Court Opinion

ID: 4690125
Source: CourtListenerOpinion
Date Created: 2021-05-26 14:09:30.867228+00
Date Added: 2024-06-11T08:04:58.121458
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
              APPROVAL OF THE APPELLATE DIVISION

                                SUPERIOR COURT OF NEW JERSEY
                                APPELLATE DIVISION
                                DOCKET NO. A-1152-20

PREMIER PHYSICIAN
NETWORK, LLC,
                                  APPROVED FOR PUBLICATION
     Plaintiff-Respondent,
                                         May 26, 2021

v.                                   APPELLATE DIVISION

ROBERT MARO, JR., M.D.,

     Defendant-Appellant.
_________________________

PREMIER PHYSICIAN
NETWORK, LLC,

     Plaintiff-Respondent,

v.

TIMOTHY SHACK, M.D.,

     Defendant-Appellant.
_________________________

          Argued March 9, 2021 – Decided May 26, 2021

          Before Judges Fisher, Moynihan, and Gummer.

          On appeal from the Superior Court of New Jersey,
          Law Division, Camden County, Docket Nos. L-0166-
          18 and L-0167-18.
            Peter M. Rhodes argued the cause for appellants
            (Cahill, Wilinski, Rhodes & Joyce, PA, attorneys;
            Peter M. Rhodes, on the brief).

            Robert G. Kenny argued the cause for respondent
            (Hoagland, Longo, Moran, Dunst & Doukas, LLP,
            attorneys; Michael J. Baker, of counsel; Richard J.
            Mirra, on the brief).

      The opinion of the court was delivered by

GUMMER, J.S.C., (temporarily assigned)

      Because the court misinterpreted statutory law 1 in determining a draft

operating agreement was the operating agreement of a limited liability

company (LLC), and because a genuine issue of material fact exists as to

whether and when a draft operating agreement became the operating agreement

of plaintiff Premier Physician Network, LLC (PPN), we reverse the trial

court's order granting in part plaintiff's partial summary-judgment motion and

affirm its order denying defendants' partial summary-judgment cross-motion.

Finding no abuse of discretion, we affirm the order compelling production of

defendants' tax returns.

      For the appeal of the order granting plaintiff's summary-judgment

motion, we take the facts from the record, viewing them in a light most

favorable to defendants, the non-moving parties. Green v. Monmouth Univ.,

1
  The Revised Uniform Limited Liability Company Act, N.J.S.A. 42:2C-1 to -
94 (the Act).

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                                      2
237 N.J. 516, 529 (2019); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520,

540 (1995).

      Defendants Robert Maro and Timothy Shack were partners with four

other physicians in a medical practice called Robert J. Maro, M.D., P.A. (Maro

Group). Sometime in or around August 2014, defendants and their partners

were approached about forming an organization with other doctors that would

allow them to save on costs and receive higher reimbursement from insurers.

That organization ultimately was PPN, which was created as a limited liability

company by the filing of a certificate of formation with the New Jersey

Division of Revenue on August 12, 2014.

      Maro and other physicians signed a Letter of Intention Agreement (LOI)

on or about October 16, 2014. 2 Its introductory paragraph stated the LOI was

"intended to set forth in principle the terms of a proposed transaction involving

each of the physicians . . . who sign counterparts of this [LOI], pursuant to

which the [physicians] intend to participate [in] a multi-specialty medical

group [PPN]." Paragraph one of the LOI set forth the purpose of PPN: to

2
   The LOI appears to have been executed by Drs. Catherine Montgomery,
Eduardo Enriquez, Andrew Blumenthal, Toby Soble, Joseph Costabile, Lisa
Dructor, Sean Goudsward, Barbara Winfield, Mark Todt, Terence Schiller,
Keith Damerau, Thomas P. McMahon, MaryAnn McMahon, and defendant
Maro. Shack's signature does not appear on the copy of the LOI in defendants'
appellate appendix but in their brief defendants assert he signed it. In its brief,
plaintiff acknowledges Shack joined PPN with the rest of the Maro Group.

