statutory references are to the Corporations 

Code.

2 Because the parties share the same surname, we refer to 

them by their first names to avoid confusion. Caroline and Diana 

are referred to collectively as respondents.
3

understood in the appraisal industry, California statutes, and 

precedents which have applied Corp. Code 17707.03.” The 

parties further stipulated that “[t]he award of the appraisers, or a 

majority of them when confirmed by the court, shall be final and 

conclusive upon all parties, pursuant to § 17707.03(c)(3).” The 

parties’ stipulation also stated: “Arlene and Bernice have not 

alleged any direct or derivative claims for damages against any 

defendant in this case.[3] Arlene and Bernice reserve the right to 

assert such claims in the future if any evidence supporting such 

allegations comes to light, to the extent permitted by existing 

law, and to seek a lifting of the stay to the extent permitted by 

existing law. Caroline and Diana reserve the right to oppose any 

such requests.”

Pursuant to the parties’ stipulation, the trial court 

appointed John Thomson, Gazelle Wichner, and Laurence 

Sommer as appraisers. At the time of the appraisal, the LLC’s 

sole asset was a single-story industrial warehouse located in San 

Gabriel, California. The building, which was appraised at $3 

million in March 2018, was occupied by a single tenant whose 

five-year lease term was set to expire sometime in 2021. The 

three appraisers worked separately on their initial individual 

valuation reports, and each reached a different valuation.4

3 Appellant’s first amended complaint (FAC), the operative 

pleading at the time the parties entered into the stipulation, 

asserted causes of action for dissolution and partition only. As 

the basis for dissolution, the FAC alleged, among other grounds, 

mismanagement of the property owned by the LLC and 

respondents’ “persistent and pervasive fraud, mismanagement 

and/or abuse of authority.”

4 Thomson calculated a value of $3,252,791 and applied a 31

percent discount, for a fair market value of $561,000. Wichner 
4

Respondents filed a motion asking the trial court to 

instruct the appraisers to determine whether they could agree on 

a consensus valuation. Appellant opposed the motion. The trial 

court granted respondents’ motion and instructed the appraisers 

to review their respective reports, confer with each other, and 

submit their joint conclusions as to the fair market value of the 

LLC interests.

The appraisers submitted a joint final report on August 20, 

2019. In their joint report, the appraisers unanimously agreed on 

a net asset value of $831,973 for a 25 percent interest in the LLC 

as of October 20, 2017. The report stated that a majority of the 

appraisers agreed that the fair market value standard required 

consideration of discounts and “the value should be $623,979 

after the application of a 27% discount applicable to a minority 

interest in the Clary Associates, LLC.”

Respondents moved to confirm the appraisers’ valuation on 

September 4, 2019. Appellant opposed the motion.

The parties then stipulated to an order allowing appellant 

to file a third amended complaint (TAC) in the stayed dissolution 

action.5 The TAC, filed on October 15, 2019, and the operative 

calculated a value of $3,040,000 and applied a 23 percent

discount, for a fair market value of $610,000. Sommer calculated 

a value of $906,973 and concluded no discount was warranted.

5 Appellant filed a second amended complaint on July 17, 

2019, asserting new derivative causes of action for 

mismanagement and breach of fiduciary duty. Respondents 

notified appellant of their intent to demur on the grounds that 

the new derivative causes of action failed to allege statutory 

prerequisites for derivative actions and failed to allege sufficient 

facts to constitute any claims for mismanagement or breach of 

fiduciary duty. Appellant agreed to withdraw the derivative 
5

pleading at the time of the LLC buyout, asserts causes of action 

for dissolution of the LLC, partition, and an accounting. As 

grounds for dissolution, the TAC alleges, among other grounds, 

mismanagement and conflicts of interest by respondents.

On November 12, 2019, the trial court confirmed the 

appraisers’ discounted fair market valuation of a 25 percent

interest in the LLC at $623,979. Pursuant to an agreement by 

the parties, the trial court ordered an additional deduction of 

$2,025 for reimbursement of appraisal fees and set a final buyout 

price of $621,954 for a 25 percent interest in the LLC. The trial 

court ordered respondents to prepare the necessary documents 

and to tender payment to complete the purchase of appellant’s 

and Arlene’s respective LLC interests by January 31, 2020. 

Appellant filed this appeal on January 8, 2020.

CONTENTIONS ON APPEAL

Appellant raises the following contentions on appeal:

I. The trial court’s order instructing the appraisers to 

review each other’s reports, confer with one another, and reach a 

consensus on the fair market valuation did not comply with the 

statutory procedures set forth in section 17707.03. That statute, 

appellant maintains, required the trial court either to confirm 

one of the three valuations initially submitted by the appraisers 

or to make a de novo determination of the fair market value of 

the LLC interests.

