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Court of Appeal:
Judge Aided Effort to Block Dissolution of LLC That Had Already Been Dissolved
Grimes’s Opinion Says Dissolution Took Place Upon Vote of
Those Whose Ownership Interests Totaled 50 Percent
By a MetNews Staff Writer
A Los Angeles Superior Court judge acted contrary to the “the plain language” of a statute in paving the way for a buyout of the one percent interest of an owner of a company in order to block the dissolution of that entity where the judicial action came after dissolution had already been effected, Div. Eight of the Court of Appeal for this district declared yesterday.
The statute which Judge Maureen Duffy-Lewis was found to have skirted is Corporations Code §17707.01. It provides that a limited liability company (“LLC”) “is dissolved” upon the happening of one of four events, two of which were relevant to the dispute.
Under subd. (b), dissolution is effected “[b]y the vote of 50 percent or more of the voting interests of the members” of the LLC or, under subd. (d), it occurs upon “[e]ntry of a decree of judicial dissolution.”
Facts of Case
This is a chronology of the events:
•Oct. 28, 2019: Friend of Camden, Inc., owner of a one percent interest in Ventura-Petit East, LLC (“VPE”), filed suit calling for a judicial dissolution of the LLC because the owners were evenly split in the question of whether to sell the company’s sole asset, a commercial office building. Friend of Camden is the manager of that building and favors selling it.
•Dec. 17, 2019: Parties that did not want to sell filed an answer and moved “to stay proceedings in order to ascertain value of and purchase” Friend of Camden’s interest.
•Jan. 2, 2020: Friend of Camden joined with owners whose interests in the LLC totaled 49 percent in voting to dissolve. (Those entities became parties to the action.)
•Feb. 10, 2020: Duffy-Lewis stayed proceedings pursuant to a code section that applies where there is to be a buy-out to “avoid the dissolution” of an LLC.
•Nov. 9, 2020: The judge issued an order appointing appraisers to determine the value of Friend of Camden’s interest so that a buyout could proceed.
That order was reversed in an opinion by Acting Presiding Justice Elizabeth A. Grimes. She wrote:
“The issue in this appeal is whether the vote to dissolve the LLC extinguished the right defendants otherwise would have had to purchase plaintiffs 1 percent interest and avoid dissolution of the LLC.
“We conclude, in accordance with the plain language of section 17707.01, that the answer is ‘yes,’ and the vote of 50 percent of the LLC membership interests to dissolve the LLC must be given effect. Consequently, the trial court erred when it issued an order appointing appraisers to determine the price defendants must pay to purchase plaintiffs 1 percent membership interest. The trial court must dismiss the buyout proceeding as moot and direct the parties to wind up the activities of the LLC.”
Dissolution Not Barred
Grimes went on to say:
“[W]e see nothing in the statute or other law to suggest that the mere filing of the buyout motion somehow operated to prevent members from voting to dissolve the LLC. The buyout procedure did not begin until the court ordered the stay of the dissolution proceeding 39 days after the vote to dissolve. Under the statute, the LLC was dissolved in accordance with that vote, and its activities are now required to be wound up.”
The case is Friend of Camden v. Brandt, 2022 S.O.S. 3420.
Representing Friend of Camden and those joining with it were Alan S. Gutman and John Juenger of the Beverly Hills firm of Gutman Law, along with Junger Robin Meadow, Geoffrey B. Kehlmann and Jeffrey Gurrola of the Miracle Mile appellate firm Greines, Martin, Stein & Richland, for Plaintiffs and Appellants.
Joseph S. Klapach of the Sherman Oaks firm of Klapach & Klapach, P.C. teamed with Gregg A. Martin and Ann S. Lee of the Century City firm Hamburg, Karic, Edwards & Martin in putting forth the position of the defendants/respondents.
Copyright 2022, Metropolitan News Company