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"form a multi-specialty medical group, intended to provide increased financial

stability to its members and improved patient care and outcomes, by partnering

with insurance companies and other stakeholders, developing ancillary

services, leveraging economies of scale, facilitating practice coverage . . . and

developing superior back office management and IT support." Paragraph two

provided that a signature on the LOI "will constitute that person's co nsent to

the terms contained in this [LOI]" and that after at least four people signed the

LOI, the signors and the identified "[o]rganizers" 3 "will initiate negotiation and

preparation of a definitive operational agreement (the 'Definitive Agreement')

and any other collateral agreement(s) necessary and proper to facilitate the

formation and commencement of the professional and business affairs of

[PPN]."   Paragraph four stated "the parties will use good faith efforts to

execute the Definite [sic] Agreement prior to December 13, 2014," and "[i]f

the parties are unable to negotiate and execute the Definitive Agreement by

such date, any [s]ignatory, for any reason whatever, with or without cause,

may terminate negotiations as to their participation in [PPN] by written notice

to the [o]rganizers." Paragraph seven specified, "[s]ubsequent to the execution

of this [LOI], and in connection with the negotiation and preparation of the

3
    The "[o]rganizers" were identified as Enriquez, Costabile, Soble,
Blumenthal, and Montgomery.

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Definitive Agreement and related documents, [the physician] agrees to

negotiate diligently and in good faith the terms of the Definitive Agreement,

which negotiation is expected to involve . . . prompt review of and response to

proposed agreements and other undertakings. Notwithstanding the foregoing,

[the physician] shall not be under any obligation to continue with his/her

involvement if he/she [sic] the terms of the proposed Definitive Agreement are

not satisfactory . . . for any reason in his/her sole discretion." Paragraph ten

stated the "[i]ntent of [p]arties":

             The agreements set forth in Paragraphs [three, four,
             and five] of this [LOI] shall be binding legal
             obligations of the parties hereto. The remaining
             portions of this [LOI] are intended only as guidelines
             for the drafting and execution of a Definitive
             Agreement and are not intended to and shall not
             constitute a binding legal obligation, which shall only
             arise upon the execution and delivery of the Definitive
             Agreement. While the concepts expressed in this
             [LOI] represent the mutual understanding of the
             parties to date, it is not intended that the specific
             language of the provisions shall not be negotiated, and
             the specific terms of the Definitive Agreement are
             finally subject to the mutual approval of all parties
             thereto.

Paragraph twelve provided: "[t]his Agreement contains the entire agreements

among the parties relating to the subject matter thereof and supersedes all prior

agreements or commitments.            This Agreement may not be amended or

modified except by a writing executed by all Signatories."

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      On January 9, 2015, William Febus, CEO of PPN, sent an email to

several email addresses, including addresses appearing to belong to

defendants.4 In the email, Febus included an agenda for a January 12, 2015

meeting; the first subject on the agenda was "[o]perating [a]greement." On

January 21, 2015, Febus sent an email with the subject "Schoppmann's

Response," stating he had attached comments "from our attorney Kern

Augustine Conroy and Schoppmann," referencing a teleconference meeting the

next evening, and advising "I have not received the [forty-two] concerns

regarding the Operating Agreement. Once[] I receive them[,] I will send them

to everyone along with a copy of my contract. If you have any questions or

concerns, please let me know." 5

      On January 26, 2015, Febus sent an email with the subject "Operating

Agreement," asking the recipients to review an attached draft operating

agreement:

             I have attached the Operating Agreement with the
             changes per our phone call this past Thursday evening.

4
  Two addresses appear to be defendants' email addresses because they include
defendants' names. During oral argument, defendants' counsel did not deny
those addresses were defendants' addresses.
5
   According to Lisa A. Dructor, D.O., who identifies herself as a former
member of the Maro Group and PPN, the attached document included a
response by PPN's attorneys to comments from Montgomery's personal
attorney.

