DAVID EHRLICH v. AUDUBON QUARTET, INC.

,
Court of Common Pleas, Allegheny County, Pennsylvania
October 12, 2001

O'REILLY, J.

This somewhat novel matter first came before me on June 6, 2000, on application by Plaintiff, David Ehrlich ("Ehrlich") for a
Preliminary Injunction against Audubon Quartet, Inc., a Pennsylvania Non-Profit Corporation, (Quartet"), Clyde T. Shaw
("Shaw"), Doris Lederer ("Lederer") and Akemi Takayama ("Takayama’) (Defendants"). This Opinion is rendered under Rule
1517 of the Rules of Civil Procedure. The Quartet is a classical string quartet and the Plaintiff and individual Defendants are the
four players. The matter had originally been filed on May 30, 2000, and the Honorable S. Louis Farino of this Court granted a
Preliminary Injunction enjoining a special meeting of the Quartet, and the attendance, and/or participation therein by the
individuals Defendants; enjoining Quartet from holding or attending any other membership or Board Meetings until further Order
of Court; and accepting a Bond previously posted in a case between the same parties in the Montgomery County Court in the
Commonwealth of Virginia as Bond for this case.

The Quartet is a non-profit Pennsylvania Corporation formed on February 5, 1979, and basically involves 4 musicians who
comprise the Quartet, and who are all associate professors on the faculty of Virginia Polytechnic Institute and State University
("VA Tech’) in Blacksburg, Virginia. The Virginia Court, however, declined jurisdiction of the dispute that was developing among
the parties because Virginia Law forbids its courts to interfere in the internal affairs of a corporation that was not a Virginia
Corporation.

The first violinist, Ehrlich, filed a Complaint in Equity and the Petition for Preliminary Injunction in this Court. When it came before
me on June 6, Ehrlich requested that the matter be referred back to Virginia, and await disposition of another case that he had
filed against the same Defendants in Virginia. Counsel for the Quartet vigorously opposed any such referral back to Virginia.
Given the fact that the case involved an intra corporate dispute among the principles of the corporation, and Judge Grubbs letter
opinion, and the clear language of the Virginia Statute, I retained jurisdiction over the case.

As the evidence developed, it became clear that the issue was the summary ouster of Ehrlich as first violinist from the Quartet by
the other three members, to-wit, Shaw - cello; Lederer - viola; Takayama second violin. This was accomplished via a conference
among the three other players without Ehrlich, and without notice to him, and without a formal meeting of the corporation, at
which time they determined that he would be removed. Shaw, then President and Chairman of the Board, at that time developed
a document captioned "NOTICE OF TERMINATION" dated February 21, in which he advised Ehrlich that his employment with
the Quartet, and his position as violinist were terminated effective immediately, and that he was likewise removed from his office
of Vice President, and Director of the Corporation. Exhibit A to Complaint.

Ehrlich, not agreeing with the aforesaid conduct by Shaw and the other players, brought his Complaint in Equity seeking to enjoin
further action by the Quartet; and seeking to enjoin any further activities by them, including any performances, and use of any
assets until such time as Ehrlich was reinstated, as well as a request for an appointment of a Custodian and a request for such
other relief as the Court should deem appropriate.

Ehrlich relies on the Pennsylvania Non-Profit Corporation Law, 15 Pa. C.S.A. 5981(2) for the proposition that a non-profit
corporation may be dissolved if the corporation is acting in a oppressive or illegal fashion and it would be beneficial to the
members for the corporation to be dissolved. He further cities 15 Pa. C.S.A. 5712 for the proposition that directors of a non-profit
corporation stand in a fiduciary relationship to the corporation.

On June 20, 2001, the three individual Defendants had filed Preliminary Objections to the complaints against them asserting a
lack of jurisdiction, which were argued before me on June 20, 2001. I denied the same on the theory of waiver, and the individual
Defendants thereafter Answered and raised New Matter, and Ehrlich responded to the New Matter. All pleadings are now closed.
I will note that while the counsel who appeared before me on June 6, appeared on behalf of the corporation only, but he was
quick to point out that " the individual defendants have filed an individual pleading in which they adopt our Response and New
Matter". (N.T., June 6, 2000 p.4). Further, in a document captioned "Affirmation of Adoption by Pro Se Defendants", filed June 6,
2000, the individual Defendants state that they "adopt by reference the Answer to the Petition for Preliminary Injunction, the
Answer to the Amended Petition for Preliminary Injunction, and the Defendant, Audubon Quartet’s Brief in Opposition to
Plaintiff’s Petition for Preliminary Injunction".

