Dumbar Group, LLC v. Tignor

Facts

Dunbar Group, LLC (Plaintiff) and Tignor (Defendant) were co-equal members and managers) in XpertCTI, LLC (Xpert). Dunbar was controlled by its sole owner, Robertson (Plaintiff), and Defendant was a 50 percent owner of X-tel, Inc. Dunbar’s (Plaintiff) role in Xpert was to provide software, and Tignor’s (Defendant) role was to provide access to business contacts. Xpert’s operating agreement provided a procedure for a member to assert a breach of the agreement by another member, where, if the breach was not timely cured by the defaulting member, the complaining member had the “right to petition a court of competent jurisdiction for dissolution of the Company.” The agreement also stated that the “dissolution of a member or occurrence of any other event that terminates the continued membership of a member in the Company shall not cause the dissolution of the Company.” The agreement also stated that the “dissolution of a member or occurrence of any other event that terminates the continued membership of a member in the Company shall not cause the dissolution of the Company” Xpert had a 36-month contract with one of its main clients, Samsung, which renewed annually unless terminated by either party. Eventually, disagreements came up between Robertson (Plaintiff) and T=Defendant about the management and distribution of company assets. Dunbar, Robertson (Plaintiff) and Xpert (collectively “Dunbar”) (Plaintiff) filed suit seeking Defendant’s expulsion, claiming numerous allegations of Defendant’s misconduct, including Defendant’s commingling of Xpert’s funds with those of X-tel. Defendant, in turn, sought judicial dissolution of Xpert, claiming that it was not reasonably practical to continue Xpert’s business in conformity with its articles and operating agreement because the company was deadlocked in its ability to conduct its business affairs. The actions were consolidated, and the trial court found that Defendant had indeed commingled Xpert’s funds with X-tel’s; had authorized a change in the status of Xpert’s checking account without informing Robertson (Plaintiff); restricted Robertson’s (Plaintiff) access to equipment that impacted Xpert’s ability to fulfill orders in a timely manner and impacted the quality of the company’s products; terminated Robertson’s access to his Xpert email account; and had committed other misconduct that was contrary to Xpert’s best interest and negatively affected its ability to continue business. The trial court determined that Defendant’s conduct called for immediate expulsion under the state’s LLC statute, and ordered Defendant’s expulsion. Additionally, however, the court ordered that Xpert be dissolved after its contract with Samsung ended. In doing so, the trial court did not consider the evidence in light of the factor that Defendant was being expelled. Dunbar Plaintiff appealed the portion of the court’s order dissolving Xpert. The state’s highest court granted review.