Horning v. Horning Construction, LLC

Supreme Court, Monroe County, New York · 2006 · Corporations

12 Misc. 3d 402 (2006)

Updated August 22, 2026

CorporationsLLC dissolutionJudicial dissolutionLLCLimited Liability Company Law § 702no operating agreementreasonable practicabilitymember withdrawal

Facts

Petitioner formed Horning Construction, LLC in 2001 with respondents, each owning a one-third interest, and the LLC never adopted an operating agreement. Petitioner claimed the parties could not work together, could not agree on an operating agreement or buyout, and that the resulting animosity impaired bidding and made continued operation untenable. At the same time, petitioner acknowledged that the LLC had grown substantially and grossed $25 million in 2005. Respondents asserted the LLC remained solvent, employed more than 40 people, met its obligations, and could continue operating because bids required approval of only two members.

Issue

Whether a member of a New York LLC that has no operating agreement is entitled to judicial dissolution under Limited Liability Company Law § 702 based on severe discord, inability to agree on an operating agreement or buyout, and the member's desire to sever the relationship, despite evidence that the LLC remains profitable and operational.

Rule

Under Limited Liability Company Law § 702, judicial dissolution of an LLC may be granted only when it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement. In the absence of an operating agreement, dissolution is not triggered merely by a member's wish to withdraw, by hostility among members, by failure to agree on fundamental terms, or by alleged failure of consideration; the petitioner must present competent evidence raising a material issue of fact that the business cannot practicably continue. In a special proceeding, if no triable issue of fact is raised, the court must summarily determine the matter on the papers.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Buffalo, three equal members operate Lakeshore Millwork LLC, a New York LLC formed without an operating agreement. One member, Daniel Reeve, petitions for dissolution, alleging the other two mock him in meetings and refuse to socialize with him, but the company remains profitable, pays vendors on time, and continues completing projects.

Should a court most likely grant Daniel's petition for judicial dissolution?

Explanation. Under the majority opinion, the controlling standard is whether it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement. Where there is no operating agreement, that strict standard still applies. Member hostility, distrust, and a desire to separate do not by themselves justify dissolution when the LLC is still operating successfully.