Skip to main content



Brick Professional, L.L.C. v. Napolean

A-1283-08T3 (N.J. Super. App. Div. 2009) (Unpublished)

LIMITED LIABILITY COMPANIES — Almost all provisions of New Jersey’s Limited Liability Company Act are applicable in the absence of a written operating agreement or where an operating agreement does not contain conflicting terms, essentially making the Act’s provisions into “gap fillers.”

Three individuals formed a limited liability company, with each member having a one-third membership interest. One of the members died. The company’s operating agreement provided that, upon the death of that member, his membership interest would be offered to his son. The operating agreement also provided that once offered, the son was required to respond within thirty days and that inaction would be deemed a rejection of the assignment of his father’s membership interest in the company. The operating agreement also contained a valuation method for the deceased member’s interest, which was to be calculated as of the date of death. The son did not respond timely to notices from the other members regarding assignment of his father’s membership interest. The other members then offered the son a sum equal to the appraised value of his father’s membership interest, which he refused. The remaining members then sued for a declaratory judgment that the son had no membership interest in the company, setting the value of the son’s interest, and finding that the other members succeeded to the deceased member’s interest in the company.

The lower court found that the son had succeeded to his father’s membership interest upon his death. It found that the operating agreement’s provisions relating to the assignment of a deceased member’s interest contradicted the provisions of the New Jersey Limited Liability Company Act. It also rejected the member’s argument regarding the calculation of the value of the deceased member’s interest in the company.

On appeal, the Appellate Division reversed, finding that the legislative intent of the statute was to provide a framework for governing the operations of a limited liability company in the absence of a written operating agreement. Further, it noted that the statute itself contains reminders that the provisions are applicable in the absence of a written operating agreement and that the provisions of an operating agreement supercede the statute. Thus, the Court found that the company’s members were free to adopt their own procedures relating to the assignment of a deceased member’s interest and the valuation of that interest even if the procedures deviated from the “gap filing” scheme set forth in the statute. According to the Appellate Division, the lower court was not entitled to disregard the operating agreement by requiring the members to use the assignment and valuation default methods set forth in the statute.


MEISLIK & MEISLIK
66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 • info@meislik.com