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In this decision, the Court of Chancery enforced LLC agreement provisions permitting a preferred equity investor to remove and replace the LLC’s manager. The plaintiff-investor invested $18 million in the LLC, which was formed to commercialize residential real property, in exchange for certain membership interests that, among other things, required the LLC to pay a preferred monthly distribution. The monthly distribution requirement was effectively guaranteed by another LLC member, who had contributed the real property and served as the LLC’s manager. Under the LLC agreement, an uncured event of default in the payment of these distributions gave the member the right to remove and replace the manager. Here, the Court of Chancery found post-trial that the member had validly exercised its removal rights, and that the defendant’s failure to cede control as manager breached the LLC agreement. The Court of Chancery accordingly entered judgment in favor of the investor-plaintiff, whom the Court found was the LLC’s lawful manager.
