Delaware courts often emphasize the freedom of contract of parties to define their rights, powers, duties, obligations, liabilities and restrictions in a limited liability or operating agreement under the Delaware Limited Liability Company Act (LLC Act). Pursuant to Section 18-802 of the LLC Act, a member or manager may file an application, seeking the Court of Chancery to “decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with a limited liability agreement.” Since judicial dissolution under Section 18-802 of the LLC Act is not a mandatory provision of the LLC Act, the right to file for judicial dissolution may be modified, restricted, or waived in an operating agreement, as in R&R Capital LLC v. Buck & Doe Run Valley Farms LLC, 2008 Del. Ch. LEXIS 115 (Del. Ch. Aug. 19, 2008). In an action for judicial dissolution, the Court of Chancery recently had the opportunity to address whether parties had prohibited or restricted in their operating agreement the right of a managing member to file a petition for judicial dissolution under Section 18-802 of the LLC Act.
In Meyer Natural Foods LLC v. Duff, C.A. No. 9703-VCN (Del. Ch. June 4, 2015) (Noble, V.C.), the Chancery Court dissolved Premium Natural Beef LLC (PNB) under Section 18-802 of the LLC Act on the grounds that it was no longer reasonably practicable to operate PNB in conformity with its purpose. While concluding that PNB’s operating agreement permitted its managing member to file a petition for judicial dissolution in the first instance, the court noted that the equities or an inequitable result also counseled against a strict interpretation that the operating agreement restricted the filing of a petition for judicial dissolution.