In addition, counsel for the individual Defendants entered the case in January and appeared before me to argue with respect to
deposition scheduling, and took an active part in the depositions taken of the 3 economic experts, the Quartet’s accountant, and
of the Plaintiff and Shaw. All of the foregoing occurred before the Preliminary Objections were filed.

On June 6, I heard testimony from Shaw and continued the Injunction, and the hearing, to June 28. I was then advised that the
parties were seeking mediation so I rescheduled the hearing to October 27. The efforts at mediation were unsuccessful, and a
hearing was held before me on October 27, which continued onto October 30. At the close of that hearing the parties agreed to
present all other evidence to me via deposition. The same was not completed until June 20, 2001. On June 20, 2001, I heard
argument and received briefs. I have considered all the evidence and arguments advanced in this case including testimony,
deposition transcripts, and documentary evidence.

I. FACTS

In the course of the three days testimony before me, the evidence demonstrated that Shaw became displeased with what he
characterized as "back channeling" by Ehrlich in an effort to acquire for Ehrlich’s use as first violinist, a concert class violin, a
Bergonzi, and committing the Quartet to give an annual free concert in the continental United States to such benefactor as might
provide the aforesaid Bergonzi. The apparent price of such an instrument is $900,000. Shaw also contended that Ehrlich, when
confronted with his "back channeling" effort, behaved as if he had been caught with his "hand in the cookie jar" and otherwise re-
acted inappropriately. (N.T. June Hearing p. 52).

"Back channeling" appeared to be Shaw’s phrase for Ehrlich’s seeking philanthropic support for his acquiring a Bergonzi without
notice to Shaw or the others. The pledge for a free concert for such benefactor also nettled Shaw, and he opined that Ehrlich’s
commitment to play for the benefactor damaged the Quartet. (N.T. June Hearing pp. 54-59).

The Bergonzi matter is somewhat confusing in that in 1998 or 1999 the University Foundation had purchased a Bergonzi for
$900,000 for the use of the Quartet and Ehrlich. Ehrlich played the Bergonzi in 1999. It appears that Ehrlich had tried to get
another Bergonzi for his use and had solicited, unsuccessfully, one or two potential benefactors to buy the same and promised
the free concert. This effort never came to fruition. Ehrlich, however, in an effort to help Takayama get a better instrument, gave
her a copy of his prior solicitation letter which she might use, but with the admonition that it not be disclosed. Her disclosure of it
to the Quartet contributed to the tension among them.

When confronted, Ehrlich expressed his view that the Quartet was spinning out of control, and that they needed to take stock of
themselves, and indeed even engage in mutual psychotherapy to bring about a recapture of creativity. (See Ehrlich’s letter dated
February 3, 2000, Ehrlich Depo. Exhibit 8). Ehrlich also threatened lawsuits if things did not improve in the Quartet. Later, Ehrlich
read a letter to the other 3 wherein he recites the Quartet’s lengthy history of trying to get quality instruments and apologizes for
any misunderstanding his efforts at obtaining the Bergonzi created and professes that he acted in good faith and for the benefit
of the Quartet. In his letter he also refers to prior efforts to get a Stradivarius, which had universal support of the Quartet, and
apologized for his error in thinking the same attitude prevailed with reference to the Bergonzi.
Shaw and the others were displeased with this "back channeling" and it is cited by Shaw as the basis for his being removed from
the Quartet. While Shaw considered this "back channeling" and threatened law suits as indicative of a lack of trust which
required Ehrlich’s removal, he finds nothing untoward in his own behavior in December, 1999, when he filed with the U.S. Patent
and Trading Office to register the name Audubon Quartet in his name alone without advising Ehrlich. (Shaw Depo. pp. 104, 112-
115 & Exhibits 11, 12, & 13). Shaw also alluded to "artistic differences" among the players. (N.T. June Hearing pp. 51-53).
As best as I can determine, the "artistic differences" involved the powerful sound of the Bergonzi and how it impacted the role of
the second violin (Takayama). The players had discussed consulting a respected teacher or other qualified professional for
advice and assistance on this issue, but they could not agree. Takayama, the newest and youngest member of the Quartet, also
expressed dissatisfaction with Ehrlich’s avuncular attitude toward her. Lederer, the violinist, and Shaw’s wife said Ehrlich’s play
was "substandard" when he joined the Quartet 16 years ago, but she thought he would improve. (N.T. October Hearing p. 274).
During the time of Ehrlich’s tenure, the income to the Quartet increased, their bookings expanded, they acquired an agent, and
they never received any negative critical reviews of their performances.