II. The consensus valuation confirmed by the trial court 

improperly discounted the fair market value of the LLC interests. 

claims, and respondents stipulated to allow the filing of the TAC 

without any direct or derivative claims of mismanagement or 

breach of fiduciary duty.
6

Such discounts are disallowed under section 2000, which governs 

the buyout of shareholder interests in closely held corporations, 

and appellant argues that discounts should similarly be 

disallowed under section 17707.03.

III. The valuation confirmed by the trial court improperly 

failed to account for appellant’s mismanagement allegations.

DISCUSSION

I. Applicable law and standard of review

Section 17707.03, subdivision (a), authorizes any member 

of a limited liability company to file an action to dissolve the 

limited liability company in certain specified circumstances. The 

statutory grounds for dissolution include “[t]he management of 

the limited liability company is deadlocked or subject to internal 

dissension” (§ 17707.03, subd. (b)(4)), and “[t]hose in control of 

the limited liability company have been guilty of, or have 

knowingly countenanced, persistent and pervasive fraud, 

mismanagement, or abuse of authority” (§ 17707.03, subd. (b)(5)).

In any action for judicial dissolution, the other members of 

the limited liability company may avoid the dissolution by 

purchasing for cash the fair market value of the interests owned 

by the members initiating the dissolution proceeding. 

(§ 17707.03, subd. (c)(1).) If the parties are unable to agree on a 

value, then “[t]he court shall appoint three disinterested 

appraisers to appraise the fair market value of the membership 

interests owned by the moving parties, and shall make an order 

referring the matter to the appraisers so appointed for the 

purpose of ascertaining that value. . . . The award of the 

appraisers or a majority of them, when confirmed by the court, 
7

shall be final and conclusive upon all parties.” (§ 17707.03, subd. 

(c)(3).)

The appraisers’ award does not bind the trial court. The 

court may select among conflicting appraiser opinions or decide 

the matter de novo. (Dickson v. Rehmke (2008) 164 Cal.App.4th

469, 475 (Dickson).) The trial court’s valuation order is 

appealable. (§ 17707.03, subd. (c)(3); Dickson, at p. 476.) We 

review the trial court’s valuation order under the substantial 

evidence standard. (Dickson, at p. 477.) We review de novo 

appellant’s challenge to the trial court’s statutory authority to 

order the appraisers to meet and confer and attempt to reach a 

consensus valuation. (See Mart v. Severson (2002) 95 

Cal.App.4th 521, 530 [trial court’s interpretation of statutory 

standard for valuation subject to de novo review]; City of Desert 

Hot Springs v. Valenti (2019) 43 Cal.App.5th 788, 793 

[determination of proper scope of trial court’s authority under 

statute is a matter of statutory construction subject to de novo 

review].)

II. Alleged failure to follow statutory procedures

A. Section 17707.03 does not prohibit the trial 

court from ordering the appraisers to meet and 

confer and does not require the trial court to 

make a de novo determination of value

The trial court’s order instructing the appraisers to review 

each other’s reports, confer with one another, and attempt to 

reach a consensus valuation did not contravene the statutory 

procedures set forth in section 17707.03. The statute provides in 

pertinent part:

“The court shall appoint three disinterested 

appraisers to appraise the fair market value of the 

membership interests owned by the moving parties,
8

and shall make an order referring the matter to the 

appraisers so appointed for the purpose of 

ascertaining that value. The order shall prescribe 

the time and manner of producing evidence, if 

evidence is required. The award of the appraisers or 

a majority of them, when confirmed by the court, 

shall be final and conclusive upon all parties.” 

(§ 17707.03, subd. (c)(3).)

Nothing in the statutory language prohibits or restricts the trial 

court’s authority to order the appraisers, if unable initially to 

reach a majority consensus on valuation, to confer further with 

each other to determine whether such a consensus can be 

achieved. Similarly, nothing in the statutory language requires 

the trial court to make a de novo determination of value in the 

absence of a consensus valuation determined by a majority of the 

appraisers.

