## Facts

- Jeffrey M. Horning formed a commercial construction company and, in December 2001, organized Horning Construction, LLC under New York law.
- Horning offered two employees, Ted Holdsworth and Robert Klimowski, membership interests in the new LLC; each of the three members held a one-third interest.
- The members never agreed on or signed an operating agreement, and the LLC operated without one.
- The business conducted through Horning’s prior corporation was moved into the LLC, and the LLC grew into a successful, expanding construction business.
- Conflict developed between Horning and the other two members, and the relationship deteriorated over time.
- Horning contended that Holdsworth and Klimowski did not take on the management responsibilities he expected in exchange for their ownership interests.
- Horning also asserted that, to obtain surety bonds, he pledged substantial collateral and that the other members would not agree to comparable support from the LLC.
- As disagreements increased, Horning attempted to sell his interest to Holdsworth and Klimowski, but the members could not agree on a price.
- After the failed sale negotiations, Horning petitioned the New York Supreme Court (Monroe County) to dissolve the LLC, alleging that the discord made it impossible for the members to continue operating together.
- Holdsworth and Klimowski opposed dissolution, arguing the LLC remained solvent and successful and should continue; they also sought to restrain Horning from conduct they claimed was harmful to the LLC.

## Issues

1. Whether the LLC should be judicially dissolved under N.Y. Limited Liability Company Law § 702 because it was not reasonably practicable to carry on the business in conformity with the articles of organization.
2. Whether the court should grant respondents’ request for injunctive relief against Horning based on alleged conduct harmful to the LLC.

## Decision

- The court denied the petition for judicial dissolution and dismissed the proceeding, finding Horning did not show that continuing the LLC’s business was not reasonably practicable under LLC Law § 702.
- The court declined to grant respondents’ requested injunctive relief in this dissolution proceeding.

## Legal Principles

- N.Y. LLC Law § 702 permits judicial dissolution only when it is not reasonably practicable to carry on the business in conformity with the articles of organization; the standard is strict.
- Serious member hostility, strained relations, or failed negotiations over an exit price do not, by themselves, satisfy § 702 if the LLC can still operate and pursue its business purpose.
- Operating without a written operating agreement is not, standing alone, a basis for dissolution where the LLC continues to function.
- Courts consider whether the enterprise remains viable and operating (including meeting obligations and continuing projects) when deciding whether § 702 has been met.
- Judicial dissolution is an equitable remedy and is not a substitute for a buy-sell or exit arrangement that members did not put in place.

## Conclusion

Because Horning Construction, LLC continued to operate as a successful, functioning business despite substantial conflict and the absence of an operating agreement, the court held Horning failed to meet the strict “not reasonably practicable” standard of LLC Law § 702 and therefore denied and dismissed the dissolution petition, while also declining to issue the requested injunctive relief.


Horning v. Horning Construction, LLC, 12 Misc. 3d 402, 816 N.Y.S.2d 877 (2006)