In Comerica Bank v. Global Payments Direct, C.A. No. 9707-CB (Del. Ch. Aug. 1, 2014), the Delaware Court of Chancery appointed a liquidating trustee to assist with and oversee the winding up of Global Payments Comerica Alliance LLC pursuant to Section 18-803(a) of the Delaware Limited Liability Company Act. Alliance was the entity through which Global Payments Direct Inc. processed credit and debit card transactions for Comerica Bank. The parties and sole members of Alliance, Comerica Bank and Global Direct disagreed on how to wind up Alliance. Comerica Bank claimed that Global Direct was intentionally delaying and inhibiting Alliance’s winding up for its sole gain and as retribution for Comerica Bank’s termination of its service agreement with Global Direct. Following a two-day trial, the court determined that Alliance had been properly dissolved and that the parties’ exclusivity and noncompetition obligations regarding Alliance had ended. The court also agreed with Comerica Bank that Alliance could not be wound up without appointment of a liquidating trustee.
Section 18-803(a) of the LLC Act permits the Court of Chancery to “wind up [a] limited liability company” upon application and a showing of “cause” by any member of a limited liability company. Because the term “cause” is undefined in the LLC Act, here, the court looked to precedent, including Spellman v. Katz, C.A. No. 1838-VCN (Del. Ch. Feb. 6, 2009), and Phillips v. Hove, C.A. No. 3644-VCL (Del. Ch. Sept. 22, 2011). In Spellman, the court determined that the requisite cause to appoint a liquidating trustee was established by the members’ inability, unwillingness and contractual obligation to implement the wind-up process following dissolution. Two years later, in Phillips, the court again appointed a liquidating trustee after finding that the members’ history of large and small disputes effectively created a deadlock with regard to winding up the LLC. Relying on these analyses, the court found in Comerica that cause exists to appoint a liquidating trustee when “the history of the parties suggest[s] they would be unable or unwilling to undergo a wind-up process in an orderly or timely manner.”
