Blythe v. Bell (Lawyers Weekly No. 12-15-1199, 17 pp.) (James L. Gale, J.) 2012 NCBC 60
Holding: In the absence of an operating agreement, when LLC member Hickory Brands, Inc. assigned its interest in the LLC to other members, no consent was required and Hickory Brands was then no longer a member of the LLC. When another LLC member, defendant Joseph, later assigned his interest to (then non-member) Hickory Brands, Hickory Brands received only Joseph’s economic interest in the LLC, and Joseph retained his control interest pending the members’ unanimous consent to the assignment.
Defendants’ motion for partial summary judgment is granted. Plaintiffs’ motion for partial summary judgment is denied.
In reaching this decision, the court resolves a potential conflict between two phrases within G.S. § 57C-5-02. One restrictively states that an assignee “receives only the distributions and allocations to which the assignor would be entitled but for the assignment.” The other provides that “a member ceases to be a member upon assignment of all of his membership interest.”
The court interprets the N.C. Limited Liability Company Act to allow members, absent a contrary agreement, to transfer both their economic and control membership interests to existing members without unanimous member consent.
Under the default provisions of the Act, a member assignor ceases to be a member under § 57C-5-02 once his entire interest is assigned. Such assignment is immediately complete upon assignment as between existing members without the need for further member consent, but as to an assignment to a non-member, the assignor does not cease being a member until the assignee is admitted pursuant to the provisions of § 57C-5-04.