Shareholder Oppression

On March 17, 2015, the Appellate Division issued an important decision which provides guidance to New Jersey Trial Courts asked to judicially expel a member of a Limited Liability Company. IE Test, LLC v. Kenneth Carroll (App. Div. 2015)

N.J.S.A. 42:2B-24(b)(3) permits the expulsion of a member of a New Jersey Limited Liability Company under certain circumstances. The Appellate Division in IE Test, LLC v. Kenneth Carroll, provides a wonderful analysis of expulsion of a member based upon wrongful conduct (N.J.S.A. 42:2B-24(b)(3)(a)) or that the continued membership was not practicable to continue the business (N.J.S.A. 42:2B-24(b)(3)(c)).

The material facts of the case were undisputed and straightforward. Defendant Carroll and Mr. Cuppo were co-owners of a predecessor limited liability company, Instrumental Engineering, LLC (“IE”). Unfortunately, in or about 2009, IE was experiencing serious economic problems. As a result of those problems, Carroll and Cuppo decided that IE should file a Chapter 7 petition for bankruptcy.

According to Carroll, he purchased some of IE’s assets from the bankruptcy trustee and transferred them to Plaintiff, IE Test, LLC for $5,000, which remained due and owing to him. Cuppo refuted the same. Unfortunately, there was no documentation supporting Carroll’s contention.

IE Test, LLC had three members, Carroll (33%); Cuppo (34%) and James (33%). In addition to the disagreement relating to the $5,000, sale of assets from IE, the three members could not reach agreement as to the terms and conditions of an Operating Agreement. In addition, several of the members testified during the course of their depositions that they could not work together and did not speak with one another.

The Trial Court Judge found that IE Test, LLC could not establish that Carroll engaged in wrongful conduct that adversely and materially harmed the company. Nevertheless, the Trial Court found that pursuant to N.J.S.A. 42:2B-24(b)(3)(c), it was not reasonably practicable to continue the business with Carroll as a member. Carroll appealed the Trial Court’s decision. In its decision, the Appellate Division provided a wonderful analysis of judicial considerations when determining whether or not to expel a member.

The Appellate Court first provided guidance on the standard for judicial expulsion of a member of a New Jersey Limited Liability based upon “wrongful” conduct. Pursuant to N.J.S.A. 42:2B-24(b)(3)(a), a Court may only expel a member if it finds that the member’s conduct was “wrongful” and “actually harmed” the limited liability company in an “adverse and material manner.”

Next, the Appellate Court discussed the standard to expel a member because the continued inclusion of that member may not be practicable to carry on the business. The Court held that N.J.S.A. 42:2B-24(3)(c), does not require proof that the member committed any wrongful conduct whatsoever. Rather, subsection (c) is forward looking, only requiring proof that the member’s conduct makes it “not reasonably practicable to carry on the business if the member remained.”

The Appellate Division articulated the following seven factors when deciding whether or not to expel a member based upon the not reasonably practicable on the business statute:

  1. Whether the management of the entity is unable or unwilling reasonably to permit or promote the purposes for which the company was formed;
  2. Whether a member or manager has engaged in misconduct;
  3. Whether the members have clearly reached an inability to work with one another to pursue the company’s goals;
  4. Whether there is deadlock between the members;
  5. Whether the operating agreement provides a means of navigating around any such deadlock;
  6. Whether, due to the company’s financial position, there is still a business to operate; and
  7. Whether continuing the company is financially feasible.

The Appellate Division, applying those factors, affirmed the Trial Court’s decision expelling Carroll pursuant to N.J.S.A. 42:2B:24(b)(3)(c).

New York does not have one statute of limitations governing all breach of fiduciary duty claims. Rather, it has two: three and six years.

In most cases, the statute of limitations for a breach of fiduciary duty claim depends on the substantive remedy sought by the Plaintiff in their complaint. Where the Plaintiff seeks equitable relief, it is governed by the six year statute of limitations. IDT Corp. v. Morgan Stanley Dean Witter & Co., 879 NE2d 268 (2009). Where the Plaintiff seeks legal relief, it is often governed by a three year statute of limitations. Id.

For breach of fiduciary duty claims asserted by minority shareholders against majority shareholders seeking redress pursuant to New York’s common law and/or statutory shareholder oppression statute, there is a six year statute of limitations. See, Loengard v. Santa Fee Industries, Inc., 514 NE2d 113 (1987). That is because the oppressed party is seeking equitable relief in the form of a buy-out or dissolution of the corporation.

