Lieberman v. Wyoming. Com LLC, 99-97.

• Decision Date: 21 September 2000
• Docket Number: No. 99-97.,99-97.
• Citation: 11 P.3d 353
• Parties: E. Michael LIEBERMAN, Appellant (Defendant), v. WYOMING.COM LLC, a Wyoming Limited Liability Company, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

11 P.3d 353

E. Michael LIEBERMAN, Appellant (Defendant), v. WYOMING.COM LLC, a Wyoming Limited Liability Company, Appellee (Plaintiff).

No. 99-97.

Supreme Court of Wyoming.

September 21, 2000.

Representing Appellant: William D. Bagley of Bagley Law Office, Cheyenne, WY. Argument by Mr. Bagley.

Representing Appellee: Alexander K. Davison of Patton & Davison, Cheyenne, WY. Argument by Mr. Davison.

Before LEHMAN, C.J., and THOMAS, MACY,¹ GOLDEN, and HILL, JJ. LEHMAN, Chief Justice.

In this case, we review a summary judgment in favor of appellee Wyoming.com LLC, directing it to return only the capital contribution made by a withdrawing member of the LLC, appellant E. Michael Lieberman (Lieberman). Although the district court correctly resolved the return of Lieberman's capital contribution, its order does not resolve the question of what became of the rest of Lieberman's interest in the company. We affirm in part and reverse and remand for full resolution of the parties' dispute.

ISSUES

In his brief, Lieberman raises three issues:

Issue No. 1: Unless otherwise provided in the Articles or Operating Agreement, is a member withdrawing from a Wyoming Limited Liability Company entitled to demand and receive the fair market value of his share of the business as a going concern, if the Company elects to continue?

Issue No. 2: Absent agreement, is there authority for the withdrawing Member's contribution to be valued at less than the fair value of his equity in the Company?

Issue No. 3: Did the District Court err in granting Summary Judgment on disputed material issues of fact?

Appellee, Wyoming.com LLC, presents this statement of the issues:

1. Whether a member who withdraws from a Wyoming limited liability company is entitled to demand and receive only the return of his contributions to capital when the limited liability company elects to continue, is in accord with Wyoming law?

2. Whether the trial court's grant of summary judgment in favor of appellee was proper.

FACTS

On September 30, 1994, Steven Mossbrook, Sandra Mossbrook, and Lieberman created Wyoming.com LLC by filing Articles of Organization with the Wyoming Secretary of State. The initial capital contributions to Wyoming.com were valued at $50,000.² Lieberman was vested with an initial capital contribution of $20,000, to consist of services rendered and to be rendered.³ According to the Articles of Organization, Lieberman's contribution represented a 40% ownership interest in the LLC. The Mossbrooks were vested with the remaining $30,000 capital contribution and 60% ownership interest. In August of 1995, the Articles of Organization of Wyoming.com were amended to reflect an increase in capitalization to $100,000.⁴ The increase in capitalization was the result of the addition of two members, each of whom was vested with a capital contribution of $25,000, representing a 2.5% ownership interest for each new member. Despite the increase in capitalization, Lieberman's ownership interest, as well as his stated capital contribution, remained the same.

On February 27, 1998, Lieberman was terminated as vice president of Wyoming.com and required to leave the business premises. The other members of Wyoming.com met the same day and approved and ratified the termination.⁵ On March 13, 1998, Lieberman served Wyoming.com and its members with a document titled "Notice of Withdrawal of Member Upon Expulsion: Demand for Return of Contributions to Capit[a]l." In addition to giving notice of his withdrawal from the company, Lieberman's notice demanded the immediate return of "his share of the current value of the company," estimating the value of his share at $400,000, "based on a recent offer from the Majority Shareholder."

In response to Lieberman's notice of withdrawal, the members of Wyoming.com held a special meeting on March 17, 1998, and accepted Lieberman's withdrawal. The members also elected to continue, rather than dissolve, Wyoming.com. Additionally, they approved the return of Lieberman's $20,000 capital contribution. However, Lieberman refused to accept the $20,000 when it was offered.

Wyoming.com filed suit in June of 1998 asking for a declaration of its rights against Lieberman. Lieberman filed suit the same month requesting dissolution of Wyoming.com, and the actions were consolidated. After a hearing on cross motions for summary judgment, the district court granted Wyoming.com's motion for summary judgment and denied Lieberman's motion for partial summary judgment. The district court ruled that, because the remaining members of Wyoming.com LLC agreed to continue the business under a right to do so in the Articles of Organization, the company was not in a state of dissolution. The district court further ruled that Lieberman had the right to demand return of only his stated capital contribution, $20,000, which the district court ordered to be paid in cash. Lieberman appealed.

