1. Based on the court’s decision, what specific rights did Lieberman lose when he withdrew as a member of the LLC?

2. What is the impact of the court’s determination that Lieberman’s withdrawal constituted a dissociation?

3. What kind of language and methodology could be included in an operating agreement that could have prevented this dispute?

Lieberman was a member and vice president of Wyoming.com, LLC (Wyoming), with a $20,000 ownership stake in the LLC at the time of formation in 1994. After a dispute between the parties in 1998, Lieberman was terminated as vice president by the other LLC members. Lieberman served Wyoming with a “notice of withdrawal” and demanded that Wyoming pay for Lieberman’s “share of the company” in the amount of $400,000. Wyoming held a meeting of remaining members and voted to accept Lieberman’s withdrawal and continue operating the LLC. Wyoming then notified Lieberman that it accepted his withdrawal but offered him only $20,000 because that was his initial ownership stake. Lieberman rejected the $20,000 offer. Because the operating agreement was silent on the issue of dissociation, Wyoming filed suit asking for a declaratory judgment of its rights against Lieberman. 

The Wyoming Supreme Court ruled that Lieberman did not have the right to force Wyoming to buy his interest even after the notice of withdrawal. Lieberman’s withdrawal is recognized as a dissociation under the state LLC statute, but there was no contractual provision (via the operating agreement) between the members related to a buyout of a dissociating member’s financial interest in the venture. The operating agreement only provided a method for calculating a member’s interest in the case of dissolution. Nor does the state LLC statute provide for a buyout in the case of a dissociated member. Therefore, even though Lieberman is a dissociated member, he may not demand a buyout, nor may Wyoming force him to sell his interest. Lieberman continues to keep his interest in the LLC until dissolution.

Limited Rights  “Lieberman has withdrawn as a member of Wyoming.com and all remaining members unanimously accepted his withdrawal as a member. Lieberman is thus no longer a member of Wyoming.com.  .  .  . Because the members of Wyoming.com failed to contractually provide for a buy-out, Lieberman remains a [financial interest] holder in Wyoming.com, LLC. There are no further rights or obligations of the parties for this court to construe with regards to this situation.”