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MONTH-IN-BRIEF (Nov 2017)

Limited Liability Companies

Court of Chancery Dissolves LLC Based on Deadlock Between 50/50 Members

By Jason C. Jowers, Morris James LLP

In the case of In re GR BURGR, LLC, 2017 WL 3669511 (Del. Ch. Aug. 25, 2017), the Court of Chancery judicially dissolved an LLC pursuant to 6 Del. C. § 18–802 after the entity proved unable to function following the felony conviction of one of its members. Each of the members owned 50 percent of the entity, and the LLC agreement provided no mechanism to resolve deadlocks. The LLC lost a licensing deal when the members were unable to come to an agreement on an exit for the convicted member. According to the court, after the conviction, the deadlock “solidified to igneous rock.” Practitioners should note that the dissolution was granted on a motion for judgment on the pleadings rather than after a full trial.

Corporate Governance

Court of Chancery Finds It Lacks Personal Jurisdiction over Non-Resident Officer of Delaware Company

By Jason C. Jowers, Morris James LLP

In LVI Group Investments, LLC v. NCM Group Holdings, LLC, 2017 WL 3912632 (Del. Ch. Sept. 7, 2017), the court dismissed a fraud claim relating to a merger of two Delaware LLCs brought against a non-resident officer because it found it lacked personal jurisdiction under Delaware’s long-arm statute. The court determined that simply serving as an officer of a Delaware LLC does not constitute “transacting business” for long-arm statute purposes. The court also found that preparing allegedly false financial statements outside of Delaware for a Delaware LLC was not a transaction of business within Delaware. Finally, the court ruled that executing a certificate of merger filed in Delaware for a different merger that was an antecedent to the merger that was the subject of the litigation did not have a sufficiently “tight nexus” to the cause of action for personal jurisdiction purposes.

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