Moreover, a party seeking the equitable remedy of an accounting is governed by the six year statute of limitations as set forth in CPLR §213. See, Evangelista v. Mattone, 844 NYS 2d 14 (2nd Dept. 2007).

If a breach of fiduciary duty claim is based upon fraud, like an employee stealing from their employer, then the Court will apply a six year statute of limitations. See, Kaufman v. Cohen, 760 NYS2d. 157 (1st Dept. 2003). The discovery rule may also toll the statute of limitations if it is a fraud-based breach of fiduciary duty claim. Id

A 20% or greater shareholder in a closely held New York corporation may commence a special action for dissolution of the corporation on the grounds that those in control have either committed “illegal, fraudulent or oppressive actions toward the complaining shareholder” or have “looted, wasted or diverted for non-corporate purposes the corporation’s assets.” Business Corporation Law §1104-a. New York’s Business Corporation Law §1118 is a corollary to Section 1104-a.It grants non-petitioning shareholders, as well as the corporation itself, the right to avoid dissolution by timely electing to purchase the petitioning shareholder’s shares at their fair value. In re Matter of Penepent Corporation, Inc., 96 N.Y 2d 186, 191 (2001). Pursuant to Section 1118, an election may be made “at any time within ninety days after the filing of a 1104-a petition for dissolution or at such later time as the court in its discretion may allow.” Business Corporation Law §1118

In shareholder oppression litigation, whether or not discounts are applicable is important in determining the buy-out price. A “minority discount” is based upon a lack of control. Most states do not apply “minority discounts” in an oppressed shareholder sale because the sale is not an arm’s length voluntary transaction but in reality an “involuntary” occasioned by way of remedy for the misconduct of the purchaser. See, Balsamides v. Protameen Chemicals, 160 N.J. 352 (1999). The New York Court of Appeals (the highest Court in New York) held, “in determining fair value, a minority shareholder’s stock should not be further discounted because of its minority status.” In re Matter of Penepent Corporation, Inc., 96 N.Y 2d at 194. In making that determination, the New York Court of Appeals found “[t]o impose upon petitioning minority shareholders a penalty because they lack control would violate two ‘central equitable principles of corporate governance.’ First, a minority discount would deprive minority shareholders of their proportionate interest in the corporation as a going concern. Second, it would result in shares in the same being treated unequally.” Id

In 1993, the New Jersey Supreme Court conferred great powers to Courts when adjudicating minority oppression claims. Brenner v. Berkowitz, 134 N.J. 488 (1993). Last year, the New Jersey Supreme Court conferred even greater equitable powers to Chancery Division Judges deciding intra-company disputes. Sipko v. Koger, Inc., 214 N.J. 364, 383-384 (2013).

The Sipko decision expands the Brenner decision in two ways:

  1. Trial Courts deciding intra-company disagreements are not confined to the remedies set forth in the Minority Oppression Statute; and
  2. Trial Courts are not required to make findings of oppression, fraud or illegality when applying equitable remedies to address disputes over closely held companies.

The facts of the Sipko family dispute are simple. George Sipko (“dad”) and his son, Robert, were owners of a closely-held New Jersey corporation, Koger, Inc. The genesis of this family dispute was the family’s disapproval of Robert’s new girlfriend. Robert’s reaction to his parent’s disapproval was to quit his job with Koger, Inc. and give up his shares in the company. The trial court found that Robert was not an oppressed minority shareholder. Perhaps, had dad terminated Robert’s employment there would have been oppression. Moreover, the trial court did not find that dad or the other shareholders had not engaged in illegal or fraudulent activities. Finally, the trial court did not find that dad or other mismanaged the company.

One of the central issues of importance in Sipko was whether or not the trial court could order a buy-out or accounting of a closely-held company without a triggering event (a finding of oppressive conduct, fraud, illegality or mismanagement). The New Jersey Supreme Court found that a showing of a “triggering” event was not required for the trial court to utilize its equitable powers to formulate solutions to disputes within closely held companies. In doing so, the New Jersey Supreme Court held that the enactment of New Jersey’s Minority Oppression Statute “was not intended to supersede the inherent common law power of the Chancery Division to achieve equity. Sipko v. Koger, Inc., 214 N.J. at 384. Furthermore, the New Jersey Supreme Court held that New Jersey’s Oppressed Minority Shareholder Statute “does not limit the equitable power of courts to fashion remedies appropriate to an individual case.” Id.

