Gatz Props., LLC v. Auriga Capital Corp.
Supreme Court of Delaware
59 A.3d 1206 (Del. 2012)
Peconic Bay, LLC (Peconic Bay) was formed to establish a golf course on Long Island. Gatz Properties, LLC (defendant), controlled by William Gatz (defendant), was the manager of Peconic Bay. The company hired to manage the golf course appeared on the verge of terminating its contract with Peconic Bay, and thus Gatz fielded an offer from Matthew Galvin to buy the golf course. Galvin made an offer of $4.15 million that Peconic Bay’s members rejected. Subsequently, however, Galvin discussed with Gatz a purchase price of “north of $6 million.” Galvin asked Gatz for a purchase price range Peconic Bay would consider. Gatz never got back to Galvin with a range or informed Peconic Bay’s members about the discussion of a higher purchase price. Instead, Gatz commissioned an auction for the golf course. In doing so, however, Gatz did not reach out to any golf course managers or operators. Gatz was the only bidder at the auction; he purchased the golf course for $50,000 cash and assumption of the golf course’s debt of $5.4 million. Minority members of Peconic Bay (plaintiffs) brought suit in the Delaware Court of Chancery, challenging the transaction. At trial, the plaintiffs’ expert witness estimated Peconic Bay’s value at $8.9 million. The trial court found in favor of the plaintiffs. Gatz appealed.
Rule of Law
Holding and Reasoning (Per Curiam)
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