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             Since, there is a possibility of tomorrow being a snow
             day then tomorrow will be a great opportunity to
             review the Agreement. Time is [of] the essence and I
             need to have [these] documents to our Insurance
             carriers . . . by the middle of this [sic] to have
             everything in place for February 1st. So, I have our
             carriers pick them this week. If you have any
             questions, please do not hesitate to contact me.

Section 1.63 of the draft defined "Member" as "a person executing this

Agreement or a Joinder Agreement as an existing Member or a new Member,

the Member Services Agreement and an Asset Contribution Agreement, if

applicable, as directed by the Board of Managers." Section 2.5 of the draft

stated "[a]ll current Members of [PPN] . . . shall be listed on the most current

attached Exhibit A . . . ." The Exhibit A attached to the draft did not contain

any names.

      In support of its motion for partial summary judgment, plaintiff

submitted the certification of its attorney, who certified that "a true and

accurate copy of the Operating Agreement of [PPN] dated January 1, 2015" 6

was attached. That document, which had an effective date of January 1, 2015,

contains signatures, none of which is dated.       Exhibit A attached to the

6
  Counsel did not explain how he would have personal knowledge the attached
document was "a true and accurate copy" of PPN's operating agreement. See
R. 1:6-6 (stating a court may consider "affidavits made on personal
knowledge, setting forth only facts . . . to which the affiant is competent to
testify").

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document sets forth a "LIST OF MEMBERS," which does not include

defendants.

      Defendants did not execute the operating agreement. 7 Defendants assert

in their appellate brief they had not seen the operating agreement until this

litigation began. Maro testified he had seen the operating agreement before his

deposition but not before he joined PPN.        During his deposition, Shack

testified he did not recall seeing or signing the operating agreement. The

record does not contain any proof the signed copy of the purported operating

agreement was sent to defendants.

      Between January 1, 2015, and January 22, 2016, defendants submitted

insurance-claim billings to PPN, cash payments for deposit in PPN accounts,

and credit-card payments for deposit through PPN's credit-card company

system. During that time, PPN handled the billing, collection, and accounts-

payable work for defendants and paid their malpractice insurance premiums

and rent for the building where they practiced. Employees from the former

Maro group were paid by PPN. On April 16, and April 22, 2015, respectively,

7
   The trial court found "the final draft of the agreement that ultimately was
signed by everyone, except for [defendants], was circulated." It is not clear to
us what the trial court meant by "everyone." Some people, other than
defendants, who had signed the LOI did not sign the operating agreement, and
some people who were listed as members in Exhibit A of the purported
operating agreement had not signed the LOI.

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                                       8
Maro and Shack executed a personal guaranty agreement with Choice Health

Finance on behalf of PPN. PPN issued K-1's to defendants for 2014, 2015, and

2016. After January 22, 2016, defendants stopped submitting payments to

PPN and returned "to practicing on their own" in February 2016.

      Plaintiff filed complaints against defendants, alleging they had joined

PPN as members on or about January 1, 2015, were bound by plaintiff's

operating agreement, and owed plaintiff any "[s]hortfall [a]mount" and

penalties for giving less than ninety-days' notice of their withdrawal and for

withdrawing after the first anniversary and before the third anniversary of

PPN's creation. Defendants filed answers, denying they were bound by the

operating agreement or owed plaintiff any money, and counterclaims, asserting

plaintiff's "total failure to uphold its promises" caused them to "expend large

sums of money to revamp their offices, attempt to collect its accounts

receivable and other expenses." The court later consolidated the cases.

