McDonough v. McDonough

• Decision Date: 23 December 2016
• Docket Number: No. 2015–0694,2015–0694
• Parties: Mark E. MCDONOUGH v. Patrick M. MCDONOUGH & a.
• Court: New Hampshire Supreme Court

169 N.H. 537

153 A.3d 187

Mark E. MCDONOUGH

v.Patrick M. MCDONOUGH & a.

No. 2015–0694

Supreme Court of New Hampshire.

Argued: September 14, 2016

Opinion Issued: December 23, 2016

Sheehan Phinney Bass & Green, Professional Association, of Manchester (James P. Harris on the brief and Christopher N. Cole orally), for the plaintiff.

Orr & Reno, P.A., of Concord (James F. Laboe and Jeffrey C. Spear on the joint brief, and Mr. Laboe orally), for defendant TASC Technical Services, LLC.

Cook, Little, Rosenblatt & Manson, PLLC, of Manchester (Arnold Rosenblatt and Kathleen M. Mahan on the joint brief), for defendant Patrick M. McDonough.

Matthew J. McDonough, self-represented defendant, by joint brief.

DALIANIS, C.J.

The plaintiff, Mark E. McDonough, appeals an order of the Superior Court (McNamara, J.) denying him summary judgment and granting summary judgment to the defendants, TASC Technical Services, LLC (TASC), Patrick M. McDonough, and Matthew J. McDonough. The trial court ruled that TASC was not required to dissolve on September 30, 2015. We affirm.

I. Background

The trial court found that the following facts were not disputed. In 1992, brothers Mark, Matthew, and Patrick McDonough established TASC, a corporation that provides technical engineering services. In September 1995, the brothers converted TASC to a Limited Liability Company (LLC). As of January 2014, the New Hampshire Revised Limited Liability Company Act (the Act), RSA chapter 304–C (2015 & Supp. 2016), governs TASC. See RSA 304–C:5, II (2015).

The brothers had a falling out. As a result, Mark sued the defendants seeking a declaration that TASC must dissolve by September 30, 2015, pursuant to its certificate of formation and operating agreement. TASC's certificate of formation states that "[t]he latest date on which the limited liability company is to dissolve is September 30, 2015." Section 5 of TASC's operating agreement states: "The Company shall have a term beginning on the date the Certificate of Formation is filed ... and shall continue in full force and effect for a term of twenty (20) years, unless sooner terminated or continued pursuant to the further terms of this Agreement." On August 7, 2015, Matthew and Patrick—constituting a majority of TASC's members—voted to dissolve TASC and then immediately voted to revoke the dissolution.

Both parties moved for summary judgment. After a hearing, the trial court ruled that: (1) the August 7 dissolution and revocation had no effect on TASC's governing documents; and (2) TASC was not required to dissolve because its operating agreement permits a majority of its members to continue the company. Consequently, it denied summary judgment to Mark and granted summary judgment to the defendants. This appeal followed.

On appeal, Mark argues that: (1) the trial court erred when it determined that a majority of TASC's members could continue TASC beyond September 30, 2015; and (2) permitting a majority of TASC's members to continue the company causes him substantial harm because the company is not obligated to pay him any consideration if he withdraws.

II. Standard of Review

In reviewing a trial court's rulings on cross-motions for summary judgment, "[w]e consider the evidence in the light most favorable to each party in its capacity as the nonmoving party and, if no genuine issue of material fact exists, we determine whether the moving party is entitled to judgment as a matter of law." Conant v. O'Meara, 167 N.H. 644, 648, 117 A.3d 692 (2015) (quotation omitted). "If our review of that evidence discloses no genuine issue of material fact and if the moving party is entitled to judgment as a matter of law, then we will affirm the grant of summary judgment." Id. (quotation omitted). "We review the trial court's application of the law to the facts de novo." Id. (quotation omitted).

TASC is governed by both its operating agreement and the Act. See RSA 304–C:25, I (2015) (stating that "[t]he laws of ... New Hampshire govern ... [t]he internal affairs of a[n] [LLC]"); RSA 304–C:16 (2015) (defining "operating agreement" to mean an agreement of the members "as to the internal affairs of a[n] [LLC] or the conduct of its business"); RSA 304–C:41, I (2015) (making an LLC's operating agreement binding upon its members). Therefore, to resolve the issues in this appeal, we need to construe both the Act and TASC's operating agreement.