While, I do not believe the Sipko decision creates a “no fault” provision under New Jersey law for shareholders and members of closely-held New Jersey corporations and limited liability companies to seek a buy-out or other equitable remedies, it certainly gives trial courts greater latitude when deciding intra-company disputes. I believe evidence of “irreconcilable differences” which will affect the shareholders or members ability to work together going forward would be enough for courts to Order a buy-out or employ other equitable remedies to address those problems.

I believe the Sipko decision is important outside of the world of shareholder or member oppression a/k/a “shareholder divorce” because it confirms that Chancery Division Judges hold great powers when addressing disputes which come before them.

On March 11, 2014, the Supreme Court of New York, New York County, denied a motion for summary judgment seeking to dismiss a Special Proceeding for Judicial Intervention seeking dissolution of three New York corporations premised upon violations of New York’s Minority Oppression Statute. Quazzo v. 9 Charlton Street Corp., 2014 N.Y. Misc. 1093; N.Y. Slip. Op. 30625 (U) (March 11, 2014).

In Quzzo, the defendants sought dismissal of minority oppression claims pursuant to CPLR §3212(b) (“summary judgment”) because they claimed the minority shareholder was not a shareholder and therefore did not have standing to assert an oppression claim.

The case involved a dispute between a daughter, Christine and her father, Ugo regarding three closely-held New York corporations. Ugo exercised control over the subject corporations since their founding or acquisition. Christina was never employed by the corporations, except for two summers and was not otherwise involved with their operations.

Prior to 2001, Ugo gifted Christine along with her brothers, Marco and Stephen one-third (1/3) of the shares in each corporation. One of the central issues with regard to the standing argument was that Ugo never actually delivered the shares. In support of his motion for summary judgment, Ugo asserted that although he considered gifting shares of the corporations to his children as part of his estate planning and prepared share certificates, he never delivered the shares to the children, and had no intention of transferring any "present interest" in the corporations to them. Instead, Ugo stated that it has always been his understanding that he is the sole shareholder of the corporations and that the shares, if not revoked, would pass upon his death. He also asserted that he has "always exercised complete control" over the corporations.

In opposition to those arguments, Christine set forth evidence that she was a shareholder. She demonstrated that the corporations issued K-1s (tax forms that reports the amounts that are passed through to each party that has an interest in the entity). Moreover, she produced records in which she consented to the form of a shareholder meeting. Furthermore, she was mentioned in the corporations’ meeting minutes where she was identified as a shareholder.

The Court denied Ugo’s motion for summary judgment. It held that the Schedules K-1 constituted evidence, along with the other documents produced by Christine, which raised a triable issue of fact as to her ownership of shares of the corporations. See e.g. Matter of Capizola v Vantage Intl., Ltd., 2 AD3d 843, 845, 770 N.Y.S.2d 395 (2nd Dept 2003) (Schedule K-1 reporting petitioner as shareholder, among other evidence "prove[d] the issuance of stock to petitioner"].) Put another way, Ugo’s conclusory assertions of lack of donative intent do not warrant summary judgment in the face of Cristina’s documentary evidence to the contrary. (See Pell St. Nineteen Corp. v Yue Er Liu Mah, 243 AD2d 121, 125, 671 N.Y.S.2d 742 (1st Dept 1998), lv dismissed 92 NY2d 947, 704 N.E.2d 230, 681 N.Y.S.2d 477 (1998), lv denied 93 NY2d 808, 712 N.E.2d 1245, 691 N.Y.S.2d 2 (1999).

The Court rejected Ugo’s contention that the lack of delivery of the shares to Cristina demonstrated as a matter of law that no inter vivos gift of the shares was effectuated. The Court found that physical possession of the shares was not dispositive. "The elements necessary for an effective gift are: (1) an intent on the part of the donor to make a present transfer; (2) delivery of the gift, either actual or constructive, to the donee; and (3) acceptance by the donee." Widom v Mittman, 39 AD3d 374, 833 N.Y.S.2d 502(1st Dept 2007). Where a transfer of stock certificates is at issue, "a symbolical delivery" may be sufficient where the facts otherwise show a transfer, as where the certificates are recorded on the books of the company. Matter of Szabo, 10 NY2d 94, 98, 176 N.E.2d 395, 217 N.Y.S.2d 593 (1961). The Court followed the law in the First Department which states "physical delivery of a stock certificate is not a rigid requirement; constructive or symbolic delivery may suffice." Citing, Pell St. Nineteen Corp., 243 AD2d at 126.) Thus, the Court’s found the transferor’s retention of shares in a closely held corporation was not conclusive where the transfer was evidenced by gift and corporate tax returns.

