Can an LLC operating agreement strip a minority member of the right to sue derivatively—simply by requiring majority approval before anyone commences litigation “involving the Company”?  An arbitrator in New York thought so, and a New York court confirmed it.  But when the same dispute landed in Delaware Chancery, Vice Chancellor Laster had something to say about it—even though the issue wasn’t technically before him.

In In re Dynamk Fund Advisors LLC, C.A. No. 2026-0002-JTL (Del. Ch. May 20, 2026), V.C. Laster confronted what he called the “Every-Claim Reading” of an authority provision—a reading that would let a majority owner veto virtually any lawsuit a co-member might bring (direct, derivative, or otherwise).  His holding was narrow: a statutory dissolution claim is a direct member claim, not subject to any majority approval requirement.  But his dicta makes this case worth the read.

The Family Dispute.

The dispute arises from a falling out between siblings Mario and Daniella Kranjac, who co-founded a life-sciences venture capital business in 2015.  The business operated through two Delaware entities: Dynamk Fund Advisors LLC (the “Company”), which served as the general partner of Dynamk Life Sciences Fund, L.P. 

According to Mario, he and Daniella shared equal management rights.  Daniella was the full-time life-sciences professional; Mario was the lawyer, general counsel, investment committee participant, and co-manager.  The Company’s operating agreement had a detailed managerial authority section, which generally made Mario and Daniella co-equal managers.

As the fund matured, the siblings’ relationship deteriorated.  Mario became a controversial figure in New Jersey politics, creating adverse publicity that—according to Daniella—caused concern among Dynamk investors and eventually embroiled Dynamk in a public-records dispute.

The siblings also disagreed over a successor fund.  Eventually, Daniella formed a new venture called Avant Bio, and Mario accused her of excluding him from management while diverting Dynamk personnel and resources to the new fund.

Mario Commences Arbitration.

Mario filed arbitration claims, both individually and derivatively on behalf of Dynamk, against Daniella, Avant Bio, and others.  Among other relief, Mario sought a declaration that he had equal management rights with Daniella under the LLC agreements.

The Litigation-Authority Provision.

Daniella responded by invoking Section 6.01(B) of the Company’s Operating Agreement, which required member approval before certain company actions, including litigation:

Majority Approval of the Members shall be required prior to any . . . (iv) commencement of any litigation or arbitration proceedings involving the Company and settlement of any such proceedings.”

Daniella argued that this provision meant what it said: Mario could not commence litigation or arbitration involving Dynamk—including claims brought derivatively on behalf of Dynamk—without majority (i.e., Daniella’s) approval.

Mario countered that this provision dealt with manager-authority; that is, the ability of a manager to cause the Company to take action, not the ability of the manager to sue (either to assert individual rights, or to assert derivative claims on behalf of the Company).

The Authority Provision Bars Derivative Claims, Says the Arbitrator.

The arbitrator agreed with Daniella. In a Final Award, the arbitrator concluded that Mario breached Section 6.01(B) by commencing the arbitration on behalf of Dynamk without majority approval. The arbitrator further found that Mario’s breach was “willful and knowing,” noting that the operating agreements were prepared by Mario or under his supervision.

The award also rejected Mario’s effort to establish equal management rights. The arbitrator found that Mario and Daniella never agreed to divide management responsibilities equally, and that Mario had no unilateral authority to make management determinations or decisions on behalf of Dynamk.  This fundamentally altered the managerial structure of Dynamk; Daniella effectively became the Company’s sole manager.

The award became a judgment, declaring that “Mario Kranjac is not authorized to make any claims or commence litigation or arbitration proceedings . . . on behalf of, or involving, [Dynamk] . . . without Majority Approval.”

Mario Seeks Dissolution in Delaware Chancery.

Undeterred, Mario filed in the Court of Chancery seeking judicial dissolution of the Dynamk LLCs based on alleged deadlock between the co-managers, him and Daniella.  Daniella again accused Mario of deliberately violating the Operating Agreement’s litigation-authority provision.

VC Laster Allows a Dissolution Claim Despite the Authority Provision.