B. Case authority does not require the trial court 

to make a de novo determination of value

Case authority interpreting and applying the buyout 

procedures of section 17707.03 is sparse. Absent such authority, 

courts have looked to cases applying section 2000, which

prescribes similar buyout procedures to avoid dissolution of a 

closely held corporation.6 (Dickson, supra, 164 Cal.App.4th at

6 Section 2000 provides that shareholders representing 50

percent or more of the voting power of a closely held corporation 

may avoid the dissolution of the corporation by purchasing at fair 

value the shares owned by those initiating the dissolution 

proceeding. (§ 2000, subd. (a).) The statute sets forth a 

procedure similar to that in section 17707.03 for the court to 

appoint three disinterested appraisers to ascertain fair value. 

Section 2000 similarly provides that “[t]he award of the 
9

pp. 474-475.) Cases decided under section 2000 do not support 

appellant’s argument that the trial court was required to make a

de novo determination of value.

The court in Brown v. Allied Corrugated Box Co. (1979) 91 

Cal.App.3d 477 (Brown) expressly rejected appellant’s position in 

the context of a shareholder buyout under section 2000: “We find 

absolutely no merit in plaintiffs’ contention that a trial court 

faced with highly conflicting appraisal reports is obligated to 

make a de novo determination of value. Plaintiffs’ authority for 

this proposition, Venables v. Credential Ins. Agency, Inc. [(1956)]

140 Cal.App.2d 724, says no such thing. Rather, the court in that 

case merely held that if the trial court becomes convinced that an 

appraisal award is erroneous, then it becomes the duty of the 

court to examine the matter de novo.” (Brown, at p. 491.)

In accord with Brown, the section 2000 cases appellant 

cites conclude that a de novo determination of value is required 

only when the trial court finds the appraisers’ award to be 

erroneous or incorrect. (Cotton v. Expo Power Systems, Inc. 

(2009) 170 Cal.App.4th 1371, 1376 (Cotton) [“[I]f the court 

concludes that the appraisers’ award is incorrect, rather than 

confirm the award, the court must examine the matter de novo 

and fix the correct value.”]; Brown, supra, 91 Cal.App.3d at

p. 489; Venables v. Credential Ins. Agency, Inc., supra, 140 

Cal.App.2d at p. 727 (Venables).)7 The trial court in this case did 

appraisers or of a majority of them, when confirmed by the court,

shall be final and conclusive upon all parties.” (§ 2000, subd. (c).)

7 Brown and Venables involved shareholder buyouts under 

former sections 4658 and 4659, predecessor statutes to section 

2000. (See Legis. Com. com., Deering’s Ann. Code Corp. Code, 

§ 2000 (2009) pp. 432-433.)
10

not find any of the three appraisal valuations to be erroneous. A 

de novo determination of value accordingly was not required.

Brown, supra, 91 Cal.App.3d 477 also contradicts 

appellant’s claim that the trial court lacked authority to order the 

appraisers, after submitting their initial reports, to meet and 

confer and attempt to reach a consensus valuation. In Brown, 

the trial court’s order appointing the appraisers expressly stated 

that if the appraisers were unable to agree, “‘they shall petition 

the court for instruction.’” (Id. at p. 491.)

III. Allegedly erroneous determination of fair market 

value

A. Minority interest discount

1. The valuation discount was not improper

The appraisal award did not improperly discount the fair 

market value of the LLC interests. The stipulated order 

appellant entered into defines fair market value as that term is 

“commonly understood in the appraisal industry, California 

statutes, and precedents which have applied Corp. Code 

§ 17707.03.” A majority of the appraisers agreed that the fair 

market value standard requires consideration of discounts and 

that a 27 percent discount should be applied to the 25 percent

LLC interests. Wichner and Thomson explained in their 

individual reports that a commonly accepted definition of fair 

market value is set forth in IRS Revenue Ruling 59-60 as “the 

price at which the property would change hands between a 

willing buyer and a willing seller when the former is not under 

any compulsion to buy and the latter is not under any compulsion 

to sell, both parties having reasonable knowledge of the relevant 

facts.” (Rev. Rul. 59-60, 1959-1 C.B. 237.) That same definition 

has been applied by courts in California. (See, e.g., Rappaport v. 
11

Gelfand (2011) 197 Cal.App.4th 1213, 1228 [buyout of limited 

partnership interest]; see also Metropolitan Water Dist. of So.

California v. Campus Crusade for Christ, Inc. (2007) 41 Cal.4th

954, 965 [eminent domain]; In re Marriage of Hewitson (1983) 

142 Cal.App.3d 874, 882, fn. 7 [stock valuation in marriage 

dissolution]; People v. Romanowski (2017) 2 Cal.5th 903, 914-915 

[value of property in theft offenses]; Mola Development Corp. v. 

Orange County Assessment Appeals Bd. (2000) 80 Cal.App.4th

309, 321-322 [valuation for real property tax assessment 

purposes].)

