In Re Carlisle Etcetera LLC

114 A.3d 592 (2015)

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Nature of the Case

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Facts

In 2012, Well Union Capital Limited (P) and Tom James Company (D) formed Carlisle Etcetera LLC, a Delaware limited liability company. They executed a simple form of operating agreement to be replaced with a more detailed operating agreement. P and D never reached agreement on a replacement operating agreement. After the LLC was formed, P transferred its member interest to a wholly owned subsidiary called Well Union U.S. Holdings, Inc. (Sub). D did not object and treated Sub as a member from that point on. Under the Delaware Limited Liability Company Act, the transfer rendered Sub an assignee, rather than a member. Things went south, and deadlock prevailed at the manager level. The board split 2-2 on key issues. P and D agreed a buyout was in order, but they could not agree on a buyout procedure or a price. At December 31, 2013, the book value of Carlisle Etcetera is $23,024,741. D was willing to sell its 50% share to P for its half of the book value, $11,512,371, paid in cash within thirty days. If P was unwilling to buy out D's share, D was willing to buy out P's share at the same price under the same terms. Discussions quickly stalled. D told P that if a deal could not be worked out, P was stuck because D could perpetuate the deadlock and continue operating the Company as it wished. Sub sought judicial dissolution of the Company because of deadlock at the member and manager levels. D moved to dismiss on the ground that Sub lacked standing to seek a judicial dissolution under Section 18-802 of the LLC Act. Sub filed an amended petition on November 13 that added P as a co-petitioner. D renewed its motion to dismiss.