Commercial Division Blog

Posted: December 3, 2016 / Categories Commercial, Business Divorce

Disagreement Over LLC Management Insufficient Grounds for Dissolution

On November 18, 2016, Justice Ash of the Kings County Commercial Division issued a decision in Matter of Norvell v. Guchi's Idea LLC, 2016 NY Slip Op. 32307(U), holding that a dispute over LLC management was not sufficient grounds for dissolution, explaining:

Limited Liability Company Law S 702 provides for judicial dissolution as follows: On application by or for a member, the supreme court in the judicial district in which the office of the limited liability company is located may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement. The petitioning member satisfies the not reasonably practicable standard under LLCL S 702 when, in the context of the terms of the operating agreement or articles of incorporation, the petitioner can show 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, it is undisputed that when the partnership commenced, there was no operating agreement signed by the parties. Thus, the issue is whether, currently, the purpose of the LLC is being achieved and whether it remains financially feasible. The evidence before the Court indicates that both the purpose of Guchi, as a Japanese restaurant, and its financial viability are being achieved. That Norvell disagrees with Haraguchi's control and operation of Guchi is insufficient to warrant dissolution of Guchi.

(Internal quotations and citations omitted).