A special litigation committee cannot be used to determine the fate or direction of derivative claims brought on behalf of a New York limited liability company, unless its use is expressly written into the operating agreement, a Manhattan appeals court has ruled in an important decision of first impression.
“Article IV of the New York LLC Act makes clear that the operating agreement of an LLC governs the relationships among members and [their] powers and authority,” wrote a unanimous panel of the Appellate Division, First Department, in a ruling that has changed the course of a legal battle, begun in 2011, over revenues springing from a luxury condominium development found in Manhattan’s opulent Tribeca neighborhood.
