M.B v. P and P LLC

Nov 18, 2018

OUTCOME: Emergency Injunction obtained and day to day decision making authority given to our client.

Member Dispute. This case embodies one of the most fundamental reasons why a company needs an operating or a shareholder agreement. There were two members, each of which owed a fifty percent (50%) int ... erest in the company. The parties had each agreed to contribute a certain amount of capital to the business. Our client contributed his share of the investment to the business, and the other member refused. As a result, the company and the completion of the company's store were at a standstill. This went on for months and months. Our client offered to buy out the other member's units (i.e., shares); however, the other member refused. Our client suggested that they sell the business; the other member refused. Our client finally suggested that the parties bring in a new member and that new member's units would come from the non-compliant member's units, the other member refused and continued to maintain the deadlock between the parties. All the while, the rent, along with all the other ordinary expenses of the company, continue to accrue, and the creditors, including the landlord, were threatening legal action and eviction. Because the parties did not have an operating agreement, which clearly defined who had the authority to make decisions on behalf of the company or how a deadlock between the parties would be resolved, the parties were subject to the default provisions set forth in the Revised LLC statutes, which essentially left the parties in the same position. Our client threatened to seek a dissolution of the company or a forced buyout in court. Within days, the non-compliant member removed all of the assets which were in the company's store location, which were initially purchased by our client and in which the landlord had a contractual lien interest in without our client's knowledge. Upon our client finding out what his partner did, our office immediately sought and successfully obtained an emergency and ex-parte injunction against the non-compliant member which required the non-compliant member to return all of the company's assets to the store location and temporarily gave our client full decision making and authority over the business. After the court entered the injunction, the parties were able to fairly quickly come to a resolution as to what to do with the company.