Court Grants LLC Member’s Request For Appointment Of Receiver And Accounting To Investigate Alleged Improper Use Of LLC Funds

Posted: December 22, 2025 / Written by: Jeffrey M. Eilender, Joshua Wurtzel, Channing J. Turner, Samuel L. Butt, Thomas A. Kissane / Category Receivers

Court Grants LLC Member’s Request For Appointment Of Receiver And Accounting To Investigate Alleged Improper Use Of LLC Funds

On November 10, 2025, Justice Andrew Borrok granted a request for a court-appointed receiver and for an accounting of all income and expenses of a LLC to investigate alleged improper uses of the LLC’s assets. In 176 West 87th Leasehold LLC, et al., v. Mark S. Rudd, et al., Index No. 653491/2025, the LLC in question had three individual members who jointly managed the LLC. After one of the members passed away, an estate executor took over representation of his interest in the LLC. The estate executor allegedly discovered that the other two members had been improperly using the LLC’s assets to pay for their families’ health insurance and had made a $150,000 payment without the consent of the deceased member. Because relations between the members had broken down, the executor brought a petition to dissolve the LLC and sought appointment of a receiver and an accounting. The Court granted those requests, explaining:

[T]he Operating Agreement requires unanimous consent to make decisions on behalf of the LLC. The Members are unable to effectively communicate with each other. Indeed, the Members are unable to properly discuss whether or not to sell the Lease, which is the LLC’s sole asset. Mark S. Rudd and Richard Klein are also allegedly taking the LLC’s funds for their own personal use without the consent of all of the Members. Thus, the management of the entity is unwilling to reasonably permit the stated purpose of the entity to be achieved, dissolution of the LLC is proper, appointment of a receiver is appropriate and an accounting is warranted.

The attorneys at Schlam Stone & Dolan have extensive experience with disputes between members, managers, and partners of business entities. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.