Wichner stated in her report that Revenue Ruling 59-60 

requires discounts to be considered when valuing fractional 

interests. She explained that a lack of control discount “is 

applicable for minority interests, which are interests of less than 

50% in a given asset or entity” and that “[m]inority, noncontrolling interests in real estate holding companies have 

historically sold at a discount in comparison to their prorata 

share due primarily to lack of control and lack of marketability.” 

Wichner further explained that another reason for discounting 

the minority LLC interests was the general unavailability of 

conventional financing for partial real estate interests.

Wichner based her discount analysis on sales of real estate 

limited partnership interests in the secondary market. Thomson 

based his discount analysis on valuation principles applied to 

specialized closed end funds holding real estate assets and 

valuation studies involving restricted stock transactions.

The 27 percent discount applied by a majority of the 

appraisers and confirmed by the trial court is consistent with 

commonly understood fair market valuation principles stipulated 
12

to by the parties. It is also supported by substantial evidence, 

consisting of Wichner’s and Thomson’s reports and analyses.8

We disregard appellant’s argument that a ruling in a prior, 

wholly separate trust dispute between the parties has any 

relevance to the valuation analysis and the discount applied in 

this case. The prior case did not concern the buyout of LLC 

membership interests under section 17707.03 or the valuation of 

those interests. It accordingly has no relevance to the issues 

presented here.

2. The valuation standard prescribed under 

section 2000 does not apply

Appellant contends the valuation standards prescribed for 

shareholder buyouts under section 2000 should apply to LLC 

membership purchases under section 17707.03. Section 2000, 

which governs shareholder purchases initiated to avoid 

dissolution of a closely held corporation, “does not permit a lack

of control discount when determining the fair value of a minority 

shareholder interest.” (Goles v. Sawhney (2016) 5 Cal.App.5th

1014, 1019; see Ronald v. 4-C’s Electronic Packaging, Inc. (1985) 

168 Cal.App.3d 290, 298-299; Brown, supra, 91 Cal.App.3d at

p. 486.) Appellant claims such discounts should similarly be 

disallowed here.

Appellant’s position contravenes ordinary principles of 

statutory construction. When construing a statute, a court need 

only consider other statutes or case law applying other statutes if 

8 One appellate court has suggested that a trial court’s 

decision to apply a minority discount is within the scope of its 

discretionary authority. (Maughan v. Correia (2012) 210 

Cal.App.4th 507, 523 [“the court’s choice to apply a minority 

discount at all may involve an exercise of its discretion”].)
13

the plain language of the statute at issue is unclear. (Hoechst 

Celanese Corp. v. Franchise Tax Bd. (2001) 25 Cal.4th 508, 519.) 

That is not the case here. Section 17707.03 plainly states that 

members may avoid dissolution of a limited liability company by 

purchasing at “fair market value” the membership interests of 

those seeking dissolution. The commonly accepted definition of 

“fair market value” under California law is the price at which the 

property would change hands between a willing buyer and a 

willing seller when the former is not under any compulsion to buy 

and the latter is not under any compulsion to sell, and both 

parties have reasonable knowledge of the relevant facts. 

(Rappaport v. Gelfand, supra, 197 Cal.App.4th at p. 1228; see 

Metropolitan Water Dist. of So. California v. Campus Crusade for 

Christ, Inc., supra, 41 Cal.4th at p. 965; In re Marriage of 

Hewitson, supra, 142 Cal.App.3d at p. 882, fn. 7; People v. 

Romanowski, supra, 2 Cal.5th at pp. 914-915; Mola Development 

Corp. v. Orange Assessment Appeals Bd., supra, 80 Cal.App.4th

at pp. 321-322.) Fair market value includes discounts reflected in 

the market. (See Miller, Discounts and Buyouts in Minority 

Investor LLC Valuation Disputes Involving Oppression or Divorce 

(2011) 13 U.Pa. J. Bus. L. 607, 611 (hereafter Miller) [“‘fair 

market value’ would be the owner’s proportionate interest in the 

corporation multiplied by the value of the corporation, plus or 

minus any premiums or discounts that would be reflected in the 

market”]; see also Moll, Shareholder Oppression and “Fair 

Value”: of Discounts, Dates, and Dastardly Deeds in the Close 

Corporation (2004) 54 Duke L.J. 293 [discussing difference 

between “fair value” and “fair market value” in close corporation 

dissolutions].)
14

Section 2000, in contrast, specifies that shareholders 

seeking to avoid dissolution of closely held corporation must 

purchase at “fair value” the shares of those seeking dissolution.” 