      Before the close of discovery, plaintiff moved to compel production of

defendants' 2014, 2015, and 2016 tax returns. Plaintiff also moved for partial

summary judgment, asking the trial court to find defendants were members of

PPN from January 1, 2015, until at least January 22, 2016, were bound by the

operating agreement, voluntarily withdrew on January 22, 2016, and owed

plaintiff a shortfall amount, penalties, and attorneys' fees based on the terms of

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                                        9
the operating agreement. Defendants opposed plaintiff's motions and cross-

moved for a protective order to prevent disclosure of their tax returns and for

partial summary judgment, seeking an order declaring the operating agreement

void and dismissing the complaint with prejudice.

      After hearing oral argument, the trial court rendered an oral opinion.

Relying primarily on the language of N.J.S.A. 42:2C-12(b), which states "[a]

person that becomes a member of a limited liability company is deemed to

assent to the operating agreement," the court held "all members of the LLC in

this case are deemed to have assented to the operating agreement," including

defendants even though they had not signed it. The trial court reached that

conclusion even though it also found "[t]here's a material issue as to whether

or not [Maro] ever agreed to the operating agreement so that the definition of

operating agreement came into effect." The trial court determined defendants

had to produce "any tax documents that they intend to use in their

counterclaim."

      On November 13, 2020, the court issued orders granting in part

plaintiff's motion for partial summary judgment:     finding defendants were

members of PPN "in 2014 and at all relevant times set forth in the [c]omplaint"

and were bound by the operating agreement "drafted and circulated in or about

January 2015" even though they had not executed it; denying without prejudice

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                                      10
plaintiff's request for damages and fees; granting plaintiff's motion to compel

production of defendants' tax returns, requiring defendants to produce their tax

returns if they or their expert "intend to use any information contained within

these tax returns at trial or in the preparation of any expert report"; and

denying defendants' cross-motions for summary judgment and a protective

order. We granted defendants' motion for leave to appeal.

      We review a grant of summary judgment using the same standard that

governs the trial court's decision. RSI Bank v. Providence Mut. Fire Ins. Co.,

234 N.J. 459, 472 (2018). Under that standard, summary judgment will be

granted when "the competent evidential materials submitted by the parties,"

viewed in the light most favorable to the non-moving party, show there are no

"genuine issues of material fact" and that "the moving party is entitled to

summary judgment as a matter of law." Bhagat v. Bhagat, 217 N.J. 22, 38

(2014); see also Grande v. Saint Clare's Health Sys., 230 N.J. 1, 24 (2017); R.

4:46-2(c).

      "An issue of material fact is 'genuine only if, considering the burden of

persuasion at trial, the evidence submitted by the parties on the motion,

together with all legitimate inferences therefrom favoring the non-moving

party, would require submission of the issue to the trier of fact.'" Grande, 230

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                                      11
N.J. at 24 (quoting R. 4:46-2(c)). We owe no special deference to the trial

court's legal analysis. RSI Bank, 234 N.J. at 472.

      The resolution of this appeal depends on the meaning of language

contained in the Act. N.J.S.A. 42:2C-2 defines "[o]perating agreement" as

            the agreement, whether or not referred to as an
            operating agreement and whether oral, in a record,
            implied, or in any combination thereof, of all the
            members of a limited liability company, including a
            sole member, concerning the matters described in
            subsection a. of section 11 of this act. The term
            includes the agreement as amended or restated.

N.J.S.A 42:2C-12(b) provides:      "[a] person that becomes a member of a

limited liability company is deemed to assent to the operating agreement."

      Our "paramount goal" in interpreting a statute is to determine the

"Legislature's intent."   DiProspero v. Penn, 183 N.J. 477, 492 (2005). To

achieve that goal, "we start with the words the Legislature used." Simadiris v.

Paterson Pub. Sch. Dist., 466 N.J. Super. 40, 45 (App. Div. 2021).            In

reviewing the Legislature's words, we follow the "bedrock assumption that the

Legislature did not use 'any unnecessary or meaningless language.'" Jersey

Cent. Power & Light Co. v. Melcar Util. Co., 212 N.J. 576, 587 (2013)

(quoting Patel v. N.J. Motor Vehicle Comm'n, 200 N.J. 413, 418-19 (2009)).

