DTI-DSIC, LLC v. 930-DSIC, LLC

Summary

The Appellate Division, First Department modified an order concerning claims arising from the forced sale of an LLC member’s interest after default. The court dismissed the breach of contract claim against the managing member and the breach of fiduciary duty claim, but allowed the breach of contract claim against the company and the accounting claim to proceed. The decision applied Delaware law under the parties’ operating agreement.

Holdings

1. The breach-of-contract claim against the Managing Member was properly dismissed because DTI-DSIC did not allege conduct that violated the operating agreement or that the Managing Member exercised its contractual authority in bad faith.
2. The breach-of-fiduciary-duty cause of action was properly dismissed because the Managing Member's exercise of contractual rights could not form the basis of that claim.
3. DTI-DSIC stated a breach-of-contract claim against the Company by alleging that the Company improperly reduced the proceeds of the forced sales.
4. DTI-DSIC sufficiently pleaded an accounting claim by alleging that it demanded an accounting of the forced-sale proceeds and that the Managing Member refused to provide one.

Questions Presented

1. Whether DTI-DSIC adequately pleaded breach of contract against the Managing Member.
2. Whether the exercise of contractual discretion by the Managing Member supported a breach-of-fiduciary-duty claim.
3. Whether DTI-DSIC adequately pleaded breach of contract against the Company based on allegedly improper deductions from forced-sale proceeds.
4. Whether DTI-DSIC adequately pleaded a cause of action for an accounting.

Disposition

other