By way of background, the Quartet had begun performing in 1974, at which time it was comprised of Shaw, Gregory Fulkerson,
Janet Brady, and Larry Bradford. (Shaw Depo. P. 128). It performed in the Scranton vicinity and secured an appointment at
Marywood College, a small Catholic women’s college in Scranton, as the "in residence" chamber music quartet.
The name grew out of a lighthearted meeting of the Quartet in Texas in April 1, 1974, when they needed a name to put on a
demonstration tape. (Shaw Dep. p. 234-238). I say lighthearted because one of the players, since they were in Texas, wanted to
name it "The Armadillo Quartet". The name Audubon surfaced because Shaw had an old girlfriend who lived near an Audubon
School, and one of the other players had attended an Audubon Elementary School in Winter Park, Florida. Shaw also said they
wanted an "American" name to underscore the democracy that would reign within the Quartet. Shaw added that he had
"brokered" the meeting and considered himself the "papa" of the Quartet. (Shaw Depo. p. 237).

A thread that runs through this case is Shaw’s apparent belief that the Quartet is his personal property and that the players all
"work" for him. The facts demonstrate otherwise, however, and show that each new player became a member and Director of the
corporation and had an equal voice with all the others. Further, no written documents were ever developed suggesting that the
players were anything other than equal equity owners of the corporation and the corporation functioned as if each was an equal
owner. No one contends any oral agreement existed that limited their equal equity status. This of course is consistent with the
democratic premise on which the Quartet was founded. They took equal "bonuses" and attempted to equalize expenses, and in
all other things were guided by equality and unanimity, until sometime in 1999 when Shaw decided to secure the name as his
trademark alone. There is no showing of any equity contribution by any player at anytime and they lived off the receipts and
grants the Quartet generated, plus such salary as the "inresidence" status produced. They each own their instruments, with the
exception of the Bergonzi, and maintenance costs are all paid out as expenses of the Quartet.

The Quartet operated as a business and the product was their musical performances. They engaged in no eleemosynary or
charitable activities and even an Annual Spring Chamber Music Conference they gave at VA Tech was done for a fee. Dispute
exists among the parties over a certain power point computer generated program, with music, that they developed in regard to
the Terezin concentration camp during World War II. Shaw contended that this is his property because he did the laborious work
of selecting pictures and integrating them into the computer generated images. Ehrlich claims he assisted in development of the
program including preparing a narrative given during the program. The music itself is readily available and others have played it.
Shaw asserts the power point computer program is his creation. Ehrlich points out that Shaw accomplished this with grant funds
from a government agency.

To the parties’ credit, they seemed to have worked out their disputes as to receipt of musical scores.

[In February 1979,] the Quartet was incorporated as a non-profit corporation in Pennsylvania, and was styled as Audubon
Quartet, Inc. Its location was the Music Department of Marywood College and its corporate purposes were the "promotion and
performance of live chamber music in Pennsylvania, and to increase public awareness and attention to chamber music". The
names of the incorporators on the document filed with the Pennsylvania Department of State were the four players, at that time,
Dennis Cleveland, Doris Lederer, Thomas Shaw, and Sharon Smith. An Amendment to the Articles of Incorporation was filed on
August 26, 1980, which incorporated the language of the Internal Revenue Code, specifically, Section 501(c)(3) so that the
corporation could qualify for tax-deductible contributions. Those Articles of Amendment were received as Exhibit 2 and they bear
the signature of Clyde T. Shaw, President who is known as Tom Shaw.
Testimony received from Shaw, and later from Ehrlich, was that the Corporation functioned on a very informal basis and few
meetings were provided. Suffice to say, when the Quartet became affiliated with VA Tech, they filed an annual statement with the
Virginia Department of State on a form signed by one of the officers simply indicating that they were an existing corporation. The
four players of the Quartet served as the four officers of the Corporation on a more or less rotating basis, although it appears that
the rotation was not strictly adhered to. Such rotation accounted for Shaw being President in February.

While the Quartet has placed various other individuals on its Board of Directors, usually associated with the University, none of
them draw any salary, or bonuses or receive any funds from the Quartet, and have little to do with the actual operation of it.
Indeed formal meetings and minutes thereof were few and far between.

