On November 26, 2025, the Second Department issued a decision in Kober v. Nestampower, 2025 NY Slip Op. 06609, holding that a person who acquired an ownership interest in a limited liability company did not also become a member or have standing to bring a derivative action, explaining:
Members of a limited liability company (LLC) may bring derivative suits on the LLC’s behalf. A membership interest in a limited liability company is assignable in whole or in part. However, the assignment of a membership interest does not entitle the assignee to participate in the management and affairs of the limited liability company or to become or to exercise any rights or powers of a member. Rather, the only effect of an assignment of a membership interest is to entitle the assignee to receive, to the extent assigned, the distributions and allocations of profits and losses to which the assignor would be entitled. A person can become a member of a limited liability company by assignment, but only where the operating agreement grants the assignor such power, and, then, where the conditions of such authority have been complied with.
Here, the LLC’s operating agreement allows for the transfer of a membership interest, but provides that new members may only be admitted with the consent of the LLC’s other members. The assignment further provides that the transfer of the membership was subject to the acceptance of this assignment and assumption by the LLC. In support of their cross-motion, the defendants established their prima facie entitlement to judgment as a matter of law dismissing the first, second, and fourth causes of action by submitting evidence that there had not been any prior consent allowing for the transfer of any membership interest to the plaintiffs. In opposition, the plaintiffs failed to raise a triable issue of fact, as they do not dispute that they failed to obtain the consent of the LLC’s other members to be admitted as members of the LLC when they acquired their membership interest. Therefore, the plaintiffs, as nonmembers who had not been admitted as members of the LLC, lacked standing to pursue derivative causes of action on behalf of the LLC. For the same reasons, the plaintiffs failed to demonstrate their prima facie entitlement to judgment as a matter of law on the complaint.
(Internal quotations and citations omitted).