The Pennsylvania Superior Court will not disturb a lower court's ruling that awarded compensatory damages but denied punitive damages to a plaintiff whose former co-owners in a public utility consulting firm fired him and bought out his membership share for a fraction of its value.

In Saltzer v. Rolka, a three-judge panel of the Superior Court declined to second guess Cumberland County Court of Common Pleas Judge Edward Guido's ruling that plaintiff Matthew Saltzer's former co-owners substantially undervalued his membership share after they terminated him but still should not be hit with punitives, despite what the judge called “a very close call.”

Saltzer and defendants David Rolka and Robert Loube were co-owners of Rolka Loube Saltzer Associates, a firm that provides consulting services to state public utility commissions and the federal government, according to the Superior Court's opinion, penned by Judge Jack Panella. Saltzer was fired in May 2013 and, over his objections, Rolka and Loube amended their operating agreement to grant them the right to force a buyout of his minority interest. The next day, they advised Saltzer that they were purchasing his share of the company for $63,389, a number that was based on an arbitrary formula Rolka and Loube came up with, Panella said.

Saltzer filed suit, alleging he was not fairly compensated and, after a bench trial, Guido agreed and valued Saltzer's membership share at $294,000.

Guido ruled that Rolka and Loube violated the Limited Liability Company Act by voting to amend the operating agreement to provide a formula for a membership buyout without Saltzer's consent, Panella said. The LLCA requires a unanimous vote by all members of an LLC in order to amend an operating agreement “except as provided … in writing in the operating agreement.”

But Guido denied Saltzer's claim for punitive damages, finding that while Rolka and Loube acted with “'reckless indifference to the interests of Saltzer,'” the judge was ”'satisfied that they subjectively believed they were acting within the law,'” according to Panella.

Both Saltzer and the defendants appealed.

Rolka and Loube said Section 6.02 of their operating agreement allowed them to amend it with a majority vote, but the Superior Court found that nothing in the agreement explicitly granted that permission.

“In fact, Section 6.02 clearly provides for majority vote '[e]xcept as otherwise provided in the [LLCA.],'” said Panella, joined by Judges Judith Ference Olson and Correale Stevens. ”There is no ambiguity in this section; since the LLCA required a unanimous vote, it provided otherwise.”

Both sides also took issue with Guido's calculation of the value of Saltzer's membership share: Saltzer disagreed with the judge's application of a 24 percent discount based on the possibility of nonrenewal of the firm's most lucrative contract and the defendants argued that the trial court should have applied a reduction for the personal goodwill owned by Rolka and Loube.

But Guido found Saltzer's valuation expert more credible overall than the expert put forward by Rolka and Loube except with regard to the 24 percent discount. Panella said the Superior Court would not disturb those credibility determinations.

Turning to Saltzer's appeal of the denial of punitive damages, Panella said Guido did not abuse his discretion in reaching that result.

“The court balanced all of the attendant circumstances and did not conclude punitive damages were warranted,” Panella said.

Counsel for Rolka and Loube, Dana Chilson of McNees Wallace & Nurick in Harrisburg, could not be reached for comment; nor could Saltzer's attorney, Michael Scherer of Baric Scherer in Carlisle.

(Copies of the 12-page opinion in Saltzer v. Rolka, PICS No. 18-1338, are available at http://at.law.com/PICS.)