## Facts

- Two 50–50 participants formed a Delaware LLC in 2012 to acquire and operate a custom-clothing business.
- The initial operating agreement created a four-person board as the company’s sole manager, split evenly between the two sides, and required unanimity for board action.
- The board appointed an executive affiliated with one participant as CEO, giving that participant effective control of day-to-day operations through management.
- One participant attempted to transfer its LLC interest to an affiliate entity for tax reasons; the other participant knew of the transfer, did not object, and treated the affiliate as a member thereafter.
- Under the Delaware LLC Act, the transfer did not make the affiliate a member; it held only an assignee’s interest because statutory admission requirements were not satisfied.
- The parties’ relationship deteriorated; the manager-level board deadlocked 2–2 on significant decisions, and the parties failed to agree on a buyout process or price.
- With the board unable to act, the CEO continued operating without effective board oversight, and the controlling participant allegedly used its position during buyout talks to seek concessions.
- The assignee filed a petition seeking dissolution under 6 Del. C. § 18-802 and in equity; the controlling participant moved to dismiss for lack of statutory standing, after which the original transferring party joined as a co-petitioner.

## Issues

1. Whether an assignee (and/or a transferor that has divested its interest) qualifies as a “member or manager” with standing to seek statutory dissolution under 6 Del. C. § 18-802.
2. Whether the Court of Chancery may recognize and entertain a claim for equitable dissolution of a Delaware LLC when § 18-802 standing is absent, based on alleged deadlock and unfairness.

## Decision

- The court granted the motion to dismiss the statutory dissolution claim under § 18-802 for lack of standing.
- The court held the assignee was not a member under the LLC Act and therefore could not invoke § 18-802.
- The court held the transferor, having transferred its interest, was no longer a member and likewise lacked § 18-802 standing.
- The court denied the motion to dismiss as to equitable dissolution, recognizing an independent equitable cause of action and permitting the assignee to proceed.
- The court found the pleaded facts—manager-level deadlock, lack of oversight coupled with asymmetric operational control, and alleged use of deadlock as leverage—sufficient at the pleading stage to support equitable relief.

## Legal Principles

- Statutory dissolution under 6 Del. C. § 18-802 may be sought only “by or for a member or manager”; assignees lack statutory standing absent member admission under the LLC Act.
- A transfer that does not satisfy statutory requirements for admission results in the transferee holding an assignee’s economic interest rather than member status, even if the parties informally treat the transferee as a member.
- The Court of Chancery retains inherent equitable authority to dissolve a Delaware LLC when equity requires and the statutory/contractual scheme does not foreclose equitable remedies.
- Equitable dissolution may be available in exceptional circumstances, including manager-level deadlock that prevents governance, coupled with structural conditions that permit one side to operate the business without effective oversight and potentially exploit the impasse.

## Conclusion

The court enforced the statutory limits of § 18-802 by dismissing dissolution claims brought by entities that were not members or managers, but it allowed an assignee to pursue equitable dissolution where the pleadings alleged a paralyzing management deadlock and a resulting inequitable operating structure.


In re Carlisle Etcetera LLC, 114 A.3d 592 (Del. Ch. 2015)