An oppressed minority shareholder in a New York corporation may commence a special proceeding for judicial dissolution Business Corporation Law § 1104-a (a)(1) and (a)(2). The New York statute provides, in relevant part, as follows:

(a) The holders of shares representing twenty percent or more of the votes of all outstanding shares of a corporation, other than a corporation registered as an investment company under an act of congress entitled "Investment Company Act of 1940", no shares of which are listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national or an affiliated securities association, entitled to vote in an election of directors may present a petition of dissolution on one or more of the following grounds:

  1. The directors or those in control of the corporation have been guilty of illegal, fraudulent or oppressive actions toward the complaining shareholders;
  2. The property or assets of the corporation are being looted, wasted, or diverted for non-corporate purposes by its directors, officers or those in control of the corporation.

Business Corporation Law § 1104-a (a)(1) and (a)(2).

Pursuant to New York law "oppression should [is] deemed to arise only when the majority conduct substantially defeats expectations that, objectively viewed, were both reasonable under the circumstances and were central to the petitioner’s decision to join the venture." Matter of Kemp & Beatley, Inc., 64 NY2d 63, 73, 473 N.E.2d 1173, 484 N.Y.S.2d 799 [1984].) In other words, like New Jersey, New York applies the “reasonable expectations of the shareholder” test when determining whether or not the majority oppressed the minority shareholder. That test first requires the party seeking to invoke the protections set forth in Business Corporation Law § 1104-a (a)(1) and (a)(2) demonstrate that their expectations are reasonable.

Often parties will use “course of dealing evidence” to determine what are the reasonable expectations of the shareholder. For example, if the shareholder has never been employed by the subject company it would be difficult to use the majority’s refusal to hire the minority as proof of oppression. See Matter of Farega Realty Corp., 132 AD2d 797, 798, 517 N.Y.S.2d 610 (3d Dept. 1987) (petitioner could not state claim for oppression where petitioner was "a passive investor" and he neither sought "responsibilities in the day-to-day management nor did he expect the corporation to provide him with an occupation"). On the other hand, a minority could establish oppression if they demonstrated their employment was terminated and their active participation in the company was interfered with by the majority. See, Matter of Rambusch, 143 AD2d 605, 606, 533 N.Y.S.2d 423 (1st Dept 1988) (petitioner stated claim for oppression where "he was employed for 36 years, and in which he served in executive positions and owned over 30% of the stock").

In 1982, the New Jersey Supreme Court in the oft-cited decision Crowe v. DeGioia, 90 N.J. 126 (1982), set forth the factors Courts should consider when petitioned for injunctive relief. For the past thirty-plus years, litigants arguing in favor of the issuance of an interlocutory injunction asserted their clients have demonstrated by “clear and convincing evidence” that: (1) there is no adequate remedy at law and the irreparable harm to be suffered in the absence of injunctive relief is substantial and imminent; (2) there is a reasonable probability of success on the merits; (3) the equities and hardships favors injunctive relief; and (4) the public interest will not be harmed. Id. at 520; McKenzie v. Corzine, 396 N.J. Super. 405, 414 (App. Div. 2007).

Often parties opposing an Order to Show Cause seeking injunctive relief will assert that the moving parties’ cases are in dispute and therefore the movant has not demonstrated by “clear and convincing evidence” that they are entitled to injunctive relief.

Recently, the Appellate Division was asked to decide whether or not a Trial Court Judge’s decision not to award injunctive relief which would have maintained the status quo during the pendency of the litigation because that Judge believed the movant did not demonstrate it would ultimately prevail was an error. Waste Management of New Jersey, Inc. v. Morris County Municipal Utilities Authority, 433 N.J. Super. 445 (App. Div. 2013). The Waste Management Court held it did. In doing so, the New Jersey Appellate Division set forth a less rigid test than the approach articulated by the Crowe decision. “This less rigid approach…permits injunctive relief preserving the status quo even if the claim appears to be doubtful when a balancing of the relative hardships substantially favors the movant, or the irreparable injury to be suffered by the movant in the absence of the injunction would be imminent and grave, or the subject matter of the suit would be impaired or destroyed.” Id. at 454.

The Waste Management decision provides New Jersey litigants with two potential arguments when seeking injunctive relief. Litigants can still argue that they are entitled to injunctive relief because they satisfy each of the factors set forth in Crowe. As a result of the Waste Management decision they may also argue they are entitled to injunctive relief to maintain the “status quo.”

Over the years, I have represented numerous minority shareholders whose employment was terminated by the majority. In an effort to further “oppress” the minority in violation of New Jersey’s minority oppression statute the majority will often terminate the minority’s income and benefits. I have successfully filed applications seeking to reinstate the minority’s employment, income and benefits. Prior to the Waste Management decision, I was required to demonstrate each of the factors articulated by the Crowe decision. I believe the Waste Management decision will give my clients an additional argument in favor of injunctive relief reinstating their employment, benefits and income because I will also be able to argue that to do so would be to maintain the “status quo.”

The Ohio Supreme Court in the seminal case Crosby v. Beam, 47 Ohio St. 3d 105 (1989) set forth protections for Ohio minority shareholders. Minority shareholders sought redress via the Ohio courts. In their complaint, the minority shareholders alleged that the majority shareholders had oppressed them by: (1) awarding themselves unreasonable salaries; (2) using corporate property for their personal enterprise; (3) having the company purchase life-insurance only for the majority’s benefit; and (4) taking improper, low-interest loans from the company.

In deciding the case, the Ohio Supreme Court first had to consider whether or not the minority shareholders could maintain their claims against the majority shareholders in their individual capacities. The defendants argued that the plaintiffs could only assert those claims derivatively pursuant to Ohio Civ. R. 23.1. The majority argued that Plaintiff’s complaint only alleged that the defendants’ misappropriation of corporate funds directly affected the corporation and only indirectly harmed the Plaintiffs. “A shareholder’s derivative suit is brought by a shareholder in the name of the corporation to enforce a corporate claim.” Crosby v. Beam 47 Ohio St. 3d at 107. If the Ohio Supreme Court found that the claims could only be asserted derivatively than Ohio would not have embraced the individual minority shareholder’s right to assert individual shareholder claims.

Fortunately for minority shareholders in closely held Ohio corporations, the Ohio Supreme Court held that they could individually assert minority oppression claims. The Crosby decision is the genesis of the minority oppression claim in Ohio. The Ohio Supreme Court recognized the vulnerabilities associated with being a minority shareholder in a closely held company. The Ohio Supreme Court recognized that the close corporation structure gives the “majority or controlling shareholders opportunities to oppress the minority shareholders.” Id. That is because “a close corporation is a corporation with few shareholders and whose corporate shares are not generally traded on the securities market. Id. (citing, 1 O’Neil & Thompson, O’Neal’s Close Corporations (3 Ed. 1986) 2-3, Section 1.02). In addition, in reaching that conclusion the Ohio Supreme Court reasoned that like “a partnership, the relationship between the shareholders must be one of trust, confidence and loyalty.” Id.

After finding that the Plaintiffs could assert the claims in their individual capacities the Ohio Supreme Court defined the fiduciary duties the majority shareholders owed the minority in closely held Ohio corporations. The Ohio Supreme Court defined “the standard of a duty to be of the ‘utmost good faith and loyalty.’” Crosby v. Beam, 47 Ohio St. 3d at 108. The Court held “a majority shareholder has a fiduciary duty not to misuse his power by promoting his personal interests at the expense of corporate interests.” Crosby v. Beam, 47 Ohio St. 3d at 108-109.

Next, the Ohio Supreme Court found that Ohio Courts of equity “will grant appropriate relief where the majority or dominant group of shareholders act in their own interest or in the interest of others so as to oppress the minority or commit fraud upon their rights.” Crosby v. Beam, 47 Ohio St. 3d at 109. In doing so, the Ohio Supreme Court empowered Ohio trial courts to use their equitable powers to address actionable oppression. In doing so, the Ohio Supreme Court gave Ohio trial courts the power to order a buy-out or other forms of equitable relief when oppression or fraud is found.

The Crosby decision is an extremely important case because it is the genesis of the minority oppression claim in Ohio. The decision not only recognizes the cause of action it defines the fiduciary duties the majority or dominant shareholders owes the minority in Ohio closely-held companies.

Recently, the New Jersey Appellate Division affirmed a Monmouth County General Equity Judge’s finding in favor of an oppressed minority shareholder. Kaible v. Gropack, 2013 N.J. Super. Unpub. LEXIS 1453 (App. Div. 2013). The Appellate Division also affirmed the Trial Court’s verdict in favor of the oppressed minority shareholder which awarded him damages and attorneys’ fees pursuant to the New Jersey Minority Oppression statute. See N.J.S.A. 14A:12-7(c); & N.J.S.A.14A:12-7(8)(d).

