## Facts

- A New York LLC was formed in 2006 by two members holding equal 50% interests to buy and develop commercial real estate in Bohemia, New York.
- The LLC’s stated purpose was to rehabilitate an existing building and construct a second building for commercial rental.
- The operating agreement named two managers, one designated by each member, and permitted any manager to act unilaterally unless the agreement or statute required multi-manager approval.
- One manager owned a construction company that performed demolition and reconstruction work on the project; the parties disputed whether the other manager consented and whether permits and bidding procedures were followed.
- The non-affiliated manager challenged the construction company’s billing and alleged a lack of cooperation and regular project meetings, though he acknowledged the quality of the work.
- Relations deteriorated; buy-out discussions failed; one member petitioned for judicial dissolution based on alleged deadlock and frustration of purpose.
- Construction work continued while the dissolution petition was pending.

## Issues

1. Whether judicial dissolution under N.Y. Limited Liability Company Law § 702 may be granted based on managerial deadlock and member dissatisfaction in a 50–50 LLC.
2. Whether the petitioner must instead prove that it is no longer reasonably practicable to carry on the LLC’s business in conformity with the operating agreement.

## Decision

- The Appellate Division reversed the dissolution order and dismissed the petition.
- The court held that § 702 dissolution is available only upon a showing that it is no longer reasonably practicable for the LLC to carry on its business in conformity with the operating agreement.
- The court found the LLC’s contractual purpose remained achievable and the record did not show financial infeasibility or operational impossibility under the operating agreement’s governance structure.

## Legal Principles

- Dissolution under LLC Law § 702 turns on whether the LLC can continue to operate in conformity with the operating agreement.
- Internal dissension, hostility, or a stalemate between 50–50 owners is insufficient without proof that the LLC’s management is unable or unwilling to permit the LLC’s stated purpose to be realized, or that continued operation is financially unfeasible.
- Close-corporation deadlock doctrines are not imported into LLC dissolution analysis where the operating agreement allocates authority differently.
- Dissolution is not a substitute for a bargained-for buy-out right; dissatisfaction with the relationship does not justify dissolution absent the statutory showing.

## Conclusion

The court held that § 702 requires proof that the LLC cannot reasonably carry on its business as structured by the operating agreement, and because the project continued and the LLC’s purpose remained attainable, dissolution was not warranted.


In re 1545 Ocean Ave., LLC, 72 A.D.3d 121, 893 N.Y.S.2d 590 (N.Y. App. Div. 2d Dep’t 2010)