In a recent decision, the New Jersey Appellate Division confirmed that the New Jersey Oppressed Shareholder Statute, N.J.S.A. 14A:12-7(1)(c) does not apply to limited liability companies.
Hopkins v. Duckett (N.J. App. Div. January 17, 2012) involved a long-running dispute between members of an LLC over, among other things, whether the founder could be expelled after he changed his mind on a promise to retire. The founder sued claiming that his ouster constituted “oppression.”
The Court held that the founder could not assert an oppression claim because the LLC, Nightingale & Associates, L.L.C. (N&A) was a Delaware LLC and Delaware did not recognize a claim for oppression (more on this below).
However the Court also ruled that even if N&A had been governed by New Jersey law, the founder’s claim would fail because New Jersey’s oppression cause of action applies only to corporations, and not to LLC’s. The Court was very clear and concise on this point in its January 17, 2012 decision: