719 S.E.2d 309
Va.2011Background
- Dewey and Lou Ann Monroe formed L&J Holdings, LLC, with Dewey 80% and Lou Ann 20% ownership; Lou Ann is managing member, with Joseph Monroe as successor managing member.
- The operating agreement restricts transfers of membership interests to non-members without written consent of all members, except by death, intestacy, devise, or operation of law.
- Paragraph 10(B) generally bars transfers of all or any part of a membership interest, while Paragraph 10(C) allows transfers to other Members or to spouses/descendants under specified circumstances.
- Dewey died in 2004; by his will he left all to his daughter Janet, who then sought to assert ownership rights in the Company.
- The circuit court held that Dewey was dissociated upon death under Code § 13.1-1040.1(7)(a), leaving Janet with only the right to profits, losses, and distributions, not membership or management powers; Janet appealed.
- The Virginia Supreme Court affirmed, holding Janet inherited only the financial interest and had no authority to remove Lou Ann and Joseph.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Janet inherited direct membership in the LLC by will | Janet contends Paragraph 2 supersedes dissolution rule | Monroes argue dissociation applies, Janet receives only financial interest | Janet inherits only financial interest |
| Whether Paragraph 2 supersedes Code § 13.1-1040.1(7)(a) dissociation | Paragraph 2 creates an exception to dissociation | Paragraph 2 does not address dissociation or supersede the statute | Paragraph 2 does not supersede dissociation |
| Whether Dewey dissociated upon death under the Act | Dewey’s death was a transfer under the agreement | Statute dissociation applies; Janet becomes assignee | Dewey dissociated; Janet only financial interest |
| Whether Janet, as non-member, had authority to remove Lou Ann and Joseph | If Janet inherited full membership, she could remove | Janet not a member; lacked authority | No authority to remove |
Key Cases Cited
- Uniwest Constr., Inc. v. Amtech Elevator Servs., 280 Va. 428 (2010) (de novo contract interpretation and statutory analysis guidance)
- Covel v. Town of Vienna, 280 Va. 151 (2010) (plain meaning of statutes when unambiguous)
- Virginia Electric & Power Co. v. Board of County Supervisors, 226 Va. 382 (1983) (interpretation of statutory framework in harmonious whole)