In AM General Holdings LLC v. The Renco Group, Inc., C.A. No. 7639-VCS (Apr. 10, 2019), a member of an LLC requested the Court to remove the managing member. The LLC agreement did not provide a mechanism for removal. In a previous decision, the Court dismissed the fiduciary duty claims. However, the member argued that it had the right to remove the managing partner because the agreement provided that the members were entitled to seek “specific performance” and “other appropriate relief or remedy”.
The Court declined to grant equitable relief to remove the managing partner because the remedy for breach of contract was only limited to damages, specific performance and injunctions, but not equitable relief. Had the member successfully argued breach of fiduciary duty and based the request of removal on the breach, the Court might be able to grant the equitable remedy of removal.
BOTTOM LINE: Make sure you provide a mechanism of removal of a member in an LLC agreement.