Document: Related Westpac LLC v. JER Snowmass LLC, C.A. No. 5001-VCS (Del. Ch. July 23, 2010)

JER Snowmass LLC, a funding member of two LLCs formed to pursue a land development project, filed a motion to dismiss a complaint filed by Related Westpac LLC, operating member of the project LLCs. Related Westpac claimed that JER Snowmass breached its contractual duties under the project LLCs’ operating agreements by unreasonably refusing to give consent to various major decisions and meet calls for further capital funding of the development project. The Chancery Court dismissed the complaint because the claims made by Related Westpac were inconsistent with the project LLCs’ operating agreements. While JER Snowmass could not unreasonably withhold its consent to certain decisions under the operating agreements, the “material actions” involved in the complaint were not subject to such constraints. JER Snowmass contractually bargained for the right to deny consent to material actions if it was in its own commercial self-interest. The Court refused to impose a reasonableness condition with respect to material actions that the operating member had freely given up during formation of the operating agreement. Furthermore, the Court would not imply a reasonableness requirement when it appeared in other sections of the operating agreement but not in the provision at issue. The Chancery Court also dismissed Related Westpac’s request for damages and payment of capital calls because this remedy was in conflict with the plain terms outlined in the operating agreement.