Any similarities among business entities created under New York law end when the discussion turns to dissolution, particularly with respect to the dissolution of limited liability companies. The Second Department’s 2010 decision In re 1545 Ocean Ave., LLC1 is the seminal appellate decision addressing the issue of judicial dissolution under the Limited Liability Company Law (LLCL). Given the relatively recent passage of the LLCL in 1994, and facing a relative paucity of case law on the issue, the court in 1545 Ocean was the first to substantively address the standard for dissolution under the LLCL, analyzing the more exacting statutory requirements, which far exceed those faced by corporations and partnerships under their respective statutes. The decision continues to reverberate today as practitioners and the courts grapple with its holding and the differences between judicial dissolution of corporations, partnerships and limited liability companies.
Section 702 of the LLCL permits judicial dissolution “whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.”2 The LLCL does not define “reasonably practicable,” nor does it set forth any specific grounds for dissolution. Section 702 thus stands in stark contrast to the Business Corporation Law (BCL) and Partnership Law, which set forth numerous specific grounds for dissolution. For instance, those statutes permit dissolution in cases including oppressive and fraudulent conduct (BCL §1104-a(a)(1)); deadlocks between the directors (BCL §1104 (a)(1)); the “expulsion of any partner from the business bona fide” (Partnership Law §62 (1)(d)); and upon the “express will of any partner when no definite term or particular undertaking is specified” (Partnership Law §(1)(b)), among other grounds. Section 702, by contrast, merely provides for dissolution where the “not reasonably practicable” standard is met.
