The Delaware Court of Chancery approved the transfer of a limited liability company membership interest, including both the economic and voting rights associated with that interest, to an existing member of the company without the consent of a third member. Omniglow LLC, a Delaware limited liability company, had three members: (1) Plaintiff, Achaian, Inc., owned 20%, (2) the Randye M. Holland and Stanley M. Holland Trust owned 30%, and (3) Defendant, Leemon Family LLC, owned 50% interest. As a result of a dispute among the members regarding the management of the company, Holland transferred its entire 30% interest to Plaintiff. Plaintiff then filed suit seeking to dissolve the company, asserting that there was a 50/50 deadlock with respect to its management. Leemon opposed the motion, arguing, among other things, that Holland could not transfer its voting rights without Leemon's consent.
The Delaware Limited Liability Company Act provides that the transferee of a limited liability company interest receives only an economic interest in the LLC, unless the operating agreement provides otherwise. The Court found that the operating agreement allowed a member to transfer its entire membership interest, including both economic and voting rights, to another existing member without obtaining consent of all members. The operating agreement provided that a member was permitted to transfer all or any portion of its "Interest," which term was defined as the "entire ownership interest of the member." The Court interpreted the term "entire ownership interest of the member" to include both economic and voting rights. Although another provision of the operating agreement required the approval of each existing member before a member could be admitted, the Court found that such provision applied only to the admission of new members and not to existing members, and, thus, did not apply in this case.
Achaian, Inc. v. Leemon Family LLC, 2011 WL 3505361(Del. 2011)