RETINA ASSOCIATES OF GREATER PHILADELPHIA, LTD., JONATHAN B. BELMONT, M.D., ROBERT C. KLEINER, M.D. Appellant
RETINOVITREOUS ASSOCIATES, LTD. D/B/A MID ATLANTIC RETINA, WILLIAM BENSON, M.D., JAY L. FEDERMAN, M.D., GARY C. BROWN, M.D., MITCHELL S. FINEMAN, M.D., DAVID H. FISCHER, M.D., SUNIR J. GARG, M.D., ALLEN C. HO, M.D., RICHARD KAISER, M.D., ALFRED C. LUCIER, M.D., JOSEPH I. MAGUIRE, M.D., J. ARCH MCNAMARA, M.D., CARL H. PARK, M.D., CARL D. REGILLO, M.D., ARUNAN SIVALINGAM, M.D., WILLIAM TASMAN, M.D., JAMES F. VANDER, M.D., AND JASON HSU, M.D.
from the Order Dated July 2, 2010 In the Court of Common
Pleas of Montgomery County Civil Division at No(s): 09-32182
BEFORE: DUBOW, J., SOLANO, J., and FORD ELLIOTT, P.J.E.
Retina Associates of Greater Philadelphia, Ltd.
("Retina"), and two of its physicians - its
President, Jonathan B. Belmont, M.D. and Vice President,
Robert C. Kleiner, M.D. (together, "Retina
Physicians") - appeal from the order sustaining
preliminary objections in the nature of a demurrer filed by
Appellees William Benson, M.D., Jay L. Federman, M.D., Gary
C. Brown, M.D., Mitchell S. Fineman, M.D., David H. Fischer,
M.D., Sunir J. Garg, M.D., Allen C. Ho, M.D., Richard Kaiser,
M.D., Alfred C. Lucier, M.D., Joseph I. Maguire, M.D., J.
Arch McNamara, M.D., Carl H. Park, M.D., Arunan Sivalingam,
M.D., William Tasman, M.D., James F. Vander, M.D., and Jason
Hsu, M.D. (collectively, "Mid Atlantic
Physicians"), all of whom are alleged to be
"members and/or employees" of Appellee
Retinoviteous Associates, Ltd., doing business as Mid
Atlantic Retina ("Mid Atlantic"). We reverse.
the trial court disposed of this case on preliminary
objections, we adopt the facts as alleged in Appellants'
amended complaint and its exhibits. Khawaja v. RE/MAX
Central, 151 A.3d 626, 630 (Pa. Super. 2016).
and Mid Atlantic are competing practices of retina
specialists who have staff privileges at Wills Eye Hospital
in Philadelphia. In 2000, several retina specialists formed
Retina Diagnostic & Treatment Associates, LLC
("RDTA"), a limited liability company that entered
into contracts with Wills Eye to provide its members - who
ultimately included both the Retina Physicians and the Mid
Atlantic Physicians - with special privileges at Wills
Eye's facilities.  Pursuant to RDTA's operating
agreement, each RDTA member owned an equal 5.263% interest in
the company. The operating agreement provided that RDTA would
be run by up to six managers,  each of whom had to be a member
of RDTA and one of whom had to be "the physician who is
the then Director of the Retina Service of Wills Eye
Hospital." Third Am. and Restated Limited Liability Co.
Operating Ag. of RDTA, 1/1/2006, at 10. Appellants alleged
that at the time the amended complaint was filed, Appellee
Brown held the position of Director and Appellees Fischer and
Sivalingam were Co-Directors of the Wills Eye Retina Service.
Am. Compl. ¶¶ 14-15.
the operating agreement provided that RDTA would be run
exclusively by its managers, it contained provisions for some
extraordinary decisions to be made by RDTA's members.
Section 6.06 of the agreement stated:
Company Matters Requiring Member Approval.
(a) Specific Matters. Notwithstanding anything in
this Agreement to the contrary, the approval of the following
matters shall require the affirmative vote of the Members by
a Majority Vote:
. . .
(v) The sale, exchange or transfer of all; or substantially
all, of the assets of the Company.
. . .
(viii) The dissolution of the Company pursuant to Section
10.01(i). . . .
Third Am. and Restated Limited Liability Co. Operating Ag. of
RDTA, at 15.
March 31, 2009, fifteen of the Mid Atlantic Physicians (all
but Appellees Benson and Park), acting as members of RDTA,
adopted a resolution titled "Written Consent of the
Members Holding a Majority of the Percentage Interests."