At some point in the 1980’s, the Quartet developed an affiliation with VA Tech and left Marywood College, and became the "in
residence" string quartet from the burgeoning VA Tech. Ehrlich joined the Quartet in 1984, and became an officer and member of
the Board of Directors. David Salness became the second violin shortly after Ehrlich joined the Quartet and likewise became an
officer and member of the Board of Directors. Between 1979 and 1984 there had been changes in the composition of the
Quartet, particularly among the violinists, but Shaw has always been … with the Quartet, and Doris Lederer, his wife, joined in
1976.

From the time of contact with VA Tech, the fortunes of the Quartet and the members improved so that by 1997, the four
members had been appointed Associate Professors, and each received approximately $50,000 per annum salary, plus benefits,
as well as performing with the Quartet. Prior to 1997, the Quartet had received a gross contract amount from VA Tech, which
they shared equally, but when they become faculty members, they got W-2 earnings directly from the school.

The appointment was for an indefinite term and would terminate only upon the appointees leaving the Quartet, or [separation]
from it. While they were each given 1-year contracts in 1997, the evidence developed that from 1997 until the problem herein,
the contract simply rolled over and was never re-negotiated or reissued, and increased to the present $51,000 salary.

The terms of the appointment were closely intertwined with performance by the Quartet, and they were required to give at least 3
concerts during the academic year; give other performances and classes with respect to music; and hold themselves out as the
"quartet in residence at Virginia Polytechnic Institute and State University". The University retained a power of approval, and
presumable veto, as to any new member who might join the Quartet, but any such new player, on approval, would also receive
an Associate Professor appointment.

These facts show that a close relationship exists between VA Tech and the Quartet, and continued employment by the one is
tied to playing in the other.

Concurrent with the removal and the letter of February 21, Shaw took steps to place the considerable funds of the Quartet out of
Ehrlich’s reach. Specifically, Shaw transferred funds from the Quartet’s bank account in Virginia to an account in Pennsylvania,
and removed Ehrlich’s name from the account in Virginia. (N.T. October Hearing pp. 62-64). In fact, Shaw could not explain why
he transferred funds to an account in Pennsylvania when he had already removed Ehrlich’s name from the Virginia account.
(N.T. October Hearing p. 64).

In the course of the case, I had also appointed a Custodian, Attorney Webster Day, who assembled financial information, and
provided me with a report as to the sources of income and the disbursements of the same.

Discovery, including the examination of financial documents, tax returns, and payments made by the Quartet for other players,
show me that the Quartet makes substantial sums of money irrespective of their professorships and that Ehrlich has now been
thrown out of the an entity with substantial earning capacity and to which he contributed for 16 years.

With respect to the income of the Quartet and of the players from it, discovery produced voluminous tax records and the players
W-2’s for the period of 1995 through 1999. The W-2’s issued in 1995 and 1996 are for approximately $44, 000 per annum for
each player. The W-2’s for 1997, and 1998 and 1999 dropped to $14,000, $3,000 and $7,000 respectively. I assume the large
sums paid in 1995 and 1996 reflect the lump sum contract amount paid to the Quartet before the players were placed on the
faculty of the VA Tech.

On its face it appears that the [players] as Quartet members were earning little, and the W-2’s would suggest that playing in the
Quartet was almost a hobby or an avocation outside the VA Tech Contract.

However, other evidence in this case revealed that substantial sums of money were earned by the Quartet, but apparently
distributed only when the players felt the need for a "bonus" which was the name given to the funds reflected in the W-2’s and
distributed by the Quartet.

Specifically, the Quartet kept funds in a CAP account, which produced more interest than a traditional checking account, as well
as in a traditional checking account. At the start of the year 2000, there was $112,258.20 in the CAP account and $58,821 in
their checking account. The sum of $34,568 was paid out in January, 2000 consisting of $19,978 for "bonuses", $10,000 into
retirement or pension accounts for the players and the balance of $4,490 for expenses. On February 23, 2000, two days after
Ehrlich was ousted, the Quartet’s bank account in Virginia was closed, and the funds therein, $58,821.38, were transferred to a
new account opened in Lebanon, Pennsylvania, and $75,187.58 in the Cap account was deposited into a new Virginia account.
Shortly thereafter, $75,000 was withdrawn and deposited in Attorney Ternent’s Trust Account. Later, in July, a pension program
maintained by the Quartet for the players with Fidelity Investment was liquidated producing an additional $40,956.

Although small "bonuses" were paid out, the Quartet had accumulated $212,035.98.