By decision and order dated May 20, 2026, Vice Chancellor Laster held that the New York judgment had issue-preclusive effect on the scope of the authority provision.  He noted the arbitrator applied the provision to Mario’s derivative claims, but the arbitrator also recognized that Mario still had some member-specific claims (claims for access to books and records).  And so, concluded V.C. Laster, the arbitrator drew a distinction between direct member claims (which were not barred) and derivative claims (which were), and V.C. Laster was bound by that distinction.  The question thus became whether Mario’s dissolution claim was a company claim (akin to a derivative claim) or a member-specific claim.

Deploying a comprehensive Tooley analysis, V.C. Laster held that a member’s statutory claim for judicial dissolution is a direct claim belonging to the member, not a derivative claim belonging to the company.  Notwithstanding the authority provision, therefore, Mario could pursue dissolution without majority approval.

But Also, the Arbitrator’s Ruling on the Authority Provision Was Too Broad.

But—characteristically—V.C. Laster didn’t stop there.  V.C. Laster stated that had he been deciding the effect of the authority provision on a “blank slate,” he would have read it much more narrowly than the arbitrator and the New York Court.

Based on its position in the operating agreement (in the section related to authority to cause Company action), V.C. Laster would have treated the provision as a limit on a manager’s authority to cause the Company to sue—not as a limit on a member’s right to sue in his own or the Company’s capacity.

The Antisuit Provision does not address the ability of a member to assert its rights as a member, whether those rights arise under the LLC agreement, the LLC Act, or other sources of law. It also does not cover derivative claims, because those are claims brought by members that fall outside the scope of the limitation on managerial authority.“

V.C. Laster identified serious problems with reading the authority provision to bar derivative claims:

• For one, that reading conflicts with the Delaware LLC Act’s derivative-action provision, which authorizes a member or assignee to sue on the LLC’s behalf when those with authority to do so have refused, or when asking them would be futile (6 Del. C. § 18-1001).  Notably, that authorization is not preceded by the “nigh-ubiquitous” phrase, “unless otherwise stated in the operating agreement” (but see Lehr v Aspen Power Partners LLC, 2025-0116-LWW, 2026 WL 865854, at *7 [Del Ch Mar. 30, 2026])
• Second, a broader reading would create “discretionary immunity,” allowing the majority to decide when claims against insiders may proceed.  V.C. Laster noted that the Operating Agreement here did not eliminate members’ fiduciary duties, but the arbitrator’s broad reading of the authority provision would gut those duties, “because a member could enforce them only if a majority interest signed off.”
• Finally, to the extent the implied covenant of good faith and fair dealing could potentially constrain improper use of the authority provision, reliance on that doctrine would be cumbersome and would “introduce substantial uncertainty”—a member would have to sue to find out if he could sue.

The Arbitrator’s Finding as to Daniella’s Authority Conclusively Refutes Mario’s Claims of Deadlock.

The authority provision did not prevent Mario from filing for dissolution, but Mario still had to plead a viable basis for dissolving Dynamk. V.C. Laster ultimately concluded that the arbitrator’s binding findings as to Daniella’s managerial authority meant there could be no manager-level deadlock.

Will V.C. Laster’s Dicta Keep Litigation-Authority Provisions from Swallowing the Derivative Action Whole?

The arbitrator’s ruling—and the New York judgment confirming it—sit in uneasy tension with the whole purpose of a derivative claim.  A derivative claim exists because those in control of the entity allegedly will not cause the entity to sue (hence the pre-suit demand requirement).  Requiring majority-member approval before a minority member may sue derivatively risks converting the derivative mechanism into a nullity: the member must first obtain permission from the very constituency that may be unwilling to authorize suit in the first place.

In that sense, we are lucky V.C. Laster used Dynamk to say more than he needed to: warning against reading provisions about litigation “authority” as a majority veto over member rights, including the derivative action.

Time will tell whether that warning will be enough to keep litigation-authority provisions—and questions about who has “authority” to act for the company—out of the business of derivative suits.