"We review matters of statutory interpretation de novo." JMJ Properties, LLC v. Town of Auburn, 168 N.H. 127, 130, 122 A.3d 977 (2015). "On questions of statutory interpretation, we are the final arbiters of the intent of the legislature as expressed in the words of a statute considered as a whole." Id. "We first examine the language of the statute and ascribe the plain and ordinary meanings to the words used." Id. "We interpret legislative intent from the statute as written and will not consider what the legislature might have said or add language that the legislature did not see fit to include." Id. "Furthermore, we interpret statutes in the context of the overall statutory scheme and not in isolation." Id. "Our goal is to apply statutes in light of the legislature's intent in enacting them and in light of the policy sought to be advanced by the entire statutory scheme." Id.

"Because the operating agreement is a form of contract, we will apply the general rules of contract interpretation." Lakes Region Gaming v. Miller, 164 N.H. 558, 562, 62 A.3d 838 (2013). "When interpreting a written agreement, we give the language used by the parties its reasonable meaning, considering the circumstances and the context in which the agreement was negotiated, and reading the document as a whole." Birch Broad. v. Capitol Broad. Corp., 161 N.H. 192, 196, 13 A.3d 224 (2010). "We give an agreement the meaning intended by the parties when they wrote it." Id. "Absent ambiguity, however, the parties' intent will be determined from the plain meaning of the language used in the contract." Id. (quotation omitted). "The interpretation of a contract, including whether a contract term is ambiguous, is ultimately a question of law for this court to decide." Id. "Accordingly, we review a trial court's interpretation of a contract de novo." Id.

III. Discussion

Mark first argues that TASC's operating agreement and the Act required the company to dissolve by September 30, 2015. We disagree.

The Act requires an LLC's members to dissolve the company as provided for in the company's operating agreement. See RSA 304–C:129, I (2015) ("A[n] [LLC] shall be dissolved as provided in the operating agreement."). Section 5 of TASC's operating agreement provides: "The Company shall have a term beginning on the date the Certificate of Formation is filed ... and shall continue in full force and effect for a term of twenty (20) years, unless sooner terminated or continued pursuant to the further terms of this Agreement." (Emphasis added.)

Mark argues that, unless amended, the plain language of TASC's operating agreement required dissolution by September 30, 2015. This argument, however, overlooks the language "unless sooner terminated or continued pursuant to the further terms of this Agreement." Although Mark is correct that the members could unanimously amend section 5 of TASC's operating agreement to remove or change the dissolution clause, that does not preclude other means of continuing TASC. If TASC's members had intended that the only means of continuing the company would be an amendment of section 5, they could have explicitly said so.

Instead, they chose to more broadly state that TASC would exist for 20 years unless the company was "continued pursuant to the further terms of this Agreement."

In this case, TASC's operating agreement and the Act provide such a way for TASC's members to continue the company. Section 4 of TASC's operating agreement authorizes TASC to "have and exercise all powers now or hereafter conferred by [the Act]." This includes RSA 304–C:130, III (2015), which provides: "After the members have dissolved the limited liability company under RSA 304–C:129, I, they may revoke the dissolution at any time before completing the wind-up of the limited liability company." Thus, TASC's members have two means to avoid the effects of the September 30, 2015 dissolution. They can either revoke the dissolution pursuant to RSA 304–C:130, III, or unanimously amend section 5 of TASC's operating agreement.

Mark argues that a decision to revoke a dissolution pursuant to RSA 304–C:130, III also requires a unanimous vote. He asserts that because the legislature specifically included the word "majority" in RSA 304–C:130, I, the omission of that word in RSA 304–C:130, III demonstrates legislative intent that the phrase "the members" in paragraph III refers to all members of an LLC. Because accepting Mark's interpretation would require us to ignore the plain language of RSA 304–C:67, I (Supp. 2016), and add a unanimity requirement to RSA 304–C:130, III that is not present in the words of the statute, we conclude that a majority of members may revoke a dissolution pursuant to RSA 304–C:130, III.

RSA 304–C:130, I, is one of a number of provisions in RSA chapter 304–C specifying that certain member decisions must be made by a majority vote. See, e.g., RSA 304–C:48, II, :50, II, :94, :129, II, :150, IV, :156, I, :188, II (2015). Other provisions in RSA chapter 304–C specify that the decisions to which they refer must be made by a unanimous vote. See, e.g., RSA 304–C:100, IV–V, :120, :121, I, :122, I, :124 (2015). Still other provisions, like RSA 304–C:130, III, do not specify whether the member decision at issue must be made by majority or unanimous vote. See, e.g., RSA 304–C:34, II, :66, I (2015), :210 (Supp. 2016).

When a provision does not specify whether the member decision to which it refers must be made by majority or unanimous vote, RSA 304–C:67 applies. RSA 304–C:67, I, provides that, unless RSA 304–C:67, II or certain other...