The California Court of Appeal held in Kennedy v Kennedy, 235 CA4th 1474 (2015), that the California Revised Uniform Limited Liability Company Act (RULLCA) did not apply to a dispute among members of a California limited liability company because their lawsuit was filed before January 1, 2014, the RULLCA effective date. The court based its ruling on California Corporations Code Section 17713.03 which states,
This title does not affect an action commenced, proceeding brought, or right accrued or accruing before this title takes effect.
The defendants argued that RULLCA applied because they wanted to be able to use the mandatory disgruntled member buy-out scheme set forth in Corporations Code Section 17707.03(c)(1) which states:
In any suit for judicial dissolution, the other members may avoid the dissolution of the limited liability company by purchasing for cash the membership interests owned by the members so initiating the proceeding, the “moving parties,” at their fair market value.
Subsections (c)(2) – (6) set forth a procedure for consummating the buy out. Subsection (c)(6) states,
A dismissal of any suit for judicial dissolution by a manager, member, or members shall not affect the other members’ rights to avoid dissolution pursuant to this section.
The defendants wanted RULLCA to apply so they could carry out a buy out under Section 17707.03(c) despite the fact the plaintiff had dismissed the claim for judicial dissolution. There is no mandatory buy out under California’s LLC law before January 1, 2014.
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