Can a three-person minority outvote a four-person majority to oust the majority-appointed, longtime CEO of a profitable company (who also happens to be the founder of the company) in a vote requiring supermajority approval?

The math ain’t mathing, you may be saying to yourself.

But today, we explore a case—SJI Renewable Entery Ventures LLC, et al. v REV LNG LLC, et al.—judicially endorsing a minority’s unilateral removal of the company’s CEO based on a conflict of interest provision in the parties’ operating agreement that shifted voting power to the minority under these particular circumstances.

Background

Defendant-Appellant REV LNG LLC (the “Company”) is an alternative fuel supply company located in upstate NY, but formed as a PA LLC. The Company specializes in, among other things, the development of renewable natural gas projects, converting cow manure on dairy farms into renewable natural gas, together with the ancillary services to develop these projects from inception to operation.

The Company was founded in 2012 by its longtime CEO, E. David Kailbourne. The Company is manager-managed, and is governed by a seven-seat Board of Managers.

In 2020, Plaintiff-Respondent SJI Renewable Energy Ventures, LLC purchased a minority 35% interest in the Company for $10.5 mil. as part of a long-term strategic partnership.

Following the investment, ownership and corporate governance was structured as follows:

• Defendant-Appellant REV LNG Holdings LLC (“RH Member”), i.e. the majority member, holds a 65% stake and can appoint 4 managers to the Company’s Board.
• Plaintiff-Respondent SJI Renewable Energy Ventures, LLC (“SJI Member”), holds a 35% stake and can appoint 3 managers to the Board.

Notably, Kailbourne was not just the CEO of the Company. He is also the CEO of RH Member, as well as the most significant shareholder of that entity. Accordingly, Kailbourne handpicked the four RH Member-side managers to the Board, including himself and the Company’s COO, Jacob Digel.

Governance and Voting Rights Under the LLCA

Fast forward a few years. In 2022, the parties entered into the Fourth (and current) Amended and Restated LLC Agreement, governed by Pennsylvania law by its terms.

Section 8.1 concerns the Board of Managers.

As a manager-managed LLC, the Board of Managers: “shall make all decisions with respect to the management, supervision and control of, and the determination of all matters relating to the ownership and operation of the Business” (Section 8.1[a]). The Board functions under the one manager, one vote rule, rather than voting the respective pro rata membership interests.

The LLCA dictates that some matters require a unanimous vote (Section 8.1[e] [i] Schedule C). Some require a supermajority, including the removal of key employees and officers (Section 8.1 [e][ii], Schedule D). And the balance requires simple majority approval (Section 8.1 [e] [iii]).

Section 8.1(f) concerns “Interested Member Matters.” That section provides, “with respect to any meeting or action or decision of the Board of Managers regarding any matter or action” dealing with, among other things:

(iv) officers, employees or other personnel of any Company Entity employed by or associated with a Member or any of its Affiliates:
(A) The Member which is or which is an Affiliate of such Interested Party, or the applicable Member… shall be deemed to be an “Interested Member” and,
(B) Neither the Interested Member nor the Manager appointed by such Interested Member, if any, shall be entitled to vote or otherwise participate in any action or decision by the Board of Managers in respect of such Interested Member Matter.

The Interested Member may participate in the meeting, but attendance is not required for the meeting to be duly called or for the Board to act.

Tensions Rise Between the Members

The parties sharply disagree on Kailbourne’s job performance post-investment.

The SJI Member contends that Kailbourne failed to deliver on his projections for the Company and breached various governance provisions of the LLCA including allegedly making major distributions (in which he personally benefitted) without proper approvals and without establishing adequate reserves.

The RH Member, for its part, contends that the Company far exceeded projections under Kailbourne’s leadership, hitting major financial milestones thereby triggering certain buyout obligations on SJI’s part (which it claims SJI has attempted to avoid).

In any event, by 2024, the relationship between the two members considerably deteriorated, with SJI aiming to remove Kailbourne.

The “Board” Votes Kailbourne Out, Over Majority’s Objections

On June 17, 2025, the Board called a special meeting to discuss various agenda items unrelated to Kailbourne. But before turning to those agenda items, the SJI Member-appointed managers forced a vote terminating Kailbourne as CEO of the Company.

The vote was taken by the three SJI-appointed managers alone, taking the position that under Section 8.1(f), Kailbourne’s affiliation with the majority member (RH Member) disqualified all four RH Member-appointed managers from participating.

Following the vote, the RH managers adjourned the meeting over SJI’s objections.

The next day, June 18, 2025, the SJI Member transmitted a letter to the Company demanding that it confirm Kailbourne’s termination as CEO and the interim installment of Digel as interim CEO.

The Company, unsurprisingly, responded that the vote was invalid and refused to acknowledge its outcome, arguing that the termination vote violated the LLCA’s broader governance provisions, including clauses requiring supermajority approval for hiring or firing key executives. Kailbourne refused to step down, and the majority-controlled side continued to treat him as CEO.

Shortly thereafter, on July 25, 2025, the SJI Member sought a TRO and preliminary injunction to enforce Kailbourne’s termination.

