Philip D. Lamprecht was one of the founding members of an accounting firm called Jordan & Company. He and the other members of the firm formed an LLC in 1998 for the purpose of acquiring an office building in the picturesque mountain town of Pocatello, Idaho. The LLC members signed an operating agreement and then purchased the office building in the name of the LLC.

Among other things, their operating agreement required an automatic withdrawal from the LLC upon termination from Jordan & Company and specified that the terminated member would be entitled only to the balance in his capital account.

Two years later, Lamprecht physically attacked a colleague in the office. The police were summoned and Lamprecht was cited for battery. Jordan & Company then terminated Lamprecht and offered him the remaining balance in his capital account, which totaled a mere $3,864. Lamprecht refused to accept the payment and disputed that he was required to withdraw from the LLC, claiming that the operating agreement covered only voluntary cessation of employment.

Lamprecht also claimed that any payment for his withdrawal from the LLC should be based on the fair market value of his ownership interest in the LLC

(namely, the value of the office building owned by the LLC), which was

$273,016.

CASE QUESTIONS

1. May the other LLC members force Lamprecht to withdraw from the LLC?
2. Is it fair to base the payment on the capital account balance (typically very small) rather than the fair market value of the LLC (typically a larger amount) when the withdrawal is forced?