STANDARD OF REVIEW

The district court resolved this case by the grant and denial of cross motions for summary judgment. Generally, a denial of a motion for a summary judgment is not an appealable final order. Wolter v. Equitable Resources Energy Co., Western Region, 979 P.2d 948, 953 (Wyo.1999); Matter of Adoption of MSVW, 965 P.2d 1158, 1161 (Wyo. 1998). However, there are exceptions to this rule. One exception we have adopted is that, when the district court grants one party's motion for a summary judgment and denies the opposing party's motion for a summary judgment and the district court's decision completely resolves the case, both the grant and the denial of the motions for a summary judgment are subject to appeal. Matter of Adoption of MSVW, 965 P.2d at 1162.

The parties in this case filed opposing motions for a summary judgment. Although Lieberman's motion was one for a partial summary judgment, the district court appears to have disposed of the entire case in a single order by denying Lieberman's motion and granting Wyoming.com's motion. We will, therefore, afford review of the entire matter, including the denial of Lieberman's motion. Matter of Adoption of MSVW, 965 P.2d at 1162.

Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. W.R.C.P. 56(c); Snyder v. Lovercheck, 992 P.2d 1079, 1083 (Wyo.1999). We review a summary judgment in the same light as the district court, using the same materials and following the same standards. Id.; 40 North Corp. v. Morrell, 964 P.2d 423, 426 (Wyo.1998). We examine the record from the vantage point most favorable to the party opposing the motion, and we give that party the benefit of all favorable inferences that may fairly be drawn from the record. Id. A material fact is one which, if proved, would have the effect of establishing or refuting an essential element of the cause of action or defense asserted by the parties. Id. If the moving party presents supporting summary judgment materials demonstrating no genuine issue of material fact exists, the burden is shifted to the non-moving party to present appropriate supporting materials posing a genuine issue of a material fact for trial. Roberts v. Klinkosh, 986 P.2d 153, 155 (Wyo.1999); Downen v. Sinclair Oil Corp., 887 P.2d 515, 519 (Wyo.1994). We review a grant of summary judgment deciding a question of law de novo and afford no deference to the district court's ruling. Roberts v. Klinkosh, 986 P.2d at 156; Blagrove v. JB Mechanical, Inc., 934 P.2d 1273, 1275 (Wyo.1997).

DISCUSSION

Because this case presents our first opportunity to interpret the Wyoming LLC act, we make a few preliminary observations. Wyoming initiated a national movement in 1977 when it adopted the first limited liability company act in the United States. See Carter G. Bishop, Treatment of Members Upon Their Death and Withdrawal from a Limited Liability Company: The Case for a Uniform Paradigm, 25 Stetson L.Rev. 255, 256 (1995); 1977 Wyo. Sess. Laws ch. 158. As a business entity, limited liability companies are a conceptual hybrid, sharing some of the characteristics of partnerships and some of corporations. "In general, the purpose of forming a limited liability company is to create an entity that offers investors the protections of limited liability and the flow-through tax status of partnerships." Jonathan R. Macey, The Limited Liability Company: Lessons for Corporate Law, 73 Wash.U.L.Q. 433, 434 (1995); Tassma A. Powers & Deby L. Forry, Partnership Taxation & the Limited Liability Company: Check out the Check-the-Box Entity Classification, 32 Land & Water L.Rev. 831 (1997).

Little case law exists regarding a member's interest in a LLC. Regardless, the precedential value of cases from other jurisdictions is questionable: "Widely divergent rules on the effects of member dissociation will ultimately create confusion and inhibit the development of uniform case law. As a result, case law will have little precedential value from state to state." See Carter G. Bishop, Treatment of Members Upon Their Death and Withdrawal from a Limited Liability Company: The Case for a Uniform Paradigm, 25 Stetson L.Rev. 255, 261-63 (1995). Therefore, we must focus our review on the Wyoming LLC act as well as Wyoming.com's Articles of Organization and Operating Agreement.

Under the Wyoming LLC act, a member's interest in an LLC consists of economic and non-economic interests. One interest is a member's capital contribution, which a member may withdraw under certain conditions. Wyo. Stat. Ann. §§ 17-15-115 and 120. A member also generally has the right to receive profits. Wyo. Stat. Ann. § 17-15-119. A member's interest also usually grants him the ability to participate in management. Wyo. Stat. Ann. § 17-15-116. Overall, a member's interest is transferable, although the management rights of a transferee may be limited. Wyo. Stat. Ann. § 17-15-122. While these statutory provisions provide some guidance regarding a member's...