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PLAINTIFF WAS A NONMEMBER PURCHASER OF A MEMBER’S INTEREST IN THE LIMITED LIABILITY COMPANY (LLC) AND THEREFORE COULD NOT BRING DERIVATIVE CAUSES OF ACTION ON BEHALF OF THE LLC (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff, who was a nonmember purchaser of a member’s interest in the limited liability company (LLC), could not bring derivative causes of action on behalf of the LLC:

A “[m]ember” is a person who has been admitted as a member of a limited liability company in accordance with the terms and provisions of the Limited Liability Company Law and the limited liability company’s operating agreement, and who has a membership interest in the limited liability company with the rights, obligations, preferences, and limitations specified under the Limited Liability Company Law and the operating agreement (Limited Liability Company Law § 102[q]). A “[m]embership interest” means “a member’s aggregate rights in a limited liability company, including, without limitation: (i) the member’s right to a share of the profits and losses of the limited liability company; (ii) the member’s right to receive distributions from the limited liability company; and (iii) the member’s right to vote and participate in the management of the limited liability company” (Limited Liability Company Law § 102[r]).

Here, the plaintiff does not dispute that she failed to obtain the consent of the nonselling members to be admitted as a member of the LLC when she acquired her membership interest. Paragraph 8 of the LLC’s operating agreement provides that “[n]ew members may be admitted only upon the unanimous consent of the Members and upon compliance with the provisions of this agreement,” and paragraph 32(e) of the operating agreement provides that “[a] non-member purchaser of a member’s interest cannot exercise any rights of a Member unless, by unanimous vote, the non-selling Members consent to him becoming a Member” (see Limited Liability Company Law § 602). Therefore, contrary to the Supreme Court’s determination, the plaintiff, as a nonmember purchaser who had not been admitted as a member of the LLC, lacks standing to pursue derivative causes of action on behalf of the LLC … . Kaminski v Sirera, 2019 NY Slip Op 01067, Second Dept 2-13-19

 

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