Am. Compl. ¶ 27 & Ex. D. The fifteen signers
"collectively held a majority of the percentage
interests in RDTA." Id. ¶ 27. By their
resolution, the signers provided for RDTA to sell
substantially all of its assets to Mid Atlantic and then to
liquidate and dissolve. The two Retina Physicians did not
vote on the resolution (which did not contain signature lines
for either of them), and Appellant Belmont was not given
notice of it. Id. ¶¶ 27-28 & Ex. D.
to the resolution, Mid Atlantic then acquired RDTA's
assets, including its rights under contracts, leases, and
other agreements with Wills Eye, for $353, 494, a price that
allegedly is below the assets' fair market value. Am.
Compl. ¶¶ 31-35. RDTA also entered into agreements
to purchase services from Mid Atlantic in connection with
winding up RDTA's affairs, the cost of which, $107, 829,
would be offset against the purchase price owed to RDTA by
Mid Atlantic. Id. ¶¶ 37-39.
instituted this action by filing a complaint on October 7,
2009. In an amended complaint, Appellants purported to state
a claim for, among other things, breach of fiduciary duties
by the Mid Atlantic Physicians, who "in the aggregate
controlled the majority interest in RDTA." Am. Compl.
¶ 43. They alleged that, "[a]s controlling majority
members, the [Mid Atlantic Physicians] owe [Appellants] a
duty of utmost good faith and fair dealing" and "a
quasi-fiduciary duty . . . not to use their power for selfish
or personal interests or in such a way as to exclude
[Appellants] from their due share of the benefits accruing
from the existence and operation of RDTA." Am. Compl.
¶¶ 43-45. The pleading continued:
46. Despite these duties and obligations of utmost good faith
and fair dealing imposed upon them by law, some or all of the
[Mid Atlantic Physicians] breached these duties and acted
exclusively in their self-interests by:
a. Excluding [Appellants] from meaningful participation in
the decisions related to the [asset purchase agreement with
Mid Atlantic], sale of RDTA's assets to [Mid Atlantic],
and termination of [Retina's agreements with Wills Eye];
b. Self-dealing and directly or indirectly making a profit at
[Appellants'] financial and professional expense by
transferring and selling RDTA's assets to [Mid Atlantic]
of which all [Mid Atlantic Physicians] are members and/or
employees, thereby excluding [Appellants] from the benefits
they enjoyed through their ownership or relationship to RDTA;
c. Failing to act in good faith and for the benefit of
[Appellants], Belmont and Kleiner, and RDTA in all matters
involving the sale of RDTA's assets to [Mid Atlantic];
d. Excluding [Appellants] from their rightful participation
in and enjoyment of the benefits of their ownership in RDTA,
including, but not limited to, the agreements with Wills Eye
and the profits derived therefrom;
e. Causing [Appellants] to suffer and to continue to suffer
substantial financial harm by terminating [Retina's
agreements] with Wills Eye and depriving [Appellants] of
sufficient access to WillsEye to treat patients at the Wills
Eye facility; and
f. Failing to act solely in the best interests of all owners
and RDTA, which has caused [Appellants] to suffer and
continue to suffer financial harm.
47. The actions of the [Mid Atlantic Physicians] . . .
constitute a breach of their duty of utmost good faith and
fair dealing owed to [Appellants], as well as a breach of
their quasi-fiduciary duty owed to [Appellants], as minority,
or de facto minority owners of RDTA.
48. Further, the actions of the [Mid Atlantic Physicians] . .
. constitute a breach of their fiduciary duties to RDTA by
entering into a sales transaction for, upon information and
belief, substantially less than fair market value.
49.Some or all of [Mid Atlantic Physicians] harmed
[Appellants], Belmont and Kleiner, by acting in derogation of
[Appellants'] rights in RDTA, including
[Appellants'], Belmont and Kleiner, rights to their
respective share of the benefits accruing from the existence
and operation of RDTA.
50. Moreover, Defendants' substantial undervaluation of
RDTA has deprived [Appellants of] their fair market share of
the assets, contracts, agreements, equipment, inventory,
supplies, and goodwill.
51.Some or all of [Mid Atlantic Physicians'] intentional
and self-serving conduct is outrageous in that it represents
a wanton and willful disregard of [Appellants'] interests
and rights as well as blatant self-dealing of the most
52. Some or all of [Mid Atlantic Physicians] purposefully
transferred all assets to [Mid Atlantic] with a reckless
indifference and wanton and willful disregard of
[Appellants'] financial and beneficial interests in RDTA
without justification or privilege.