The Quartet continued to perform after Ehrlich’s ouster, and he played 4 engagements with them before injunction was issued.
Funds continued to flow into the Quartet, and were paid out. Between February 23 and July 14, the sum of $130,484 had been
paid out by the Quartet to 7 different attorneys, including the aforesaid $75,000 to the Trust Account of Attorney Allen Ternent, of
Kansas.

The record reveals that the Quartet was not involved in any litigation before the Ehrlich matter, and I , therefore, conclude that
this outpouring of funds all related to the removal of Ehrlich.

I recognize that much of the money was paid into Attorney’s Trust Accounts to be billed against thereafter, but the cold fact
remains that a large amount of money had been earned by the Quartet, and the W-2’s do not accurately reflect the value of the
Quartet, or its income generating capabilities. Although the Defendants assert that the Quartet is a non-profit corporation, and
essentially has no value, these facts suggest otherwise.

Shaw also mounted a Defense Fund Campaign to pay for legal fees.

II. Legal Analysis and Conclusions

From the beginning, the defense has repeatedly emphasized the non-profit status of the corporation, and accordingly, asserts
that Ehrlich has virtually no rights with respect to the funds that the Quartet had on the date of separation, including the
retirement funds; to any funds earned since his ouster; nor to any income projected to be made in the future. The defense
likewise ignores the impact on Ehrlich’s position as Associate Professor with VA Tech, by his summary ouster.
Ehrlich has asserted that he is being treated as a minority shareholder in a business corporation; is being improperly "squeezed
out"; and is being oppressed by the majority to his economic detriment.

As to applicable law, my research has led to few Pennsylvania cases on this subject matter. Ehrlich has, however, cited Arc
Manufacturing Co., Inc. v. Conrad, 467 A.2d 1133 (Pa. Super. 1983), which provides guidance. While it involves a business
corporation, it was closely held by 3 shareholders and is quite apposite to this case, and to the "squeeze out" of Ehrlich.

There, the Court found that the two shareholders in control of the corporation violated their fiduciary duty to the third by meeting
without notice of him as an Officer; barring him from the business premises; excluding him from business participation;
terminating his salary and excluding him from the pension plan; wasting corporate assets by paying their individual legal fees
with corporation funds.
The parallel to this case is obvious and the Quartet’s non-profit name does not insulate it and the 3 players from liability for their
breach of the fiduciary duty. The general law appears to be that the members of a closely held corporation are held to owe each
other fiduciary duty of the utmost good faith and loyalty and a close corporation may not act out of avarice, expediency or self
interest in derogation of their duty of loyalty to the other stockholder and to the corporation. See for example Sugarman v.
Sugarman, 797 F.2s 3 (1st Cir. 1986). Considerable Delaware Law has also been developed in the same vein. See generally,
PBI publication, Minority Shareholders Rights, a Case Study (1996).

I find the treatment of Ehrlich to be oppressive, which warrants remedial action by me. I find their action to be oppressive since it
was done in such preemptory fashion, without notice to Ehrlich, without an opportunity to participate therein, or even be heard on
the subject, and purportedly for his "back channeling". While it apparently irritated Shaw, it was designed to benefit the Quartet
generally, and never materialized in any event. Whatever transgressions Ehrlich may have committed, they are minor compared
to Shaw’s effort in December, 1999 to register as a trademark the name "Audubon Quartet" without notice to Ehrlich, and with
himself alone as the holder thereof. (Shaw Depo. pps 104, 112-115, Exhibits 11, 12, & 13). Obviously, Shaw considered the
Quartet to be his and his alone, and considered himself to be the creator and the owner.

Further, Ehrlich had played with the Quartet for 16 years and it continued to get bookings, its income rose, and it never received
a critical review of any of its performances. This is hardly indicative of substandard play. I further reject the testimony of Lederer
who said his play was substandard from the beginning, but she [thought] he would improve. If this be true, her 16-year tolerance
of such play is of Biblical proportions. Also, noteworthy is Shaw’s judgment that Ehrlich’s offering the Quartet’s service free, to
any philanthropist who would pay $900,000 Bergonzi, "damaged" the Quartet. I find this an incredible statement. How could a
purported 501(c)(3) corporation be damaged by this reciprocation to a benefactor of such largesse? I further credit Ehrlich when
he says that in his quest for a Stradivarius Lederer exclaimed she would be willing to play anywhere in the world for such
benefactor. (Ehrlich Depo. p. 56)

I am satisfied that the facts in this case show selfish motive and breach of fiduciary duty by the 3 players in control. The
circumstances of Ehrlich’s ouster, the lack of notice and opportunity to be heard, and the purported indignation over the Bergonzi
matter all lead me to conclude that the majority have oppressed and indeed, did "squeeze out" Ehrlich. Further, Shaw’s reaction
was excessive and not warranted, particularly given the fact that he, himself, in December, 1999 began steps to appropriate the
name to himself alone.

