## Facts

- Two New York LLCs (R&R Capital, LLC and FTP Capital, LLC) served as investment vehicles and funded nine Delaware LLCs used for real estate and racehorse ventures.
- All nine Delaware LLCs were manager-managed by Linda (Lyn) Merritt.
- The relationship deteriorated; the New York LLCs alleged misconduct, including failure to maintain certain Delaware formalities and refusal to provide an accounting.
- Two Delaware LLCs (Pandora Racing, LLC and Pandora Farms, LLC) were entities in which the New York LLCs were not direct members or managers.
- Seven Delaware LLCs (the Waiver Entities) had operating agreements containing identical provisions stating members would suffer “irreparable damage” if any member sought judicial dissolution and that each member waived and renounced the right to seek court-ordered dissolution and appointment of a receiver.
- The New York LLCs petitioned for (i) judicial dissolution and winding up under 6 Del. C. §§ 18-802 and 18-803 and (ii) alternatively, appointment of a receiver under 6 Del. C. § 18-805.
- Defendants moved to dismiss, asserting lack of standing for the Pandora Entities and enforceable contractual waivers for the Waiver Entities.

## Issues

1. Whether a nonmember/nonmanager may seek judicial dissolution and winding up of a Delaware LLC under 6 Del. C. §§ 18-802 and 18-803 based on an indirect interest as a member of the LLC’s sole member.
2. Whether LLC members may waive by contract the statutory rights to seek dissolution, winding up, or appointment of a receiver under 6 Del. C. §§ 18-802, 18-803, and 18-805.

## Decision

- The motion to dismiss was granted as to dissolution and winding-up claims against the Pandora Entities because §§ 18-802 and 18-803 allow suit only by an LLC “member or manager,” and indirect upstream status did not satisfy that requirement.
- The court recognized that § 18-805 authorizes a broader class of applicants for receivership (including “any other person who shows good cause”), so the petitioners were not categorically barred from seeking a receiver for the Pandora Entities under that section.
- The motion to dismiss was granted as to the Waiver Entities because the petitioners, though members, had clearly and unambiguously waived the right to seek dissolution, winding up, and receivership, and the waivers were enforceable.

## Legal Principles

- Standing to seek judicial dissolution and winding up under 6 Del. C. §§ 18-802 and 18-803 is limited to an LLC’s “member or manager”; an indirect economic or upstream ownership interest does not confer standing.
- 6 Del. C. § 18-805 permits broader access to receivership relief than §§ 18-802 and 18-803, extending beyond members and managers to others who show good cause.
- Delaware LLC agreements are generally enforced as written; absent an express statutory restriction, members may contractually waive statutory remedies such as dissolution and receivership.
- Public policy favoring enforcement of LLC agreements supports enforcing express waivers of dissolution and receivership rights between sophisticated parties, with the implied covenant of good faith and fair dealing remaining as a statutory nonwaivable constraint.

## Conclusion

The Court of Chancery dismissed dissolution and winding-up claims where the petitioners were not members or managers of the target LLCs and enforced express operating-agreement waivers barring members from seeking dissolution or a receiver, reflecting Delaware’s strong preference for enforcing LLC contractual arrangements.


R&R Capital, LLC v. Buck & Doe Run Valley Farms, LLC, 2008 WL 3846318 (Del. Ch. Aug. 19, 2008)