Business Associations Keyed to Hamilton
Anderson v. Wilder
The minority members (Plaintiff) of FuturePoint Administrative Services, LLC (the “LLC”), a closely held member-managed LLC, were expelled by the vote of the majority shareholders (Defendant), who together held 53 percent of the LLC. According to the operating agreement, the company was allowed to expel a member with or without cause upon a vote or consent of the members who held a majority of the units, and this is what the majority members (Defendant) purported to do. Before the expulsion, the members had met to discuss the purchase of ownership units by third parties at $250 per unit. The Plaintiffs received $150.00 per ownership unit in the LLC after they were expelled, pursuant to the LLC’s operating agreement. Not long after the expulsions, the Defendants sold 499 ownership units, amounting to a 49.9 percent interest in the LLC, to a third party at a price of $250.00 per ownership unit. The minority members filed suit, alleging inter alia, that the Defendants’ actions violated their fiduciary duty and duty of good faith and fair dealing to the Plaintiffs. One reason they provided for the expulsion was that the Plaintiffs on the management committee had planned to distribute the company’s cash, approximately $60,000, to all the members, which would jeopardize payroll and operations. The Plaintiffs strongly denied that allegation and claimed it was just a pretext for buying their units cheap and selling the units for a sizeable profit. The trial court granted summary judgment in favor of the Defendants, and the state’s intermediate appellate court granted review.
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