## Facts

- Two parties formed an LLC to market computer telephony integration software, each holding a 50% membership interest and serving as co-managers under an operating agreement.
- One member supplied proprietary software and handled daily operations; the other provided industry contacts, including a key customer.
- The LLC obtained a contract to supply security devices used with telecommunications systems, generating approximately $20,000 per month.
- The operating agreement permitted a member to seek judicial dissolution after an uncured breach, but also stated that termination of a member’s continued membership would not dissolve the company.
- The relationship deteriorated amid disputes over management and assets.
- The trial court found that one member commingled company funds with an affiliate’s account, changed banking arrangements without notice causing checks to be dishonored, restricted the other member’s access to company resources, and removed the other member from office space.
- The trial court ordered expulsion of the offending member, directed the remaining member to continue operating the LLC during the customer contract with monthly accountings to the expelled member, and ordered dissolution when the contract ended.
- The remaining member appealed only the dissolution order.

## Issues

1. Whether the evidence supported judicial dissolution of the LLC under Virginia Code § 13.1-1047 after the trial court expelled one co-manager.
2. Whether the trial court’s dissolution order was consistent with the operating agreement’s provision that termination of a member’s continued membership does not dissolve the company.

## Decision

- The Supreme Court of Virginia affirmed the order expelling the offending member.
- The Court reversed the order requiring dissolution at the end of the customer contract and remanded for entry of a decree consistent with its opinion.
- The Court held the record did not establish that it was not reasonably practicable to carry on the LLC’s business in conformity with its articles and operating agreement once the offending member had been removed from management.

## Legal Principles

- Judicial dissolution of a Virginia LLC under Code § 13.1-1047 requires proof that it is not reasonably practicable to carry on the business in conformity with the articles of organization and the operating agreement.
- Member misconduct or interpersonal conflict, standing alone, does not satisfy the statutory dissolution standard absent evidence that the company cannot operate under its governing documents.
- When a decree removes a member from managerial authority, claims of managerial deadlock must be evaluated in light of the member’s post-decree status.
- A trial court’s remedy that directs continued profitable operation for a meaningful period can be inconsistent with a finding that operation is not reasonably practicable.
- Operating agreement language separating member termination from entity dissolution weighs against dissolution unless the statutory standard is independently met.

## Conclusion

The court allowed expulsion as a remedy for misconduct but rejected dissolution because, after the offending member’s removal from management and given the operating agreement’s terms, the evidence did not show that continued operation in conformity with the company’s governance documents was not reasonably practicable.


Dunbar Grp., LLC v. Tignor, 267 Va. 361, 593 S.E.2d 216 (2004)