In addition, the makeweights offered as to Ehrlich’s abilities, which have only now surfaced after 16 years of success, disclose a
more sinister motive. While Ehrlich may have acted unwisely, and his unilateral effort to get another Bergonzi is not to be
condoned, his letter of apology discloses his personal commitment to the Quartet, and his overall support of the enterprise. I,
therefore, believe the facts demonstrate oppression as contemplated in the governing law for a corporation of this type, 15 Pa.
C.S.A. 5981 (2).

Obviously, there are now such irreconcilable differences between the players due to all that has transpired in this litigation that
any effort to direct the Quartet to resume playing with Ehrlich as first violinist would be fruitless. Similarly, I believe nothing would
be gained by dissolving the Quartet, or by directing that the name become the property of Ehrlich. Rather, the more equitable
course of action is to permit the name "Audubon Quartet" to continue to exist, and to continue to permit Shaw, Lederer and
Takayama to be the Members, Directors, and Officers of it as they desire. They could also develop such agreements,
understandings, and indeed Trademarks that would eliminate future problems. However, the corporation, and the individual
Defendants, jointly and severally must reimburse Ehrlich for his 25% share of the cash in the possession of the Quartet on
February 21, 2000 (134,008.96); pay 25% of the liquidated pension ($40,956); pay him such expenses as he had incurred prior
to February 21, which has not yet been paid; pay him for the performances that he had given, and had not yet been paid; and
finally give him the value of his interest in the corporation.

The value of the corporation was the subject of spirited debate among the various experts deposed by the parties, and further,
enlivened by the fact that 2 of the contending experts were from the same Finance Department of VA Tech. The expert
presented by the defense, Dr. Vittorio Bonomo, Associate Professor of Finance, asserted that no value could be placed on a
non-profit corporation, because it really was not a business and rather should be analogized to a public park. (Bonomo Depo. p.
87). Given what I now know about the cash on hand, the earning capacity of this entity, the symbiotic relationship with VA Tech,
and its simply being the business that is the Audubon Quartet, I do not find any merit to this approach. I find this to be a business
corporation disguised as a non-profit, 501(c) (3) corporation. From its inception, the 501 (c) (3) designation was merely a vehicle
to get funding for the four players, either as salary or expenses from donors who wanted the tax deduction. Even their Annual
Spring Conference is done for a fee. While the corporation may hold non-profit status, all the income it received went to the
players as income, or to cover normal business operating expenses. Indeed, the Power point video music program, which Shaw
claims as his own, was developed with grant funds. (See Shaw Depo. pps. 205-206). Therefore, the non-profit status arguments
have a hollow ring and are not persuasive.

The 2 experts offered by Ehrlich, Edward J. Keppel, CPA and Professor Meir I. Schneller, take a more realistic approach to this
entity and also factor in the value of the VA Tech teaching position.

Both Keppel and Schneller used substantially the same methodology to arrive at their value, but Keppel’s opinion of value is 1.2
million, while that of Schneller is 1.9 million.

They appear, however, to have used different capitalization rates and Schneller factored in a 3% per annum growth factor that
Keppel did not. Neither appears to have factored in the cash on hand that the Quartet had earned, but not distributed at the end
of 1999. The accumulated $212,035 shows an additional earning potential beyond the VA Tech teaching position. Further,
income earned in 2000 suggests conservatively that each player should receive at least $25,000 per annum from the Quartet.
It therefore, is my conclusion that the value of the Quartet from which Ehrlich has been ejected, and including the teaching
position with VA Tech, is 1.6 million.

Plaintiff also seeks payment of counsel fees by the Quartet. During this litigation, the counsel fees for the 3 individual Defendants
and of the Quartet have been paid out of the corporate funds. As claimed in Ehrlich’s brief, those fees amount to $109,811, plus
$46,478 for a total of $156,289. The 3 individual Defendants have stated that these funds will be paid back to the corporation if
the Officers and Board of Directors order them to. The likelihood of this happening is nil. Throughout the litigation defense
counsel has asserted that the Quartet no longer has any assets. Given its earning potential, as demonstrated by the size of its
bank account at the start of 2000, I do not believe it will not take long to re-generate these funds.

