The romance of the new business venture has waned. There are disputes between the principals. Emotions are clearly running high. In short, this business marriage, consummated as a limited liability company, no longer works the way at least one of the parties intended. Is that enough under New York for the members of the LLC to get divorced? The answer from the New York Appellate Division, Second Department, is a resounding “No.”
The decision In re 1545 Ocean Avenue (opinion here), which involved a limited liability company formed for purpose of redeveloping property in Bohemia, NY. The LLC’s two members were business entities, Crown Royal and Ocean Suffolk Properties, both in the construction business, and the managers were the principals of those two business entities. Various disputes arose between the managers, including the price charged by one of the members for work on the project and the selection of an architect, and ultimately one of the members asked for a divorce and walked out on the project. The other member continued on, however, and with only a few weeks Crown Royal sought to dissolve the LLC.
Crown Royal claimed deadlock and the trial court granted the petition for dissolution. The Appellate Division reversed, holding that Crown Royal had failed to establish that the LLC had been prevented from continuing in accordance with the terms of its operating agreements. (New York law, you may recall, does not provide for the expulsion of individual members.)