In NJ can a partner in llc be forced by an arbitrator to sell his shares in the company if he is disassociated as manager ?

Asked over 1 year ago - Newark, NJ

I am a partner in an LLC in NJ. I did an inappropriate yet minor offense as partner and after going through arbitration was disassociated as a managerial partner and awarded money for my shares. However, I have since learned that because of the " all saints" case, it is not allowed upon disassociation, to force a shareholder or owner to sell his shares, but rather he could be disassociated from a membership role and become an assignee, retaining his shares. I do not want to sell my ownership . Nj law states I don't have to, my question is can an arbitrator, in binding arbitration, over step her bounds by requiring I sell my shares? She does not even practice in NJ nor does she understand NJ llc law. Please answer , I am hoping to maintain my shares as the company is growing now . Thanks

Additional information

Also, the claims for arbitration did not include forcing the shareholder to sell his ownership shares. Following is taken from a nj law journal:
A new Appellate Division decision in New Jersey, styled All Saints University Of Medicine Aruba v. Chilana, App. Div. (per curiam) (Dec. 24, 2012), highlights the intricacies in the law for inter-member disputes and the importance of having a clear operating agreement, and that is particularly so with the adoption of the Revised LLC Act. All Saints provides guidance on the type of conduct that will cause a court to allow a forced dissociation with the business (there, failure to advance working capital and interruption with business operations), and also clarifies that a forced sale of the dissociated member’s shares is not permitted under the existing LLC Act.

Attorney answers (3)

  1. Christopher Edward Ezold

    Pro

    Contributor Level 17

    1

    Lawyer agrees

    Answered . I am an attorney licensed in the Commonwealth of Pennsylvania, and the States of Delaware and New Jersey. Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, Delaware, New Jersey or Federal law applies.

    That being said, the All Saints case holding relied in significant part on the LLC agreement between the parties that prohibited forced sales of membership interests. That does not mean that your arbitrator's decision could not be contested if your LLC agreement does not have that provision, however, it is very difficult to overturn an arbitration decision even if it is wrong on the law. You also have limited time in which to attempt to do so. You should speak with an attorney ASAP.

    If you would like to discuss this matter further, please feel free to contact me at the below address(es) or telephone number.

    /Christopher E. Ezold/

    The Ezold Law Firm, P.C.
    Employment, Business and Health Law
    One Belmont Avenue, Suite 501
    Bala Cynwyd, PA 19004
    (610) 660-5585
    Cezold@Ezoldlaw.com
    www.ezoldlaw.com

    Answered 8 months ago. Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed... more
  2. Mitchell T. Grayson

    Contributor Level 7

    Answered . You definitely need to have the matter reveiewed by an attorney familiar with partnership disputes and operating ahreements,
    It depends upon what your specific operating agreement provides. An operating agreement is a contract and unlerss it is illegal or unconceinable or you were cohereced you are cound by that agreement.

    The forgoing advise is just a general observation and may change dependinfg on your specific facts and... more
  3. Michael T Millar

    Pro

    Contributor Level 19

    Answered . The "All Saints" decision upheld the judicial dissociation of two members of an LLC pursuant to the existing LLC statute.

    Any LLC created after March 18, 2013 and all LLCs without an operating agreement afterMarch 1, 2014, become subject to the Revised Uniform LLC Act ("RULLCA"). Under existing law, a resigning member is bought out and has nothing further to do with the company. Under current law - there are no "dissociated members" - the concept is simply not known.

    RULLCA creates a "disassociated member" status. Under RULLCA, unless the operating agreement provides otherwise, a resigning member is not bought out. He or she simply loses the right to vote or participate in management. However, the disassociated member continues to receive profits.

    If this answer was helpful, please mark it as helpful or as a best answer. This answer is for general education... more

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