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Corporate – LLC Operating Agreement – Dueling Amendments – Family Farm – Capital Contributions

In 2010, while the parties’ father was still alive, he asked his attorney to amend the operating agreement for the family-farm limited liability company. Unfortunately, none of the siblings can remember whether anyone but their father actually read the amendment, and there are two versions of the amendment, each with an identical signature page. There is a jury question as to whether the operating agreement was validly amended.

The court denies summary judgment as to claims and counterclaims that are dependent on the validity or invalidity of the 2010 amendment. The court grants summary judgment on several uncontested claims.

Plaintiff’s claim of breach of fiduciary duty rests on several allegedly improper acts by his LLC manager-siblings Graham, Ann and Jim. The claim on several allegedly improper acts: (1) retaining counsel to amend the operating agreement again; (2) incurring fees to draft the right of first refusal, to enforce it through litigation, and to buy sibling John’s property in an eventual settlement; (3) allowing Jim to build a paddleball court on the LLC’s property; and (4) pursuing litigation against plaintiff for his failure to make capital contributions. In response to defendants’ forecast of evidence and assertion of the statute of limitations, plaintiff has not come forward with specific facts establishing the existence of a genuine factual dispute for trial.

Where Graham, Ann and Jim concede that they classified their capital contributions as loans, they are not entitled to summary judgment on plaintiff’s claim that, by doing so, they breached the operating agreement (if the 2010 amendment is valid).

When sibling Louise sold her interest in the LLC to Graham, Ann and Jim, she did so in violation of the original operating agreement, and her compliance with the 2010 amendment is disputed. She is not entitled to summary judgment on plaintiff’s claim that she breached the operating agreement.

Bennett v. Bennett (Lawyers Weekly No. 020-091-20, 22 pp.) (Adam Conrad, J.) Andrew Fitzgerald and Stuart Punger for plaintiff; Allison Parker, Kevin Williams and Andrew Irby for defendants. 2020 NCBC 91

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