You are here: / / HERE THE LLC AGREEMENT, IN ACCORDANCE WITH ITS TERMS, WAS UNILATERALLY...
,

HERE THE LLC AGREEMENT, IN ACCORDANCE WITH ITS TERMS, WAS UNILATERALLY AMENDED BY DEFENDANT SUCH THAT DEFENDANT’S PRIOR CONTRACTUAL OBLIGATION TO PLAINTIFF WAS EXTINGUISHED AFTER PLAINTIFF HAD PERFORMED; ALTHOUGH HARSH, THIS OUTCOME WAS SUPPORTED BY DELAWARE LAW AND WAS AFFIRMED BY THE MAJORITY OVER A THREE-JUDGE DISSENT (CT APP). ​

The Court of Appeals, affirming the Appellate Division, in a full-fledged opinion by Judge Singas, over a three-judge dissenting opinion, determined plaintiff was bound by the terms of an amended limited liability company (LLC) agreement which was unilaterally amended by defendant. The amended agreement included a merger clause which effectively nullified a prior oral agreement between plaintiff and defendant providing that defendant would buy-out plaintiff’s interest in the LLC after five years. Plaintiff had invested three million and his share of the LLC was worth over 11 million at the five-year mark:

… [T]he amended LLC agreement … contained a merger clause which states:

“This Agreement, together with the Certificate of Formation, each Subscription Agreement and all related Exhibits and Schedules, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter, including the Original Agreement.” * * *

Upon his initial investment, plaintiff became bound by the original LLC agreement, including its clause dictating how its terms could be altered. Once the agreement was altered pursuant to its terms, plaintiff became bound by the amended LLC agreement, including its merger clause. Pursuant to the amended LLC agreement’s choice-of-law provision, Delaware law governs its interpretation and reach … . Under Delaware’s Limited Liability Company Act, which aims to “give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements” … , a member of an LLC “is bound by the limited liability company agreement whether or not the member . . . executes the limited liability company agreement” … . Plaintiff, as a member of [the LLC], is therefore bound by its operating LLC agreement—the amended LLC agreement—regardless of whether he signed it. * * *

Though an outcome whereby one member to a contract unilaterally extinguishes his contractual obligation, even after the other party has performed, may appear “harsh,” … Delaware law “unambiguously advises prospective investors in a closely held LLC (especially one considering a multimillion-dollar investment) to scrutinize the existing LLC agreement and condition their investment upon the clear written delineation thereunder of . . . their contracted-for rights in the event of any future amendments to the LLC agreement” … . Behler v Kai-Shing Tao, 2025 NY Slip Op 00803, CtApp 2-13-25

Practice Point: Here the LLC agreement was, in accordance with its terms, unilaterally amended by defendant to extinguish a prior contractual obligation owed plaintiff after plaintiff had performed. This harsh result was supported by Delaware law, which basically says anyone entering an LLC agreement which can be unilaterally changed should think twice.

 

You might also like
THE APPELLATE DIVISION’S VACATION OF DEFENDANT’S FIRST DEGREE MURDER CONVICTION WAS AFFIRMED; THE PEOPLE DID NOT PROVE THE “RELISHING THE INFLICTION OF EXTREME PAIN” ELEMENT (CT APP).
ALTHOUGH DEFENDANT DOCTOR PRACTICED IN THE BRONX FOR PART OF EACH WEEK, THE PRINCIPAL OFFICE OF HIS BUSINESS AND HIS RESIDENCE WERE IN WESTCHESTER COUNTY, WHERE PLAINTIFF WAS TREATED; SUPREME COURT PROPERLY GRANTED DEFENDANTS’ MOTION TO CHANGE THE VENUE FROM BRONX TO WESTCHESTER COUNTY (CT APP).
THE REASONABLENESS OF THE COSTS OF TEMPORARILY RELOCATING A TENANT FORCED TO VACATE AN UNINHABITABLE BUILDING MUST BE DETERMINED IN A LIEN FORECLOSURE PROCEEDING, THE LIEN CANNOT BE SUMMARILY DISCHARGED BY FINDING THE COSTS AS STATED IN THE NOTICE OF LIEN FACIALLY UNREASONABLE.
THE COURT OF APPEALS UPHELD THE VIABILITY OF THE ASSUMPTION OF THE RISK DOCTRINE AS IT APPLIES TO SCHOOL SPORTS; AN EXTENSIVE DISSENT ARGUED THE DOCTRINE SHOULD BE ABANDONED (CT APP).
Check Cashing Business Could Not Be Excluded by Zoning Measure
ALTHOUGH THE FAILURE TO CONDUCT A FRYE HEARING TO DETERMINE THE ADMISSIBILITY OF THE ANALYSIS OF DNA EVIDENCE USING THE FORENSIC STATISTICAL TOOL WAS ERROR, THE MAJORITY CONCLUDED IT WAS HARMLESS ERROR BECAUSE OF VIDEO EVIDENCE CIRCUMSTANTIALLY CONNECTING DEFENDANT TO THE GUN FOUND BY THE POLICE; THREE-JUDGE DISSENT ON WHETHER THE ADMISSION OF THE DNA EVIDENVE CONNECTING DEFENDANT TO THE GUN WAS HARMLESS (CT APP).
FAILURE TO FILE A COVER SHEET ACCOMPANYING A DESIGNATING PETITION IS A FATAL DEFECT (CT APP).
RELEASE SIGNED BY PLAINTIFF’S DECEDENT IN 1997 DID NOT ENTITLE CHEVRON TO SUMMARY JUDGMENT IN THIS ASBESTOS-MESOTHELIOMA CASE (CT APP).

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy

IMPROPER CROSS-EXAMINATION OF PLAINTIFF ABOUT HIS STATUS AS A DEFENDANT IN A...