Summary
The Appellate Division, First Department, unanimously affirmed an order denying VBR Holdings, LLC's motion to dismiss a breach of contract claim and for a declaratory judgment. The court held that ambiguity in the LLC agreement required discovery regarding whether VBR effectively exercised its right to purchase the plaintiffs' ownership interests, including issues concerning the purchase notice and valuation process.
Topics
Practice areas
Questions Presented
- Whether the contractual provision governing defendant's right to purchase plaintiffs' ownership interests was ambiguous such that discovery was required before resolving the breach-of-contract claim.
- Whether defendant effectively exercised its purchase right even though the purchase was never consummated, including the legal effect of the purchase notice's omission of a closing time and defendant's failure to pursue selection of an investment firm to value the purchase price.
- Whether defendant's purchase right was terminated by the company's change of control before the effectiveness of the purchase notice had been determined.
Holdings
- The motion to dismiss was properly denied because section 7.6 was ambiguous and resolution of the ambiguity required discovery concerning legal and factual issues.
- The court properly declined to decide whether defendant's purchase right was terminated by the company's change of control before determining whether the purchase notice was effective.
Key quotations
“In light of the ambiguity of the contractual provision at issue — section 7.6 of defendant's Amended and Restated Limited Liability Company Agreement — resolution of which must await discovery” (*1)
“These issues include the effect of the omission from the purchase notice of a time for the closing of the repurchase transaction and the effect of defendant's failure to pursue the selection of an investment firm to value the purchase price.” (*1)
Factual background
The dispute concerned section 7.6 of defendant's Amended and Restated Limited Liability Company Agreement, which purportedly gave defendant a right to purchase plaintiffs' ownership interests in the company. Defendant issued a purchase notice, but the purchase was never consummated. The notice omitted a closing date, and defendant did not pursue selection of an investment firm to value the purchase price; the parties also disputed whether a change of control terminated defendant's purchase right.
Procedural history
Supreme Court, New York County, denied defendant's motion to dismiss and for declaratory relief. The Appellate Division, First Department, unanimously affirmed the order to the extent appealed from, with costs.
Remand instructions
No express remand was ordered. Supreme Court was allowed to consider the change-of-control issue first after determining the effectiveness of the purchase notice.