It therefore, is clear to me that the corporation has paid all counsel fees for all Defendants, and is unlikely to try to recoup them.
It, therefore, is also equitable that the corporation pay Plaintiff’s fees as well.

As claimed by Plaintiff’s attorney, David Alpern, of the Pennsylvania Bar, that amount is $132,844, and is supported by his
deposition and itemized billings and time records. Given the complexity of this case, the time devoted, and the distances
involved, I find that amount to be fair and reasonable, and will award that as well.

After the foregoing factual analysis and application of applicable law, and to re-capitulate the same, I find the following:

1. Ehrlich is an equity owner in the Quartet based on his being accorded membership status, Officer status and Board of Director
status joining the Quartet 16 years ago;

2. The non-profit status of the Quartet does not insulate it from my finding that it is, in fact, a business corporation;

3. Shaw’s status as an incorporator of the Quartet, and as its cellist since its inception, does not give him superior rights over any
of the other players given the fact of its genesis and its mode of operation since 1979;

4. Ehrlich has been oppressed by the conduct of the other 3 players in summarily ousting him from the Quartet, and is entitled to
relief in the form of receiving the monetary value of his equity interest in the corporation as well as his share of cash at the time
of his ouster, plus counsel fees; and

5. No useful purpose would be served in dissolving the Quartet, but my authority to dissolve, necessarily includes the power to
award an equitable distribution to Ehrlich of his interest in the Quartet.
All of the obligations created hereunder will be joint and several among the corporation, the Quartet and the 3 individual
Defendants.

An appropriate Decree Nisi follows.

DECREE NISI

AND NOW, this 12th day of October, 2001, based upon the foregoing Memorandum Opinion and my conclusion that the Plaintiff,
David Ehrlich has suffered oppressive conduct by the Defendants, it is hereby ORDERED, ADJUDGED and DECREED as
follows:

1. Defendants, Audubon Quartet, Inc., a Pennsylvania Non-Profit Corporation, Clyde T. Shaw, Doris Lederer, and Akemi
Takayama, jointly and severally shall pay the following amounts to the Plaintiff, David A. Ehrlich.

a. $33,502.24 representing 25% of his interest in funds on hand with the corporation on the date of his ouster, February 21,
2000.

b. $10,239 representing 25% of the Pension Fund established by the Audubon Quartet, Inc.

c. $14,583 representing expenses due Plaintiff, David A. Ehrlich as of February 21, 2000.

d. $19,951 representing concert fees due Plaintiff, David A. Ehrlich for performances given with the Quartet after February 21,
2000.

e. $400,000 representing 25% of the value of the Audubon Quartet, Inc. as of the date of his ouster.

f. $132,844 representing Attorney’s Fees.

2. The Audubon Quartet, Inc. shall not be dissolved, and the Injunction shall remain in place until such time as I shall hear and
determine any motions for Post-Trial Relief, if any are filed. Further Action on the Injunction will be taken as appropriate.

3. The assets of the Audubon Quartet, Inc. shall remain with it including the power point Terezin computer imaging program.
This Decree is issued pursuant to PA Rule of Civil Procedure 1517 and shall be final unless appropriate Post-Trial Relief,
pursuant to Rule 227.1, is sought within 10 days after the filing of this Decree.

***

Daniel J. Wakin, Lost in Bitter Legal Battle: Chamber Players' Instruments, New York Times, December 15, 2005, at E2.

