I was especially drawn to the case I’m about to introduce involving LLC member withdrawal, owing to the Jacobs v Cartalemi case that I litigated to a successful conclusion about two years ago, also involving member withdrawal.
In Jacobs, the court held that a member who withdrew from the LLC as of right under the default statute, where the operating agreement was silent on withdrawal, nonetheless was obligated to comply with the operating agreement’s right of first refusal provision, thereby defeating the member’s statutory demand for payment of the fair value of his shares. The provision by its terms was triggered by a member who “desires to sell his, her or its Membership Interest,” which the court interpreted to encompass a member’s notice of withdrawal and demand for payment.
The Point 128 LLC v Choi, decided earlier this month by Manhattan Commercial Division Justice Andrea Masley, did not involve a formal withdrawal notice and demand for payment of fair value as in Jacobs. Rather, in Choi the question presented was whether attempts to obtain a buyout and the filing of a related lawsuit brought by the LLC’s minority members against the controlling members, sought to circumvent and breach the operating agreement’s anti-withdrawal provisions. Continue Reading A Case of LLC Withdrawal Symptoms