O.R.C. Partners, LLC v. SBTN Holdings, LLC

Summary

The Delaware Court of Chancery held that O.R.C. Partners, LLC is an 80% member of SBTN Holdings, LLC under the parties’ Partnership Agreement and therefore has standing to inspect the company’s books and records under 6 Del. C. § 18-305. The court rejected SBTN Holdings’ reliance on a purported operating agreement that was not adequately authenticated and found that the parties never finalized a later replacement operating agreement. Judgment was entered for O.R.C.

Holdings

1. O.R.C. proved by a preponderance of the evidence that it was an 80% member of SBTN Holdings under the Partnership Agreement and therefore had standing to demand inspection of the company's books and records under 6 Del. C. § 18-305(a).
2. The Partnership Agreement, not the Purported Operating Agreement, governed the internal affairs of SBTN Holdings.
3. The Partnership Agreement was not rescinded or canceled because the parties never executed the contemplated replacement operating agreement or cancellation document.
4. O.R.C.'s receipt of refinancing proceeds did not transform its capital contribution into a loan because O.R.C. never agreed to become a creditor or lender and accepted the funds as a distribution.
5. O.R.C. was not entitled to attorneys' fees because it failed to establish by clear evidence that SBTN Holdings engaged in glaringly egregious bad-faith conduct.

Questions Presented

1. Whether the Partnership Agreement or the Purported Operating Agreement governed the internal affairs of SBTN Holdings.
2. Whether O.R.C. was admitted as an 80% member of SBTN Holdings and therefore had standing to inspect its books and records under 6 Del. C. § 18-305(a).
3. Whether the parties rescinded or canceled the Partnership Agreement when they negotiated, but failed to execute, a replacement operating agreement.
4. Whether O.R.C.'s receipt of funds from the refinancing transformed its capital contribution into a loan.
5. Whether O.R.C. was entitled to attorneys' fees based on SBTN Holdings' alleged bad-faith litigation conduct.

Disposition

other