On May 15, 2025, Justice Patel of the New York County Commercial Division issued a decision in Lignel v. Butler, 2025 NY Slip Op. 31791(U), holding that freezing out a member was an insufficient basis for dissolving an LLC, explaining:
Dissolution is permitted under LLC Law § 702 upon application by or for a member, who may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the operating agreement. The appropriateness of an order of dissolution of a limited liability company is vested in the sound discretion of the court hearing the petition. . . .
Courts have held that the stated purpose of the LLC did not include the petitioner’s participation in management decisions. Furthermore, disagreements between members did not make it reasonably impracticable for an LLC to continue operations in conformity with the operating agreement so long as the LLC remained a viable entity. Dissolution is reserved for situations in which the LLC’s management has become so dysfunctional or its business purpose so thwarted that it is no longer practicable to operate the business.
Here, Petitioner has failed to provide any allegation supporting a determination that it is no
longer practicable for the gallery to continue operations in conformity with the Operating Agreement. Although the Court acknowledges the discord between Petitioner and Respondents, the gallery continues to fulfill the stated purpose as set forth in the Operating Agreement of exhibiting and selling art. In support of this finding, Petitioner concedes that the gallery has recently hired additional managers, who are not LLC members, thereby demonstrating that the gallery is a functioning business.The Court therefore denies the first cause of action to dissolve Canada, LLC pursuant to LLC Law § 702. In light of the foregoing, the Court denies the second cause of action seeking the appointment of a receiver or liquidating trustee pursuant to § 703(a) as moot. Both Petitioner and Respondent agree that Petitioner has rightful access to the books and records of the LLC under both the Operating Agreement and LLC Law § 1102, and therefore, the Court grants the third cause of action.
(Internal quotations and citations omitted).