## Facts

- Matthew James Haley and Gregory L. Talcott were the only members of Matt & Greg Real Estate, LLC, each holding a 50% interest in a member-managed entity.
- The LLC was formed to acquire and hold the real property used by a restaurant business (Redfin Seafood Grill) and financed the purchase with a mortgage.
- Both members executed personal guaranties for the full mortgage amount.
- The members’ relationship deteriorated to the point that they could not cooperate in managing the LLC.
- Governance decisions required member agreement, but Haley and Talcott became deadlocked on major actions, including whether to approve a proposed lease arrangement and whether to sell the LLC’s property.
- The LLC agreement included a buy-sell style exit mechanism intended to separate the members’ interests if they could not continue together.
- The exit mechanism did not clearly resolve who would obtain the LLC if both members sought to retain it, and both did.
- The court found that use of the exit mechanism could leave Haley without any control over the LLC while he remained exposed on the personal guaranty.

## Issues

1. Whether it was “not reasonably practicable to carry on the business in conformity with a limited liability company agreement,” justifying dissolution under Del. Code Ann. tit. 6, § 18-802, where two equal members were in incurable deadlock.
2. Whether the existence of a contractual buy-sell exit mechanism barred judicial dissolution when the mechanism did not provide a workable or fair means to unwind the parties’ relationship, including due to ongoing personal guaranty exposure.

## Decision

- The Court of Chancery granted Haley’s motion for summary judgment.
- The court ordered judicial dissolution of Matt & Greg Real Estate, LLC under § 18-802.
- The court held that the undisputed deadlock between two equal members made it not reasonably practicable to operate the LLC in conformity with the LLC agreement.
- The court rejected Talcott’s argument that the contractual exit mechanism provided an exclusive remedy and precluded dissolution.
- The court treated corporate deadlock dissolution principles (including those applied to 50/50 joint ventures) as instructive by analogy in assessing deadlock in the LLC context.

## Legal Principles

- Under Del. Code Ann. tit. 6, § 18-802, an LLC may be dissolved when it is not reasonably practicable to carry on the business in conformity with the LLC agreement.
- A two-member, 50/50 member-managed LLC may satisfy the § 18-802 standard when member deadlock prevents the entity from functioning as contemplated by the agreement.
- A contractual buy-sell or other exit mechanism does not automatically preclude judicial dissolution; the court assesses whether the agreement and the parties’ circumstances still permit practical operation consistent with the agreement.
- In evaluating practicability and equitable consequences, the court may consider whether an asserted contractual exit would leave a member bearing material ongoing risks (such as personal guaranty liability) while stripping that member of meaningful governance or control.

## Conclusion

The court dissolved a deadlocked 50/50 LLC because the members could no longer jointly manage the entity as the agreement contemplated, and the contractual buy-sell mechanism was not a sufficient alternative where it could leave one member personally liable on the mortgage without corresponding control over the LLC.


Haley v. Talcott, 864 A.2d 86 (Del. Ch. 2004)