in the Klein, Ramseyer & Bainbridge Business Associations casebook we include the Delaware (Strine) decision in Haley v. Talcott on dissolution.
Haley and Talcott each held a 50% interest in Matt and Greg Real Estate, LLC. The LLC owned the land on which a restaurant called the Redfin Seafood Grill was located. According to Chancellor Leo Strine, Talcott “owned” the restaurant and Haley managed it pursuant to an employment agreement between Talcott and Haley. The two had a falling out and Haley sued for judicial dissolution. Talcott claimed that Haley was limited to the exit provision in the LLC operating agreement.
The case presents a nice conflict between two bedrock principles of Delaware business association law: (1) Freedom of contract, which is especially strong in the LLC context. (2) The power of the Delaware courts to strike down as inequitable conduct authorized by statute (as most famously stated in Schnell v. Chris-Craft).
Then Chancellor Leo Strine nodded in passing to freedom of contract, but then granted a decree of dissolution despite the existence of an apparently exclusive contractual exit provision. His analysis proceeds as follows: (1) The barebones LLC dissolution provision may be interpreted by analogy to § 273 of the Delaware General Corporation Law. (2) Under § 273, a shareholder is entitled to dissolution on grounds of deadlock if three conditions are satisfied: (i) the corporation must have two 50% stockholders, (ii) those stockholders must be engaged in a joint venture, and (iii) they must be unable to agree upon whether to discontinue the business or how to dispose of its assets. (3) All three conditions are satisfied on these facts. (4) It would be inequitable to limit Haley to the contractual exit provision because doing so would leave him subject to the guarantee he had given on the mortgage on the property.
And now my friend Jayne Barnard sent along a footnote to the case:
Sussex County restaurateur Matt Haley may have been the only Delawarean to receive a prestigious James Beard Foundation Award, but he didn't care much about fancy foods. ...
Friends, colleagues and people whom Haley, 53, touched through his restaurants and much-honored global humanitarian work were stunned to hear of his death Tuesday night from injuries suffered in a motorcycle accident in India.
Haley was one of Delaware's most respected culinary ambassadors and philanthropists. He owned eight popular restaurants in the state's beach resort towns, had a total of 25 operations in at least four states, served on several boards and was a frequent speaker. ...
The Rehoboth Beach resident was recognized for his good deeds both in Delaware and across the world.
The article details Haley's many humanitarian and philanthropic efforts.
