Satellite Dialysis of Tracy, LLC (Company) owned and operated dialysis facilities in California. The Company had two members, Dr. Aibar Huatuco and Satellite Health Care (Satellite), each of which owned 50 percent of the Company. Satellite managed the dialysis centers and Dr. Huatuco served as the medical director. 

The Company’s LLC Agreement, provided: 

Except as otherwise required by applicable law, the Members shall only have the power to exercise any and all rights expressly granted to the Members pursuant to the terms of this Agreement. 

The Agreement also provided that the company could only be dissolved if more than half the members voted in favor. Given that there were only two members, this provision meant that either party could prevent dissolution.

But this Satellite was spinning out of control. Huatuco believed that Satellite was, in a sneaky and underhanded fashion, trying to force him out as medical director, while maintaining control of the Company itself. He tried to reach agreement with Satellite to dissolve the Company, but Satellite clearly felt that it had the upper hand and so refused his requests. 

With nowhere else to turn, Huatuco filed suit, asking the court to dissolve the Company under Section 8-802 of the Delaware Code which states, “On application by or for a member or manager the Court may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement.² Satellite filed a motion to dismiss Huatuco’s suit.

Questions:

1. Does Huatuco have the right to obtain dissolution of the Company in court?

2. Why is there legal uncertainty with LLCs?

3. According to the Court, what is the explicit policy of the LLC Act?