Justice Borrok Grants TRO & Preliminary Injunction in Favor of Removal

Justice Borrok granted the TRO and, following full briefing and argument, granted a preliminary injunction, “enjoining Mr. Kailbourne, during the pendency of litigation, from purporting to act as CEO of REV LNG following his termination therefrom.”

The Court found for SJI on all three prongs of the familiar tripartite standard for preliminary injunction.

Likelihood of Success

Justice Borrok held that Section 8.1(f) of the LLCA reflects the parties agreement that “neither Interest Members nor Managers appointed by Interested Members are entitled to vote or otherwise participate in any action or decision of the Board of Managers in an Interested Member Matter (which indisputably includes the decision to terminate Mr. Kailbourne’s employment as CEO).”

Justice Borrok was unpersuaded by the Defendants’ argument that the LLCA did not contemplate a minority member’s unilateral removal of the Company’s CEO. Defendants argued that Section 8.1(f) should be interpreted narrowly, reading it together with other provisions of the LLCA to avoid this “absurd” result. Defendants advocated for a reading that requires a supermajority vote critically including the RH Member-appointed managers, before firing Kailbourne based on his status as a key employee and officer.

But, the Court rejected that framing, treating Section 8.1(f) as a specific rule governing conflicted decisions—one that overrides ordinary voting rules when triggered.

Irreparable Harm and Balance of Equities

Justice Borrok also held that, “Conduct that unnecessarily frustrates a party’s participation in the management of a company may constitute irreparable harm (Wisdom Import Sales Co., L.L.C. v Labatt Brewing Co Ltd, 339 F3d 101, 114 [2d Cir 2003]). This is particularly so where a person who is no longer the CEO were to hold themselves out as the CEO of the company when in fact they are not.”

The specific performance language of the LLCA further supported SJI’s position that it would suffer irreparable harm, where Section 15.13 expressly provides that breaches of Section 8.1 “shall be specifically enforceable, it being agreed by the parties that any remedy at law, including monetary damages, for a breach of any such provision shall not be an adequate remedy.”

Justice Borrok was not persuaded by RH’s argument that SJI previously failed to exercise those voting rights in prior votes that would have triggered Section 8.1(f) (including other decisions concerning Kailbourne’s continued employment), and that such prior course of conduct should be factored in here. Among other reasons, the Court pointed to Section 15.3, a broad non-waiver provision (“No waiver of any breach, term or condition of this LLC Agreement by any party shall constitute a subsequent waiver of the same or any other breach, term or condition”).

The Court ultimately held that the three SJI managers properly exercised their voting right to terminate Kailbourne as CEO; that they were permitted to exclude from that vote all four managers appointed by Kailbourne (through RH); and that immediate, interim relief was warranted.

Defendants appealed.

First Department Unanimously Affirms

Hewing closely to Justice Borrok’s reasoning, the First Department unanimously affirmed (read the appellants’ briefs here and here; respondent’s brief here; and reply briefs here and here).

The First Department agreed that SJI demonstrated prima facie that under Section 8.1(f), the three SJI appointed managers “had the power to unilaterally terminate Kailbourne as CEO of REV LNG.” Under a plain reading of that provision, the RH Member-appointed managers were disqualified from voting on the matter of Kailbourne’s termination as CEO, meaning that their votes were not counted as part of the quorum, nor required to enact any resultant decision.

The Appellate Court also agreed that SJI had demonstrated irreparable harm and that the balance of equities tipped in its favor. Under applicable law (citing PA law, under which the LLCA is governed), as reinforced by Section 15.13 of the LLCA, the court found that the irreparable injury is suffered if SJI’s “ability to exercise the power to unilaterally terminate Kailbourne as CEO [i.e. SJI’s bargained-for minority member rights] is not given effect on a preliminary injunction motion.”

An Ounce of Prevention is Worth a Pound of Cure

There’s no question that both sides are sophisticated parties who respectively retained sophisticated counsel at all stages. But, as I see it, this high-stakes chess match was won (and lost) before the fight even reached the courts, at the contract-drafting stage. SJI negotiated a scenario where it (as minority member) could act without the majority if the majority’s managers were conflicted. That’s what happened here.

SJI’s litigators, thus, had the relatively straightforward task of presenting to the court a simple interpretation of the Interested Member Matters provision and its obvious applicability here. RH’s counsel, on the other hand, was forced to take a roundabout route—an uphill battle, even in the best of cases—forced into a labored explanation of the context of the investment, the history between the parties, and weaving in multiple different provisions in the LLCA in order to eventually reach their advocated-for interpretation limiting the applicability of Section 8.1(f).

So it’s no wonder that, as Justice Borrok succinctly put it, in light of SJI’s bargained-for rights to disqualify conflicted managers from voting: “The people that you appointed, your buddies that you put on the board can’t save your job.”

We more often see what some might deem “harsh” results from our friends in the First State, where Delaware Chancery makes crystal clear that contract is king (see here and here for just a few recent examples). But, even in New York, where we are not as strictly contractarian and courts look to balance the inherent tension between contractarianism and fundamental fairness—this calls to mind the recent split decisions by both the First Department and the New York Court of Appeals in Behler v Tao—courts will typically enforce contract provisions exactly as written, even if the result shifts power dramatically under the particularly triggered circumstances.

It’s a real gamble to ask a court to do otherwise.