Delaware Business Litigation Report

Chancery Denies Member Status to Individual Not Admitted By Members in Accordance With LLC Agreement

Riverside Risk Advisors LLC v. Chao, C.A. No. 2019-0789-KSJM (Del. Ch. Oct. 26, 2022)
The LLC Act generally provides that someone is admitted as an LLC member as provided in the LLC agreement. Here, the plaintiff sued seeking declaratory relief that the defendant, a former employee, was not a member of the LLC and that a 2015 agreement was the LLC’s governing document, rather than an earlier agreement. The Court of Chancery ruled in the plaintiff’s favor, finding that the defendant was not a member because, under the LLC agreement, written consent of all members was required for admission, and the defendant needed to agree to be bound by the agreement in writing. But neither of these steps occurred. The Court also held that the 2015 agreement was the current operative agreement for the LLC despite not being approved by the defendant, because, as required by the previous LLC agreement, it was approved by all members, which the defendant was not.

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