Court of Appeal reverses order permitting statutory buyout of GMSR client’s interest in an LLC

GMSR’s clients own a combined 50% interest in a limited liability company (LLC).  Following years of dissension with the holders of the remaining 50% interest, one of GMSR’s clients sued for a decree of judicial dissolution.  The holders of the opposing 50% interest filed a motion under a statute that enables an LLC’s members to avoid dissolution by buying out the shares of the member suing for dissolution.  Before the trial court ruled on the buyout motion, GMSR’s clients voted their combined 50% interest in favor of dissolving the LLC.  Nonetheless, the trial court granted the buyout motion and initiated the buyout proceeding.  GMSR’s clients appealed, arguing that the dissolution vote was immediately effective to dissolve the LLC, mooting the dissolution action and related buyout proceeding.

The Court of Appeal agreed.  In a published opinion, the court held that, under the plain language of the Corporations Code, an LLC “is dissolved” upon the first of either a vote of 50% of the LLC’s membership interests or entry of a decree of judicial dissolution.  Though a suit for judicial dissolution was pending, nothing in the statute prevented GMSR’s clients from pursuing the alternative voluntary dissolution by member vote.

Click here to read the Court of Appeal Opinion:  Friend of Camden, Inc. et al. v. Brandt (2022) 81 Cal.App.5th 1054 [Second District, Division Eight].

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