LLC Managing Member

A managing member of a limited liability company (LLC) can be judicially removed as a participating member in the affairs of the LLC if he commits persistent material breaches of the company’s operating agreements and acts without the approval of the other voting members of the LLC. Managing members of an LLC have a duty to inform the other voting members of the LLC of their action plans and spending plans.

In Taustin v. Antigone, a family owned an LLC with multiple managing members. Antigone, one of the managing members of the LLC, was the founder of the first two parcels of the companies’ property. Antigone acquired the finances to purchase the property from his wife’s relatives, specifically Taustin. These relatives became managing members of the LLC along with Antigone. Disagreement between Antigone and the other members arose when a power company sought to condemn a portion of the property for compensation. Taustin wanted this money to be distributed to all LLC members but Antigone wanted to use the cash to force a larger payout. Antigone stopped disclosing his actions to the other members after they opposed Antigone’s spending plans. Antigone continued to finance his personal vision for office and hotel development on the LLC’s property. Taustin then challenged Antigone’s control over the LLC’s property.

After a bench trial, the Fairfax Judge determined that Antigone treated the property as if he were the sole proprietor and should be removed from being in charge of the companies because of his actions that were contrary to the interests of the LLC’s members. The judge stated that Antigone committed both willful and persistent material breaches of the LLC operating agreement. Further, the unjust enrichment that Antigone attempted shocked the conscience of the court. Antigone was divested of any control of the companies and was reduced to a silent owner with only an economic interest.

Taustin shows that a managing member of an LLC can be removed from their acting role when they take actions without the knowledge of, or against the consent of other managing members. It is the best practice for managing members of an LLC to provide yearly operating budgets with accurate financial information and to make sure that they do not act unilaterally in making company decisions. Additionally, members of an LLC should separate their own personal goals from the good of the company to avoid acting unilaterally or causing unjust enrichment. If a managing member acts against the interests of the company and the other managing members, he may be subject to having his control divested from a court order.