Lexplug logoLexplug

Dunbar Group, LLC v. Tignor

Supreme Court of Virginia
267 Va. 361, 593 S.E.2d 216, 2004 Va. LEXIS 49 (2004)
ELI5:

Rule of Law:

When determining whether to order the judicial dissolution of a limited liability company because it is 'not reasonably practicable' to carry on the business, a court must evaluate the company's viability based on the circumstances existing after other remedies, such as the expulsion of a disruptive member, are implemented.


Facts:

  • The Dunbar Group, LLC (controlled by Edward Robertson) and Archie Tignor formed XpertCTI, LLC (Xpert) as 50/50 members to provide computer telephony software.
  • Dunbar developed the software, while Tignor's role was to provide business contacts in the telecommunications industry.
  • Disputes arose, during which Tignor commingled Xpert's funds with his other company, X-tel, by depositing Xpert's checks into X-tel's account to pay X-tel's expenses.
  • Tignor, without informing Robertson, authorized a change to Xpert's checking account that prevented checks from being written, causing a vendor check written by Robertson to bounce.
  • Tignor evicted Robertson from the shared office space he rented from X-tel and restricted Robertson's access to necessary testing equipment, impairing product quality and delivery.
  • Tignor also terminated Robertson’s company e-mail account without notice, causing confusion among customers and giving the impression that Xpert had gone out of business.

Procedural Posture:

  • The Dunbar Group, LLC and Edward Robertson (collectively, Dunbar) filed a complaint against Archie Tignor in a Virginia circuit court (the trial court), seeking his expulsion as a member of XpertCTI, LLC.
  • Tignor filed a separate application in the same court seeking the judicial dissolution of XpertCTI, LLC.
  • The trial court consolidated the two actions for a single hearing.
  • The trial court entered an order that both (1) expelled Tignor as a member of Xpert and (2) ordered that Xpert be dissolved after its contract with Samsung terminated.
  • Dunbar (appellant) appealed the part of the order mandating dissolution to the Supreme Court of Virginia. Tignor (appellee) did not file a brief in the appeal.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Is it 'not reasonably practicable' to carry on the business of a limited liability company, thus warranting judicial dissolution under Code § 13.1-1047, when the member whose misconduct hindered the business has been judicially expelled by the same court order?


Opinions:

Majority - Justice Keenan

No. Judicial dissolution of a limited liability company is not warranted where the company can practicably continue its business after a disruptive member is expelled. The statutory standard for dissolution—that it is 'not reasonably practicable to carry on the business'—is a strict one. The trial court erred by failing to evaluate the practicability of Xpert continuing its business in light of its concurrent order expelling Tignor. Tignor's expulsion changed his role from an active, disruptive manager to a passive investor, thereby removing the obstacles to the company's operations that his misconduct had created. Furthermore, the trial court's own order, which directed Xpert to continue operating for the duration of its major contract with Samsung, implicitly recognized that it was, in fact, reasonably practicable for the business to continue post-expulsion, thus contradicting the basis for dissolution.



Analysis:

This decision clarifies the high threshold for judicial dissolution of an LLC in Virginia, establishing it as an extraordinary remedy. It mandates that courts must consider the forward-looking viability of a company after other remedies, like member expulsion, have been applied. The ruling prevents the past misconduct of a member from automatically justifying dissolution if the company can function effectively once that member is removed from management. This precedent protects the ongoing concern of an LLC from being dissolved due to interpersonal disputes when a less drastic remedy can restore its operational capacity.

🤖 Gunnerbot:
Query Dunbar Group, LLC v. Tignor (2004) directly. You can ask questions about any aspect of the case. If it's in the case, Gunnerbot will know.
Locked
Subscribe to Lexplug to chat with the Gunnerbot about this case.

Unlock the full brief for Dunbar Group, LLC v. Tignor