A Cross-Country Trio of Appellate Decisions Tackles Novel LLC Disputes

Why It Matters

These rulings give LLC owners and counsel concrete guidance on drafting amendment clauses, handling cross‑state jurisdiction, and timing membership transfers, thereby reducing legal uncertainty for closely held businesses. Understanding which law applies can prevent costly disputes and ensure proper governance.

Key Takeaways

• Montana court upheld dual amendment paths, allowing supermajority or unanimous written consent
• California court upheld internal affairs doctrine, letting courts apply foreign LLC law
• Connecticut court applied pre‑RULLCA law based on 2009 transfer date
• Decision clarifies interaction of supermajority and unanimous amendment clauses
• Rulings stress timing’s role in choosing governing LLC statutes

Pulse Analysis

The Montana Supreme Court’s Barbier v. Burns decision underscores the importance of clear, complementary amendment provisions in LLC operating agreements. By interpreting a super‑majority voting clause and a unanimous‑consent shortcut as harmonious, the court preserved both mechanisms, signaling to practitioners that drafting multiple amendment routes can provide flexibility without creating ambiguity. This approach reduces the risk of costly litigation over consent thresholds and highlights the need for precise language when members anticipate divergent interests.

In California, the Iwanaka v. Doi appellate ruling reaffirmed the internal affairs doctrine, a cornerstone of corporate law that reserves the governance of a foreign‑incorporated entity to the law of its formation state. While the court declined subject‑matter jurisdiction to dissolve the Delaware LLC, it allowed California courts to apply Delaware substantive law to resolve internal disputes. The decision clarifies that multi‑state LLCs must anticipate dual compliance: state courts can adjudicate member disputes, but cannot unilaterally terminate the entity, prompting owners to structure governance documents with cross‑jurisdictional enforcement in mind.

Connecticut’s Paquette v. Thompson case illustrates how the operative year of a membership transfer can dictate the applicable statutory regime. By anchoring the analysis to the 2009 transfer date, the appellate court applied the older Connecticut LLC Act rather than the newer RULLCA, resulting in a decisive finding that the transferring member ceased to be a member. This timing rule emphasizes that parties must consider not only the substance of a transfer but also its chronological context, as the governing law may shift dramatically, affecting rights to profits, dissociation, and control. Together, these decisions provide a roadmap for LLC stakeholders navigating amendment rights, cross‑state jurisdiction, and statutory transitions.