Brewster Park, LLC, is a business that owns, maintains, and leases residential housing in Bridgeport, Connecticut, and Trumbull, Connecticut. The LLC has two members, Michael Weinshel and Joyce Styslinger.
In a divorce proceeding unrelated to this case, Joyce Styslinger assigned her membership in Brewster Park to her ex-spouse, William C. Styslinger III (Styslinger). As an assignee, Styslinger had the right to receive distributions from Brewster Park. However, Brewster Park did not make any distributions to Styslinger after he was assigned membership despite his requests. Furthermore, the sole other member of the LLC, Weinshel, did not grant Styslinger’s request for full membership status.
Styslinger subsequently sued Brewster Park and Weinshel, alleging, inter alia, that Weinshel had breached his fiduciary duties by refusing to make distributions to Styslinger while taking distributions for himself. To recover from his injuries, Styslinger demanded the dissolution of Brewster Park and an order to begin the winding-up process.
Weinshel moved to dismiss Styslinger’s suit, asserting Styslinger lacked the standing to seek the dissolution and winding-up of Brewster Park. The trial court granted Weinshel’s motion to dismiss and Styslinger timely appealed. Styslinger’s appeal was transferred to the Connecticut Supreme Court. The question before the state supreme court is whether an assignee of a membership interest in a LLC has standing to force the winding up of an LLC in the absence of its dissolution.
JUDGE VERTEFEUILLE We begin our analysis with the nature of LLCs and the law that governs them. Our common law does not recognize LLCs, which were first created by statute in Connecticut in 1993. An LLC is a distinct type of business entity that allows its owners to take advantage of the pass-through tax treatment afforded to partnerships while also providing them with limited liability protections common to corporations. The act (Public Acts 1993) establishes the right to form an LLC and all of the rights and duties of the LLC, as well as all of the rights and duties of members and assignees. It permits the members to supplement these statutory provisions by adopting an operating agreement to govern the LLC’s affairs. It is undisputed in the present case, however, that Brewster Park does not have an operating agreement to supplement the rights and duties established in the act.
The provisions of the act relating to winding up an LLC’s affairs inextricably link the winding up process to a dissolution, and therefore must be read together with the statutes governing the dissolution of an LLC. Tellingly, the provisions governing a winding up of the affairs of an LLC are found within the provisions governing the dissolution process. The statutory provisions with regard to both dissolution and winding up of affairs are found within the portion of the act entitled “DISSOLUTION.” Reading the winding up and dissolution statutes together, the act creates a clear progression from dissolution to winding up the affairs, demonstrating that a winding up is not an independent event, but is an integral part of the dissolution process. Once an event of dissolution occurs, the LLC winds up its affairs, distributes its assets, and then terminates its business operations.
The act provides only a single mechanism for triggering a winding up of an LLC’s affairs: an event of dissolution. Section 34-206 provides in relevant part that “[a] limited liability company is dissolved and its affairs shall be wound up upon the happening” of one of three events: (1) any event of dissolution specified in the LLC’s articles of organization or operating agreement; (2) a vote to dissolve by the majority of the LLC’s members; or (3) the entry of a decree of judicial dissolution under General Statutes § 34-207. Under § 34-207, only a member or someone on the member’s behalf may apply for a decree of dissolution, and a decree may enter only if the court determines that “it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.” There are no other mechanisms in the act for triggering a winding up of the affairs.
Moreover, the provisions of the act governing the winding up process presuppose that the LLC has already dissolved prior to winding up its affairs. For instance, General Statutes § 34-208(a)(1) explains who may carry out the winding up process and vests this power in “the members or managers who have authority …to manage the limited liability company prior to dissolution….” General Statutes § 34-209

(a) sets out the powers of members and managers to bind the LLC after dissolution, providing in relevant part that, “after dissolution of the limited liability company, each of the members having authority to wind up the limited liability company’s business and affairs can bind the limited liability company …(1) [b]y any act appropriate for winding up the limited liability company’s business and affairs or completing transactions unfinished at dissolution….” In addition, General Statutes § 34-210, the sole provision among the dissolution sections of the act that governs the final distribution of the LLC’s assets, provides in relevant part that, “[u]pon the winding up of a limited liability company, the assets shall be distributed as follows….”
In the present case, none of the events of dissolution specified in § 34-206 has occurred and the plaintiff therefore cannot trigger a winding up of Brewster Park’s affairs. First, the plaintiff has not alleged that Brewster Park’s articles of organization have triggered a dissolution and it has no operating agreement.
