Document: Olson v. Halvorsen, et al., C.A. No. 1884-VCL, Lamb, V.C. (Del. Ch. Oct. 22, 2008)

The Chancery Court, in granting summary judgment to the defendant partners of a hedge fund, held that the Statute of Frauds applies to LLC operating agreements, an issue that had never before been addressed by the Court.  The Court stated that (1) an oral LLC agreement provision or multiple provisions that cannot possibly be performed within one year are unenforceable, and (2) provisions of an oral LLC agreement that could possibly be performed within one year will remain enforceable. Here, the plaintiff argued that an “earn out” provision could be performed within a year, but the Court found it unenforceable because the payments, of the LLC income over multiple years, could not be calculated within the period of one year, and there were other obligations of the LLC partners that the Court believed could not be performed within one year.