Court upholds denial of appraisal process in energy dispute

The Appellate Division of the Supreme Court of the State of New York recently ruled in the case of SJI Renewable Energy Ventures, LLC v. REV LNG, LLC, affirming a lower court's decision that denied REV LNG Holdings, LLC's request to compel SJI Renewable Energy Ventures, LLC to engage in an appraisal process related to the buyout of company interests. This ruling affects the parties involved in the dispute, particularly the financial arrangements and future operations of the companies.

The case centers around a business agreement between SJI Renewable and REV LNG Holdings regarding the valuation of the company, which supplies and distributes liquid natural gas and renewable natural gas. The court's decision is significant as it clarifies the interpretation of the appraisal process outlined in their contractual agreement, which could influence similar disputes in the future.

Background

SJI Renewable Energy Ventures, LLC (SJI Renewable) and REV LNG Holdings, LLC (Holdings) are the primary parties in this case. The dispute arose after SJI Renewable purchased a 35% interest in REV LNG, LLC, a company that specializes in liquid natural gas and renewable energy solutions, for approximately $10.5 million in December 2020. The acquisition was part of a larger agreement that included provisions for SJI Renewable to buy additional interests in the company based on certain financial milestones.

The agreement, known as the fourth amended and restated limited liability company agreement, included a detailed process for determining the buyout price of Holdings' interest in the company. This process involved calculating the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) and a fair market value (FMV) multiple based on market comparisons. However, disagreements arose regarding the interpretation of the appraisal process, leading Holdings to file a motion to compel SJI Renewable to engage in the appraisal process as outlined in the agreement.

The case reached the Appellate Division after the Supreme Court of New York County denied Holdings' motion on November 10, 2025. The court found that the appraisal process, as described in the LLC agreement, only applied to the FMV calculation and did not extend to the determination of the company's EBITDA.

The Ruling

The Appellate Division unanimously affirmed the lower court's ruling, stating that the dispute resolution process described in the LLC agreement only applied to the FMV multiple and not the EBITDA calculations. The judges noted, "Based on the unambiguous terms of the LLC agreement, Supreme Court properly determined that the dispute resolution process described in section 11.7 of the LLC agreement only applied to calculations regarding the FMV Multiple."

The court emphasized that the term "FMV Calculation" specifically referred to the determination of the FMV multiple, which meant that the EBITDA calculations were not included in the appraisal process. The judges pointed out that SJI Renewable's objections to the EBITDA calculations did not expand the scope of the appraisal process as defined in the agreement. The ruling clarified that the appraisal process was limited to the FMV calculation, which is a significant distinction in the context of the dispute.

Furthermore, the court denied Holdings' request for a stay of the action under CPLR 7503(a), stating that the valuation process would not resolve all issues raised in the complaint and could lead to further litigation and delays. The judges concluded that the lower court's decision was appropriate and well-reasoned.

Impact

This ruling has important implications for both SJI Renewable and REV LNG Holdings, as it clarifies the contractual obligations regarding the appraisal process. By affirming that the appraisal process only applies to the FMV multiple, the court has set a precedent that may influence how similar disputes are handled in the future. Companies entering into agreements with appraisal clauses may need to ensure that the terms are clearly defined to avoid disputes over interpretation.

The decision also highlights the importance of precise language in contracts, particularly in business agreements involving financial valuations. It serves as a reminder for companies to carefully consider the implications of their contractual terms, especially when it comes to dispute resolution processes. The ruling may encourage other companies to review their agreements to ensure clarity and avoid potential litigation.

What's Next

While Holdings has the option to appeal the ruling, details regarding any potential appeal were not available in the court filing. As of now, there are no related cases pending that could influence this decision.