We "must presume that every word in a statute has meaning and is not mere

surplusage," In re Att'y Gen.'s "Directive on Exit Polling: Media & Non-

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                                      12
Partisan Pub. Int. Grps.", 200 N.J. 283, 297-98 (2009), and we "give effect to

every word" so we do not "construe the statute to render part of it

superfluous." Med. Soc'y of N.J. v. N.J. Dep't of Law & Pub. Safety, 120 N.J.

18, 26-27 (1990). We cannot "rewrite a plainly written statute" or "presume

that the Legislature meant something other than what it conveyed in its clearly

expressed language." Murray v. Plainfield Rescue Squad, 210 N.J. 581, 592

(2012); see also DiProspero, 183 N.J. at 492 (finding courts cannot add

language to a statute). We also "ascribe to the statutory words their ordinary

meaning and significance . . . and read them in context with related provisions

so as to give sense to the legislation as a whole." DiProspero, 183 N.J. at 492.

      To adopt the trial court's interpretation of the Act, we would have to

ignore the Legislature's use of the word "all" in its definition of operating

agreement in N.J.S.A. 42:2C-2, or we would have to read into the Act a

provision that says a majority of members, instead of "all the members," can

vote to adopt a draft operating agreement. But we can't do either because

courts don't have the authority to ignore language the Legislature included and

don't have authority to graft onto a statute language the Legislature chose not

to include.

      Applying the actual and complete statutory language, we hold a draft

operating agreement does not become the operating agreement of an LLC

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unless it is "the agreement . . . of all the members of" the LLC, N.J.S.A.

42:2C-2, meaning "all the members" have to agree to it. 8        If all existing

members do not agree to the draft agreement when it is proposed, then the

draft operating agreement remains just that – a draft agreement; it never

becomes the operating agreement of the LLC. If all members agree to a draft

operating agreement, it then becomes the operating agreement of the LLC and

any subsequent members are bound by the already-existing operating

agreement. If the court's finding that defendants were members of PPN in

2014 is correct and if defendants' assertion that they never agreed to the draft

operating agreement, which the trial court found was "drafted and circulated in

8
   Our reading of the Act is consistent with commentary to the parallel sections
of the Uniform Limited Liability Company Act (2006) (amended 2013) (Nat'l
Conf. of Commr's on Unif. State Ls., Draft Aug. 19, 2015) (ULLCA).
Compare N.J.S.A. 42:2C-2 and -12(b) with ULLCA §§ 102(13) and 106(b);
see also ULLCA § 102 cmt. (para. 13) (describing § 106(b) as "deeming new
members to assent to the then-existing operating agreement" and noting "[a]n
agreement among less than all members might well be enforceable among
those members as parties, but would not be part of the operating agreement")
and § 106 cmt. (b) ("a person becoming a member of an existing limited
liability company should take precautions to ascertain fully the contents of the
operating agreement"). A person "becoming a member of an existing" LLC
can "ascertain . . . contents of the operating agreement" only if the original
existing members of the LLC already have agreed to and adopted the operating
agreement. Id. at § 106 cmt. (b) (emphasis added). Even if a rudimentary
operating agreement is deemed to exist on the formation of an LLC, see id. at
§ 102 cmt. (para. 13), that rudimentary operating agreement would require the
"consent of all the members" to amend it, see id. at § 407(b)(4)(B). Compare
ULLCA § 407(b)(4)(B) with N.J.S.A. 42:2C-37(b)(5).

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or about January 2015," is correct, then the draft agreement was not the

agreement of "all the members" and it never became the operating agreement

of PPN.

      The Act does not specify how the members must indicate their

agreement to a draft operating agreement in order to render it effective. It

does not require their agreement to be bound by an operating agreement be in

writing or that it be executed by them. In fact, the operating agreement itself

need not be written and may be oral.        N.J.S.A. 42:2C-2 (including "oral"

agreement in definition of operating agreement).

