Just Because it Passed Spell-Check Does Not Mean it is Correct
A substantial portion of my practice involves the review of operating agreements. While I certainly will not suggest that I am immune from the problems of bad drafting, I am still amazed at the level of deficiency I oft see.
Recently I was called into a dispute involving a Kentucky-organized LLC and was provided copies of both the original and amended and restated operating agreement of the company, both written by a local firm who, as a matter of discretion, I will not name.
Initially, the lead-in paragraph of both the original and amended and restated operating agreement recited that the agreement has an effective date of December 1, 2011. The subject LLC was not formed, however, until September, 2012. In effect, this firm had written an operating agreement that purported to be effective over nine months before the LLC was formed.
Another curiosity in this operating agreement was that it provided that the company would be dissolved and its affairs wound up upon a series of events including the “filing of a certificate of dissolution by the Secretary of State under KRS § 275.295.” Now keep in mind that this is operating agreement for a company organized in September, 2012 with a purported effective date of December 1, 2011. Irrespective of which date is correct, this provision in the operating agreement is nonsensical in that KRS § 275.295 was repealed effective January 1, 2011.
Last, as a dispute resolution mechanism, this operating agreement called for “binding mediation.” In trying to puzzle through what could be “binding mediation,” I found interesting the statement of Judge Simpson in Reid v. Swift Pork Co., 2010 WL 1795533, *1 (W.D. Ky. May 4, 2010), in which he observed that “while there is no description whatsoever of what ‘binding mediation,’ it seems almost a contradiction in terms….”
Just because it passes spell-check does not mean that it is correct.