New Jersey’s Revised Uniform Limited Liability Company Act affords Minority Members of LLC’s protection from 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 Fortunately for oppressed members of a New Jersey LLC, the LLCA has since been repealed.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Last year the Appellate Division, in the unpublished decision Tutunikov v. Markov Processing, 2013 N.J. Super.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 That decision applied the now repealed LLCA.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.