The case involved a closely held New Jersey corporation with three shareholders. The plaintiff owned 33.3% of the stock. The two defendants owned the remainder of the stock. During the course of the trial, the Plaintiff was able to demonstrate that the Defendants subjected him to the following forms of actionable minority oppression:

  1. Forcing the Plaintiff out of the company by excluding him from participating in any management or decision making;
  2. Requiring the Plaintiff to assume a different role within the Company at the behest of the Defendants;
  3. Informing the Plaintiff that he would no longer render services as an officer in the company;
  4. Withholding the Plaintiff’s final paycheck;
  5. Rejecting the Plaintiff’s requests to review the Company’s books and records; and
  6. Informing the Plaintiff that the Company was experiencing “financial difficulties” and indicating that they wanted him to step down when in fact, the company was not experiencing financial problems.

The Kaible Court analyzed the New Jersey Minority Oppression Statute and the case law interpreting the same. In doing so, the Court recognized that shareholder oppression cases are extremely fact sensitive. A Plaintiff is required to show fraud, illegality or that their “reasonable expectations as a shareholder” were interfered with. In this case, most of the alleged oppression related to the Defendants taking steps to minimize the Plaintiff’s role in the company. To determine whether a particular course of conduct has oppressed a minority shareholder in violation of the Oppressed Minority Shareholder Statute Courts should examine the understanding of the shareholders concerning their roles in corporate affairs. See, Muellenberg v. Bikon Corp., 143 N.J. 168, 179 (1996). In doing that analysis, the Kaible Court affirmed the Trial Court’s finding that the Defendants violated the New Jersey Minority Oppression Statute.

The Kaible Court also affirmed the Trial Court’s decision to award the Plaintiff attorneys’ fees pursuant to N.J.S.A. 14A:12-7(8)(d). The Appellate Division found that the Trial Judge was “not required to find that the defendants acted in bad faith in order to award counsel fees pursuant to subsection (8)(d), but rather that the Judge [found] that shareholder oppression took place.” See also, Musto v. Vidas, 333 N.J. Super. 52, 71 (App. Div.), certif. denied, 165 N.J. 607 (2000). The discretion of a trial court to award counsel fees when oppression is found can be an effective tool in evening the playing field between the majority oppressor and the minority oppressed. Of course, discretion means that the trial court does not always have to award counsel fees if it finds oppression.

Unlike the New Jersey Business Corporation Act (“BCA”), the Limited Liability Company Act, N.J.S.A. 42:2B-1 to -70 (“LLCA”) had no equivalent oppressed shareholder provision.  See, Denike v. Cupo, 394 N.J. Super. 357, 378, 926 A.2d 869 (App. Div. 2007), rev’d on other grounds, 196 N.J. 502, 958 A.2d 446 (2008). Fortunately for oppressed members of a New Jersey LLC, the LLCA has since been repealed. See L. 2012, c. 50, (eff. March 18, 2013) (enacting the Revised Uniform Limited Liability Company Act [the “RULLCA”], making the RULLCA applicable to all New Jersey LLCs formed after the legislation’s effective date, and replacing the LLCA with the RULLCA as to all existing LLCs as of March 1, 2014).

The recently-adopted RULLCA no longer permits a member to resign and be paid his fair value; instead, a member may withdraw, but the member’s status thereafter is as a "disassociated member." See N.J.S.A. 42:2C-45. The Legislature, however, chose to include an oppressed member provision in the RLLCA. N.J.S.A. 42:2C-48(a)(5)(b). That section permits a member to apply to the Superior Court for "an order dissolving the company on the grounds that the managers or those members in control of the company… have acted… in a manner that is oppressive and was, is, or will be directly harmful to the applicant." 

Last year the Appellate Division, in the unpublished decision Tutunikov v. Markov Processing, 2013 N.J. Super. UnPub. Lexis 1935 (August 1, 2013), overturned a Union County Chancery Judge’s finding that a member of a New Jersey Limited Liability Company was oppressed.  That decision applied the now repealed LLCA.  Had the oppression occurred after the enactment of the RULLCA, the Appellate Division would have affirmed the finding of oppression.  Hence, the Tutunikov decision is representative of the former law in the State of New Jersey. Today, thanks to the New Jersey Legislature’s enactment of the RULLCA, minority members are afforded the same protections given to minority shareholders in New Jersey corporations.