Delaware Business Litigation Report

Chancery Determines LLC Agreement Required Payment to Remove Manager

Soleimani v. Hakkak, C.A. No. 2023-0948-LWW (Del. Ch. Apr. 12, 2024)
The defendants attempted to remove a manager-employee of several limited liability companies. The manager filed suit, and the parties moved for summary judgment regarding the removal’s effectiveness. The Court of Chancery determined that the relevant contracts’ unambiguous language required the defendants to first have made certain payments to the manager to remove him. The Court explained that the defendants had a right to remove the manager, but that right to terminate did not necessarily mean the termination is unconditional or immediate. The contracts’ unambiguous language established a condition precedent: the defendants could remove the manager once they removed him as an employee, provided that they first paid him the fair market value of his interest. Under ambiguous contractual language, completing that payment was a condition precedent to effective removal, not a post-removal requirement. The defendants’ failure to make the payments rendered their attempt to remove the manager ineffective.

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