“Fair value” is defined in section 2000 as “the liquidation value as 

of the valuation date but taking into account the possibility, if 

any, of sale of the entire busines as a going concern in a 

liquidation.” (§ 2000, subd. (a); accord, Mart v. Severson, supra,

95 Cal.App.4th at p. 526.) Fair value “does not consider marketrelated factors that could affect value in the particular hands of a 

specific owner. Instead, ‘fair value’ considers only ‘the 

proportionate interest in a going concern.’” (Miller, supra, 13 

U.Pa. J. Bus. L. at p. 611; see Brown, supra, 91 Cal.App.3d at

p. 486; Estate of Rowell (1955) 132 Cal.App.2d 421, 429.)

The difference in the statutory language evidences a 

difference in legislative intent. “‘“When the Legislature uses 

materially different language in statutory provisions addressing 

the same subject or related subjects, the normal inference is that 

the Legislature intended a difference in meaning.”’” (American 

Coatings Assn. v. South Coast Air Quality Management Dist. 

(2012) 54 Cal.4th 446, 463, quoting People ex rel. Lockyer v. R.J. 

Reynolds Tobacco Co. (2005) 37 Cal.4th 707, 717.) Had the 

Legislature intended to apply a “fair value” standard to 

purchases of membership interests under section 17707.03, it 

would have done so expressly in the statutory language.

“Fair value,” as defined in section 2000, does not apply to 

purchases of limited liability membership interests under section 

17707.03.

B. Mismanagement allegations

Appellant’s operative TAC asserts no direct or derivative 

claims of mismanagement. Appellant confirmed in the parties’ 
15

joint stipulation and order that she has “not alleged any direct or 

derivative claims for damages against any defendant in this case” 

and that “there are no grounds for any direct or derivative claims 

for damages asserted against any defendant in this matter.”

The TAC alleges mismanagement and conflicts of interest 

solely as grounds for dissolution of the LLC. The dissolution 

action was stayed pursuant to section 17707.03 and the parties’ 

stipulated order. (§ 17707.03, subd. (c).) There were accordingly 

no claims of mismanagement to be accounted for in the buyout 

valuation.

Appellant’s counsel claimed during oral argument that 

appellant asserted mismanagement claims independent of the 

dissolution proceeding, in her cause of action in the TAC for 

failure to produce LLC records, and these claims should have 

been valued in the appraisal award. To the extent those claims 

were not stayed pursuant to section 17707.03, they were excluded 

from the appraisers’ valuation by the parties’ joint stipulation 

that no direct or derivative claims for damages were being 

asserted against respondents.

Cotton, supra, 170 Cal.App.4th 1371 and Brown, supra, 91 

Cal.App.3d 477, on which appellant relies, are distinguishable. 

Cotton involved reversal of a valuation order under section 2000 

because the valuation failed to consider a pending derivative 

action for breach of fiduciary duty. (Cotton, at p. 1380.) Brown 

similarly involved a valuation that failed to consider the impact 

of a pending wrongful death action against the corporation. 

(Brown, at pp. 482, 490-491.) Here, there were no pending 

actions for the appraisers or the trial court to consider.

Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238, 

which appellant also cites, is inapposite. The court in that case 
16

simply held that an individual shareholder has standing to assert 

a direct cause of action for breach of fiduciary duty against the 

majority shareholders and is not limited to a derivative action. 

(Id. at pp. 1257-1260.) Appellant here has asserted no direct or 

derivative claims of mismanagement.

DISPOSITION

The order confirming the majority appraisal award and 

setting a final buyout price of $621,954 for each 25 percent

interest in the LLC is affirmed. Respondents are awarded their 

costs on appeal.

___________________________

CHAVEZ, J.

We concur:

_______________________________

ASHMANN-GERST, Acting P. J.

_______________________________

HOFFSTADT, J.
Filed 9/22/21

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

BERNICE CHENG,

Plaintiff and Appellant,

v.

COASTAL L.B. ASSOCIATES, 

LLC, et al.,

Defendants and 

Respondents.

 B303519

 (Los Angeles County

 Super. Ct. No. BC680509)

 ORDER CERTIFYING

 OPINION FOR

 PUBLICATION

 NO CHANGE IN

 JUDGMENT

THE COURT:*

The opinion in the above-entitled matter filed on 

September 1, 2021, was not certified for publication in the 

Official Reports. For good cause, it now appears that the opinion 

should be published in the Official Reports, and it is so ordered.

*ASHMANN-GERST, Acting P. J. CHAVEZ, J. HOFFSTADT, J.