LLC operating agreements must be drafted with care

An opinion from the Superior Court of Vermont indicates once again why LLC operating agreements need to be drafted with care.  In Casella Waste Systems, Inc. v. GR Technology, Inc., 2009 Vt. Super. LEXIS 10, the question before the court was whether it had subject matter jurisdiction to dissolve two LLCs organized under Delaware law.  The plaintiff sought to have two LLCs judicially dissolved by the Vermont court because the management of the companies was so divided that the members' business relationship was 'irretrievably broken.' The operating agreements of both LLCs permitted dissolution by 'the entry of a decree of judicial dissolution pursuant to the Delaware LLC Act.'  Section 18-802 of the Delaware LLC Act provides that 'on application by or for a member or manager the Court of Chancery may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement.' The Vermont court concluded that because the operating agreements specifically referred to the Delaware LLC Act and that act specified the Delaware Court of Chancery as the court with jurisdiction over judicial dissolutions of Delaware LLCs, the Vermont court could not exert subject matter jurisdiction over the dissolution of the LLCs even though the LLCs presumably were owned by Vermont residents and did business in Vermont. 

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