Am. Compl. at ¶¶ 46-52.
trial court described the subsequent procedural history as
[Mid Atlantic Physicians] filed preliminary objections to the
amended complaint. Their arguments included that they did not
owe a fiduciary duty to [Appellants]. They cited 15 Pa.C.S.A.
§ 8943(b)(2) for the proposition that members of limited
liability companies do not owe fiduciary duties to each
After briefing and oral argument, this court issued an Order
dated July 2, 2010, sustaining the preliminary objections in
part and overruling them in part. Specifically, this court
dismissed the breach of fiduciary duty claim against the [Mid
Atlantic Physicians] and permitted the remaining claims to
[Appellants] filed a motion for partial reconsideration,
which this court denied in an Order dated August 9, 2010.
Approximately six years later the case was ordered on the
standby trial list for the month of October 2016.
[Appellants] voluntarily dismissed their remaining claims on
September 29, 2016.
Trial Ct. Op., 12/6/16, at 2-3. Appellants then filed this
timely appeal from the order sustaining the Mid Atlantic
Physicians' preliminary objection to the breach of
fiduciary duty claim. See Pa.R.A.P. 341 (appeal may
be filed after entry of order disposing of all claims against
response to a court order, Appellants filed a Pa.R.A.P.
1925(b) Statement that listed, among other errors that they
planned to appeal -
2. The Trial Court erred in determining, as a matter of law
and/or based on the averments of the Amended Complaint and
Exhibits attached thereto, that managers of
a manager-managed Pennsylvania LLC do not owe a fiduciary
duty to the minority members of said LLC and dismissing Count
I (Breach of Fiduciary Duty) of the Amended Complaint as to
the Physician Defendants/ Appellees.
. . .
4. The Trial Court erred in determining, as a matter of law
and/or based on the averments of the Amended Complaint and
Exhibits attached thereto, that it is not a breach of
fiduciary duty for the managers of a
manager-managed Pennsylvania LLC to intentionally and
willfully sell substantially all of the assets and
contractual rights of said LLC to a separate entity owned or
controlled by the majority members of the LLC that excludes
the minority members of the LLC and dismissing Count I
(Breach of Fiduciary Duty) of the Amended Complaint as to the
Physician Defendants/ Appellees.
Pa.R.A.P. 1925(b) Statement, at 1-2 (emphasis added). The Mid
Atlantic Physicians objected to Appellants' inclusion in
their Rule 1925(b) statement of questions regarding breach of
their fiduciary duties as managers (as opposed to majority
members) of RDTA, arguing that the amended complaint never
stated a claim against any of them based on a status as RDTA
managers. Mid Atlantic Physicians' Joint Objs. to
Retina's Rule 1925(b) Statement, 11/2/16, at 1-2. They
observed that the amended complaint "literally does not
contain the word 'manager.'" Id. at 2.
The trial court did not rule on the Mid Atlantic
Physicians' objection to Appellants' Rule 1925(b)
December 6, 2016, the trial court issued a Rule 1925(a)
opinion that explained its decision as follows:
The issues raised by [Appellants], when read together,
challenge this court's conclusion that the individual
members of the limited liability company did not owe
fiduciary duties to each other. The challenge lacks statutory
and decisional support.
. . .
Pursuant to [the Limited Liability Company Law, ] 15 Pa.
C.S.A. § 8943(b)(2), "[a] member [of a limited
liability company] who is not a manager shall have no duties
to the company or to the other members solely by reason of
acting in his capacity as a member." [Appellants] argued
the individual defendants owed a fiduciary duty because they
collectively held a majority of the interests in RDTA. . . .
The plain language of Section 8943, however, does not provide
support for [Appellants'] claim that the individual
defendants owed them a fiduciary duty. Thus, this court
properly sustained the individual defendants' preliminary
objections to the breach of fiduciary duty claim.
Trial Ct. Op., 12/6/16, at 5-6 (citation and footnotes
their appellate brief, Appellants now raise the following
1. Whether the lower court erred in determining, as a matter
of law, that managers of a manager-managed
Pennsylvania LLC do not owe a fiduciary duty to the minority
members of said LLC and dismissing Count I (Breach of
Fiduciary Duty) ...