Second, the plaintiff has not alleged that its members voted to dissolve. Third, because the plaintiff is not a member of Brewster Park, he cannot pursue a judicial dissolution under § 34-207. Unless and until the plaintiff is admitted to membership, Joyce Styslinger continues to hold the sole power to exercise the rights accompanying her membership interest and she has not sought a judicial dissolution of Brewster Park in this action. Because no event of dissolution has occurred, and the plaintiff cannot force a judicial dissolution under § 34-207 as an assignee, we conclude that the act does not grant the plaintiff standing to seek a winding up of Brewster Park’s affairs.
The plaintiff argues that his right to force a winding up of Brewster Park’s affairs is found in § 34-208(a). We disagree. That subsection pertains only to who may carry out the winding up process once it has been triggered by dissolution; it does not provide authority for an assignee to trigger a winding up in the first place. Section 34-208(a)(1) provides in relevant part that, by default, the winding up may be carried out “by the members or managers who have authority …to manage the limited liability company prior to dissolution….” Alternatively, “if one or more of the members or managers of the limited liability company have engaged in wrongful conduct, or upon other cause shown,” the statute permits any member or an assignee to apply to the Superior Court to ask the court to carry out the winding up process in place of the members and managers. Thus, under § 34-208(a), if an LLC has dissolved, but the members or managers had engaged in wrongful conduct or for other cause shown, an assignee can apply to the Superior Court to have the court perform the winding up process instead of the members or managers. Nothing in § 34-208, however, permits an assignee to apply to the Superior Court to force the commencement of a winding up process absent a dissolution under § 34-206.
Apart from having no support from the text of the act, the plaintiff’s interpretation of § 34-208 allowing an assignee to force a winding up of affairs without a dissolution of the LLC would undermine the statutory scheme for LLCs, thus leading to absurd results. Under the act, an assignee is a passive recipient of the economic benefit of a membership interest and is barred by the act from participating in the management of the LLC’s business or exercising any right of membership unless and until the assignee is admitted as a member. The act expressly provides that “an assignment of a limited liability company membership interest does not dissolve the limited liability company or entitle the assignee to participate in the management and affairs of the limited liability company or to become or exercise any rights of a member….” Instead, the rights and duties of membership remain vested in the assignor until the assignee is admitted to membership. Recognizing that assignees have no role to play in managing the LLC’s affairs, the act shields them from any liabilities that a member might have[,]
including, for example, for capital contributions. Instead, the assignor member continues to hold the obligations of membership, including for capital contributions, and continues to owe a duty of good faith to the LLC.
The plaintiff’s interpretation of the act is directly contrary to these limitations on the rights of an assignee, and would exalt rights of assignees to a level on par with those of members in the face of the act’s clear intention to the contrary. Only members may vote to dissolve an LLC and wind up its affairs. Only a member or someone on his behalf may apply to a court for a judicial dissolution forcing a winding up of an LLC. If an assignee could obtain a judgment effecting a winding up of the LLC’s affairs without a dissolution, the assignee would hold the power to force a termination of the LLC’s business operations, giving the assignee undue leverage over the members. In the present case, Joyce Styslinger, rather than the plaintiff, retains the sole right under the act to exercise her membership rights and to protect her membership interests.
There is only one provision of the act that places the rights of assignees on par with the members, and the power to exercise this right is available to assignees only after the LLC has dissolved. As we have previously explained, § 34-208 permits assignees, after a dissolution, to ask the Superior Court to conduct the winding up process in the stead of its members and managers, “if one or more of the members or managers of the limited liability company have engaged in wrongful conduct, or upon other cause shown.” Providing assignees this power after a dissolution and during a winding up process is wholly consistent with the limited role that the act grants to assignees. The assignee’s interest in receiving distributions from the LLC becomes primary after an LLC dissolves. After dissolution, the purpose of the LLC is no longer to maintain its business operations, but to wind up its affairs so that the LLC’s assets may be liquidated and distributed to its members or their assignees. Thus, only after a dissolution does the act permit an assignee to petition the court to protect his or her then primary interest in receiving a share of the LLC’s assets.
We therefore conclude that the act does not provide an assignee such as the plaintiff with standing to seek the winding up of the affairs of an LLC in the absence of a dissolution of that LLC. Accordingly, the trial court properly dismissed the plaintiff’s complaint.
CRITICAL THINKING:
Summarize the structure of the Connecticut Supreme Court’s argument and then relate the facts of the case to the summarized argument. For example, the justices first discussed the statute relevant to the case about the only trigger to dissolve an LLC found in Public Acts 1993. The relation between this act and the facts of the case is that the trigger does not pertain to Styslinger’s status as an assignee.
ETHICAL DECISION MAKING
What do you think Weinshel’s motive was when he did not grant Styslinger membership status? Do you think Weinshel would have made that decision if he adhered to the golden rule? What assumption(s) do you think are encapsulated in the decision by lawmakers to give assignees fewer rights and fewer liabilities and full members more rights and responsibilities as mentioned in the justices’ discussion of § 34-208?