Spires v. Lighthouse Solutions, LLC

4 Misc. 3d 428, 778 N.Y.S.2d 259, 2004 N.Y. Misc. LEXIS 628
CourtNew York Supreme Court
DecidedMay 6, 2004
StatusPublished
Cited by21 cases

This text of 4 Misc. 3d 428 (Spires v. Lighthouse Solutions, LLC) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Spires v. Lighthouse Solutions, LLC, 4 Misc. 3d 428, 778 N.Y.S.2d 259, 2004 N.Y. Misc. LEXIS 628 (N.Y. Super. Ct. 2004).

Opinion

OPINION OF THE COURT

Thomas A. Standee, J.

The petitioner, Timothy J. Spires, as a member of Lighthouse Solutions, LLC,1 submits an order to show cause seeking an order (a) dissolving Lighthouse Solutions, LLC; (b) appointing a receiver to gather the assets of Lighthouse, to market and liquidate such assets and thereafter to distribute to the members the proceeds of such liquidation; and (c) granting such other and further relief as is just.

I. Facts

The petitioner commenced this application for a judgment dissolving the limited liability company Lighthouse Solutions, LLC (Lighthouse or LLC) against Lighthouse, Raymond Caster-line and Mark Alamo, by verified petition filed on October 29, 2003. The petition seeks a determination that the partnership has been dissolved pursuant to Partnership Law § 69 (1); the appointment of a receiver and authorization of such receiver to sell the assets of Lighthouse; directing the receiver to wind up the affairs of Lighthouse; and/or alternatively the dissolution of Lighthouse pursuant to the Limited Liability Company Law.

In November 1999 petitioner, Casterline and Alamo formed Lighthouse Solutions, LLC by the filing of “Articles of Organization of Lighthouse Solutions LLC.” This document was executed by Timothy J. Spires as organizer and states, among other things, “[t]he limited liability company is to be managed by 1 or more members.” Thereafter, on November 16, 1999 Timothy J. Spires, president of Lighthouse, executed a “Certification of Authority of Lighthouse Solutions LLC,” which states as follows: “This LLC is managed by its members. The names and addresses of each of its current members as of 11/16/99 are listed below. Each of these persons has managerial authority and equal percentage ownership of the LLC and is empowered to transact business on its behalf.” The stated members of Lighthouse are Spires, Casterline and Alamo.

[430]*430On April 3, 2002 these three members executed a document entitled “Lighthouse Solutions, LLC Operating Agreement Amendment, March 21, 2002.” This document sets forth provisions agreed to by the members related to dissolution provisions, disability and sale of member interests. This document specifically states:

“[t]his document, as of the date agreed to and signed below, overrides any provisions, either default or otherwise, as established in the Lighthouse Solutions, LLC Operating Agreement for a period of 60 days or until agreed and terminated prior by the consent of the Members of Lighthouse Solutions as on File.”

This document was executed by the members of Lighthouse on April 3, 2002. By its terms the provisions in this document terminated 60 days after April 3, 2002.

Another document entitled “LHS Partner’s Interim Voting Agreement” (voting agreement) was executed in May 2003. This agreement outlines an interim process for the partners to vote upon routine business matters and indicates it is “intended to be an interim measure until the LHS operating plan (or other appropriate document) establishes a more thorough process.” This agreement lists five Lighthouse partners, with the new partners being Michael Faraoni and Kenneth Peters. All five of the partners executed this document by May 16, 2003. The agreement states: “This interim voting mechanism will be in effect until 12/31/2003 or until obsoleted[sic]/superceded by another LHS document/procedure/event . . . .” (LHS Partner’s Interim Voting Agreement § V) This voting agreement terminated December 31, 2003.

The three members of Lighthouse, Spires, Casterline and Alamo, had disagreements concerning the business and its operations in August 2003 and thereafter. There were numerous discussions among the members about Spires departing the business and surrendering his interest. However, the parties could not reach an acceptable agreement. Spires alleges that in October 2003 his passwords no longer worked to access the computer servers, databases, equipment and bank accounts of Lighthouse, and that he was denied access to the premises by a change of the key to the Lighthouse premises. On October 16, 2003 Spires, as an authorized member of Lighthouse, withdrew from the business bank account $120,000, representing approximately one third of the funds on deposit. This money is currently retained in the Harris Beach LLP trust account.

[431]*431There is a temporary restraining order enjoining and restraining the petitioner and respondents from the sale or disposition of any assets of Lighthouse, except in the ordinary course of business. This order also requires the petitioner to maintain the funds of Lighthouse on deposit in the Harris Beach LLP trust account.

II. Dissolution of Lighthouse Solutions, LLC under the Partnership Law

The petitioner seeks dissolution of Lighthouse pursuant to New York Partnership Law as a result of the failure of the members to adopt an “Operating Agreement.” The petitioner argues that Lighthouse was operated as a partnership because it never adopted an “Operating Agreement.”

Petitioner relies on section 417 of the Limited Liability Company Law which states: “[s]ubject to the provisions of this chapter, the members of a limited liability company shall adopt a written operating agreement that contains any provisions not inconsistent with law or its articles of organization . . . .” (Limited Liability Company Law § 417 [a].) There is no written agreement submitted by the parties entitled an “Operating Agreement.” Therefore, petitioner concludes that Lighthouse is not a limited liability company but instead is a partnership, that he may elect to terminate the partnership, and that such withdrawal of Spires from the partnership dissolves Lighthouse pursuant to Partnership Law § 62.

Petitioner’s legal argument is without merit. There is no provision in the Limited Liability Company Law imposing any type of penalty or punishment for failing to adopt a written operating agreement. The statute does not require an operating agreement prior to the formation of this type of entity (see Limited Liability Company Law § 417). There is no statute or common law that leads to the conclusion that the failure to enter into an operating agreement transforms a limited Lability company into a partnership.

The Limited Liability Company Law sets forth when this type of entity is formed:

“A limited liability company is formed at the time of the filing of the initial articles of organization with the department of state or at any later time specified in the articles of organization . . . The filing of the articles of organization shall, in the absence of actual fraud, be conclusive evidence of the formation of the limited liability company as of [432]*432the time of filing or effective date if later ... A limited liability company formed under this chapter shall be a separate legal entity, the existence of which as a separate legal entity shall continue until the cancellation of the limited liability company’s articles of organization.” (Limited Liability Company Law § 203 [d].)

The verified petition has a copy of the articles of organization of Lighthouse attached as an exhibit. There are no allegations that the articles of organization were not properly filed with the Department of State on or about November 11, 1999.

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Bluebook (online)
4 Misc. 3d 428, 778 N.Y.S.2d 259, 2004 N.Y. Misc. LEXIS 628, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spires-v-lighthouse-solutions-llc-nysupct-2004.