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Current Developments in the Commercial Divisions of the
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Posted: August 26, 2017

Questions of Fact on Whether LLC Could Fulfill its Purpose Barred Dissolution Claim’s Dismissal

On August 16, 2017, the Second Department issued a decision in Mace v. Tunick, 2017 NY Slip Op. 06170, holding that questions of fact precluded the dismissal of a claim for the dissolution of an LLC, explaining:

In order to demonstrate entitlement to dissolution of a limited liability company, the member seeking such relief must establish, in the context of the terms of the operating agreement or articles of incorporation, that (1) the management of the entity is unable or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or achieved, or (2) continuing the entity is financially unfeasible.

Here, the plaintiff alleged in the complaint that Pedani was formed for the purpose of acquiring title to and managing property to serve as Ceres’ headquarters, and that it became impossible to fulfill that purpose once Ceres relocated to a different property, not owned by Pedani. Contrary to the defendants’ contention and the Supreme Court’s conclusion, the defendants did not show, through the operating agreement or any other evidence, that the material fact alleged by the plaintiff regarding Pedani’s purpose is not a fact at all and that no significant dispute exists regarding it. In this respect, the operating agreement did not set forth any particular purpose for Pedani. The court’s determination that Pedani’s purpose was simply to acquire and manage property constituted an impermissible factual finding.

(Internal quotations and citations omitted) (emphasis added).

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