## Facts

- Three individuals each held a one-third membership interest in a New York member-managed LLC formed in January 2012.
- No written operating agreement was executed at formation; one member claimed the parties had an oral understanding that all material LLC decisions required unanimous consent.
- In December 2013, the other two members (a two-thirds majority in interest) executed a written operating agreement and caused an amendment to the LLC’s articles of organization to be filed; the dissenting member did not sign.
- The operating agreement included majority-rule governance provisions and addressed additional capital contributions and consequences for a member’s failure to contribute.
- In October 2014, the two majority members issued a notice requiring each member to contribute $10,000 and voted to reduce the dissenting member’s salary to zero while setting salaries for themselves.
- The dissenting member sued for declarations invalidating the operating agreement and capital call and sought damages and declarations related to member salaries, asserting breach of contract, fiduciary duty, and the covenant of good faith and fair dealing.
- The majority members counterclaimed for declarations that the operating agreement and capital call were valid and that their actions were authorized.
- The parties filed cross-motions for summary judgment.

## Issues

1. Whether members holding a majority in interest may adopt a written operating agreement after formation without unanimous consent, binding a non-signing member.
2. Whether an alleged oral unanimity arrangement can defeat statutory provisions governing adoption of an LLC operating agreement and default governance rules.
3. Whether the capital call and related enforcement measures were authorized under the operating agreement and New York LLC Law.
4. Whether the majority members were authorized to set member salaries and reduce the dissenting member’s salary by majority vote.

## Decision

- The court granted summary judgment largely for the defendants on their counterclaims and dismissed the complaint.
- The court declared the operating agreement and related amendment to the articles of organization valid and binding on the non-signing member.
- The court upheld the capital call as authorized under the operating agreement and applicable LLC law.
- The court rejected the claim that an oral unanimity requirement invalidated the majority’s adoption of the written operating agreement or subsequent actions taken under it.

## Legal Principles

- Under New York LLC Law § 402(c), an operating agreement may be adopted by the vote of a majority in interest of the members entitled to vote thereon.
- Under LLC Law § 417, an LLC operating agreement must be in writing; alleged oral operating terms cannot displace the statutory framework.
- When no written operating agreement exists, or when it does not address the disputed topic, the LLC Law’s default provisions govern.
- Once validly adopted, an operating agreement binds members, including those who did not sign, and authorizes company action to the extent provided by its terms.
- Capital contribution requirements and consequences for nonpayment are enforceable when expressly authorized by the operating agreement.

## Conclusion

The court enforced statutory majority adoption of a written LLC operating agreement and validated actions taken under it, including a capital call, while rejecting an alleged oral unanimity rule as inconsistent with New York’s requirement of a written operating agreement and the LLC Law’s default governance scheme.


Shapiro v. Ettenson, 2015 WL 5096026 (N.Y. Sup. Ct. 2015)