Heller v. Hartz Mountain Industries

Superior Court of New Jersey, Law Division, Hudson County · 1993 · Corporations

636 A.2d 599 (1993)

Updated August 22, 2026

CorporationsPartnershipsFiduciary dutiesAppraisalsmanaging partnerwithdrawing partnerbuyoutfiduciary duty

Facts

Heller withdrew from sixteen partnerships in which Hartz was the managing partner, triggering contractual appraisal procedures to determine the purchase price of his interests. For the single-appraiser partnerships, Hartz selected Robert DiFalco of Cushman & Wakefield and then managed the appraisal process without including Heller, providing data, holding meetings, and communicating with the appraiser without notice to Heller. The appraiser came to regard Hartz, rather than the partnerships, as his employer, and draft reports were submitted to Hartz's attorneys for review, comment, and editing. Heller challenged both Hartz's conduct and the low appraised values, arguing that Hartz had breached its fiduciary duty and tainted the process.

Issue

Whether a managing partner buying out a withdrawing partner remains subject to fiduciary duties in conducting the appraisal process, and if so, whether Hartz's control of the appraisal process required the DiFalco appraisals to be set aside. The court also considered whether DiFalco could serve as Hartz's designated appraiser in the three-appraiser partnerships.

Rule

A partner managing the buyout of a withdrawing former partner continues to owe fiduciary duties requiring complete candor, openness, honesty, and fairness in matters related to valuation. The managing partner may select an independent appraiser if the agreement so provides, but may not control the appraisal process to the exclusion of the other partner, engage in ex parte conduct that undermines independence, or subject the appraiser to its direction or control. If the fiduciary's breach has a clear capacity to taint the appraisal report, the report must be treated as a nullity even without direct evidence of actual taint.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A commercial real estate partnership in Newark allows the managing partner, Rowan Mercer, to choose a single appraiser if a withdrawing partner's interest cannot be negotiated. After Dana Iqbal withdraws, Rowan hires an appraiser and privately supplies rent projections, capital expense assumptions, and tenant correspondence without notifying Dana or giving her a chance to respond.

If Dana seeks to set aside the appraisal, what is the strongest argument under the governing rule?

Explanation. The majority held that a managing partner buying out a withdrawing partner remains bound by fiduciary duties of candor, openness, honesty, and fairness in valuation matters. Contractual authority to select an appraiser does not authorize unilateral control of the process or exclusion of the other partner. Because Rowan's conduct excluded Dana from the valuation process, Dana has the strongest basis to set the appraisal aside.