      A party to a contract can show assent to the terms of a contract in

writing, verbally, or by their acts.   Skuse v. Pfizer, Inc., 244 N.J. 30, 50

(2020). The parties concur defendants did not agree in writing or verbally to

the draft operating agreement.     They dispute whether defendants' actions

constituted consent to the draft operating agreement. Because of that genuine

dispute9 and because the trial court incorrectly interpreted N.J.S.A. 42:2C-

12(b), we reverse its order granting in part plaintiff's motion for partial

9
   The trial court briefly touched on defendants' actions. Given the fleeting
nature of that reference, the trial court's finding of a material issue as to
whether Maro agreed to the draft operating agreement, and the court's repeated
reference to the language of N.J.S.A. 42C:2C-12(b) as the basis of its decision,
we do not view the court's cursory allusion to defendants' conduct as a
resolution of this issue.

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summary judgment and affirm its order denying defendants' cross-motion for

partial summary judgment.

      "A [trial] court's discovery rulings should not be reversed on appeal

absent an abuse of discretion or a mistaken understanding of the applicable

law." Bayer v. Twp. of Union, 414 N.J. Super. 238, 272-73 (App. Div. 2010);

see also Capital Health Sys. v. Horizon Healthcare Servs., 230 N.J. 73, 79-80

(2017).   Discovery rules "are to be construed liberally in favor of broad

pretrial discovery." Payton v. N.J. Tpk. Auth., 148 N.J. 524, 535 (1997); see

also Capital Health Sys., 230 N.J. at 80. Discovery includes the obtaining of

any information, not privileged, relevant to the subject matter involved in the

pending action including information related to a party's claim. See R. 4:10-

2(a). The scope of discovery, however, is not infinite. Bayer, 414 N.J. Super.

at 272.   Rule 4:10-3 allows a court to prevent the disclosure of certain

discoverable information "for good cause shown . . . to protect a party or

person from annoyance, embarrassment, oppression, or undue burden or

expense." "Good cause" is determined on a case-by-case basis. Ullmann v.

Hartford Fire Ins. Co., 87 N.J. Super. 409, 414 (App. Div. 1965).

      The "[d]isclosure of a litigant's tax return is . . . a highly sensitive

endeavor." Campione v. Soden, 150 N.J. 163, 190 (1997). Generally, "[a]

taxpayer is entitled to nondisclosure of his or her [tax] return absent a 'strong

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need' for information contained in the return." Ibid. (quoting Ullmann, 87 N.J.

Super. at 415). But the production of tax returns can be ordered if "it clearly

appears they are relevant to the subject matter of the action or to the issues

raised thereunder, and further, there is a compelling need therefor because the

information contained therein is not otherwise readily obtainable." Ullmann,

87 N.J. Super. at 415 (quoting Cooper v. Hallgarten & Co., 34 F.R.D. 482, 484

(S.D.N.Y. 1964)); see also Campione, 150 N.J. at 189-90.

      We see no abuse of discretion in the trial court's order requiring the

production of defendants' tax returns if they or their expert witnesses "intend

to use any information contained within these tax returns at trial or in

preparation of any expert report." The trial court recognized the sensitive

nature of the production of tax returns and appropriately narrowed the

circumstances of their production.      Neither the judge's ruling nor ours

precludes the taxpayer from seeking redaction of any parts of the relevant tax

returns so as to protect the taxpayer's privacy about information within those

documents that is irrelevant or not likely to lead to the discovery of relevant

information.

      Affirmed in part as to the orders denying defendants' summary judgment

motion and compelling defendants to produce their tax returns; reversed in part

as to the order granting in part plaintiff's motion for summary judgment;

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remanded for proceedings consistent with this opinion.   We do not retain

jurisdiction.

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