Well-Drafted LLC Operating Agreement Allows Members to Be Terminated

Berndt v. Berndt, Wis: Court of Appeals, 4th Dist. 2013 - Google Scholar:

This is a decision of the Wisconsin Court of Appeals, affirming the grant of summary judgment to an LLC and two members who terminated the interests of two other members. Here, the operating agreement allowed members to be removed for wrongful conduct. The Court concluded that the Defendants appropriately (a) gave notice of the termination; and (b) offered to purchase the interests of the departing members.

The court rejected an argument that the actions taken by the Defendants were not in good faith. The covenant of good faith and fair dealing did not apply because the Defendants had proper grounds to terminate the plaintiffs' interests in the LLC.

This case illustrates the importance of carefully drafting an operating agreement for every limited liability company. The terms of the operating agreement allowed the Defendants to terminate the Plaintiffs for wrongful conduct and to purchase their interests in the company.

Edward X. Clinton, Jr.

www.clintonlaw.net

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