What would be a wrenching moment for any musician has arrived for two members of the Audubon Quartet: the loss of their
instruments, casualties of a bitter legal feud with the member they cast out five years ago.
Yesterday, a day after a federal bankruptcy court judge in Roanoke, Va., ruled that the instruments be surrendered, a trustee
prepared an order for their seizure.
''I don't have words for this,'' said Clyde Shaw, the quartet's cellist. ''The letters and notes I'm getting from around the country --
the musicians in this country are shocked. They are floored by this decision. It upsets the world that we live in.''
Mr. Shaw and his wife, Doris Lederer, the quartet's violist, will have until 4 p.m. on Dec. 23 to hand over their instruments, said
the trustee, George A. McLean Jr.
Mr. McLean was appointed to liquidate the couple's holdings. They declared bankruptcy after losing a $611,000 judgment in a
lawsuit brought by the quartet's first violinist, David Ehrlich, over his ouster in February 2000 after years of tension.
Mr. Ehrlich, who did not immediately respond to a phone message, has said that while he finds the loss of the instruments tragic,
he needs the money for lawyers' fees. He said he was unfairly and summarily fired by three people who conspired against him,
and that he had to sue to salvage his reputation.
''We'll just find a place to store them until we can have them appraised and begin the liquidation process,'' Mr. McLean said of the
instruments. He said that they and several bows were valued at $166,000, and that he was also seeking the hand-over of
annuities and accounts worth nearly $90,000. Mr. McLean said he would also seek permission to put the couple's house on the
market, and added that he had decided against seizing their 1996 Jeep Grand Cherokee because of its limited value. ''I'm not
going to take it away from them,'' he said.
Mr. Shaw's cello is an 1887 Eugenio Degani. ''It has a beautiful voice,'' he said. ''It matched what I wanted to say.'' But far worse,
he said, would be to lose his precious 1860 bow, a Nicolaus Kittel, which he said was cut from the same block of wood that
produced a bow used by Jascha Heifetz. The viola is a 1915 Ferruccio Varagnolo with what Ms. Lederer said was a rare
combination: ''It's clear and dark and chocolaty. Usually, when you get a viola, it's one or the other.''
The legal battle has been long and bitter. It has divided the music world and split loyalties in and around Blacksburg, Va., where
the quartet moved in 1980 for a residency at Virginia Tech, which ended after the lawsuit.
Despite this week's ruling, the case is not over.
The judgment against Mr. Shaw and Ms. Lederer came in Pennsylvania because the quartet was incorporated as a nonprofit
there. They and the Audubon's violinist Akemi Takayama are still holding out hope of an appeal in a Pennsylvania state court.
(Ms. Takayama faces a separate bankruptcy action.) But for that to happen, the bankruptcy judge, Ross Krumm, would have to
lift a stay. Howard Beck, a lawyer for the couple, has made the request. At a hearing in bankruptcy court in Roanoke on
Tuesday, Judge Krumm said he would hear arguments next month.
During the bankruptcy proceeding on Tuesday, according to an account in The Roanoke Times, Mr. Beck struggled to convince
the judge that the couple needed the instruments to make a living -- and that a $10,000 exemption from liquidation under
bankruptcy law for ''tools of the trade'' was meaningless for a string player. Mr. Shaw said his bow alone was worth six or eight
times that. ''How do you give them a fresh start if you take the instruments of their livelihood away from them?'' Mr. Beck said in
an interview yesterday.
But Judge Krumm said the liquidation was a ''no-brainer,'' the newspaper reported.
Meanwhile, Mr. Beck said he had not ruled out the possibility of appealing the turn-over order. He said that he would use the time
before Dec. 23 to push hard for a settlement with Mr. Ehrlich, although settlement talks in the past have foundered. If a
settlement is close, or if progress is made in an appeal, Mr. Beck said the instruments might remain protected.
''Al,'' he said, using Mr. McLean's nickname, ''isn't going to hurry out and sell the things to get the cash.'' He said another strategy
might be to give Mr. McLean a bond as an assurance to allow Mr. Shaw and Ms. Lederer to continue playing the instruments for
the time being.
Once their instruments are handed over, Mr. Shaw and Ms. Lederer, who teach at Shenandoah University's conservatory in
Winchester, Va., and continue to play in the Audubon with a different violinist, will have to find replacements. The university
president, James A. Davis, said the university was willing to help, whether lending them instruments in its collection or acquiring
new ones to be provided on loan. He left open the possibility of helping buy their old instruments.
''I told them we would work with them to be sure they have a quality instrument to perform and play on,'' Mr. Davis said.
Ms. Lederer expressed the hope -- a long shot, she said -- that somehow the money could be found to buy their instruments
back from the trustee. ''It's awfully hard to raise that kind of money, especially since most of our friends are musicians,'' she said.
Mr. Shaw said he might borrow a cello. ''Music,'' he said, ''the judge can't order that out of my soul.''

***

QUESTIONS

Why did the quartet form a corporation? Why a nonprofit corporation? Was this a nonprofit corporation?
Why was this dispute litigated in Pennsylvania? Why did the lawyer appear only for the corporation?

Where did Shaw get the authority to move the checking accounts? To seek trademark registration?

Did Ehrlich need authority to seek funds for the Bergonzi?

Would this case have turned out otherwise if there had been a proper meeting of the board of directors to terminate Ehrlich?

Would this case have turned out otherwise if no corporation had been formed?

On what basis did the court find that the corporation had a value of $1.6M?

Why did the court rule that the other members of the quartet were personally liable?