KRS § 275.177 Says What It Means and Means What It Says

KRS § 275.177 Says What It Means and Means What It Says

 

      In LAWWAL, L.L.C. v. Wallace, No. 2016 CA-000358-MR, 2019 WL 103960 (Ky. App. Jan. 4, 2019), it was held that the writing necessary to satisfy the written requirement imposed by an operating agreement (see KRS § 275.177) may be set forth in documents other than an express amendment of the operating agreement. Therein the court wrote:

The general rule of contract law is that parties may orally agree to modify a prior agreement even though they previously agreed that all future modifications must be in writing. See Restatement (Second) of Contracts § 283 (1981) (“Even a provision of the earlier contract to the effect that it can be rescinded only in writing does not impair the effectiveness of an oral agreement of rescission. In the absence of statute, such a self-imposed limitation does not limit the power of the parties subsequently to contract.”). “[A]s to operating agreements [KRS 275.177] altered this rule and provided for specific enforcement of requirements that amendments be in writing.” Mark A Sargent & Walter D. Schwidetzky, Limited Liability Company Handbook (2018-19 ed.) (Kentucky Manager-Managed LLC Operating Agreement found in Appendix KY-7).

Specifically, KRS 275.177 states:

 

If a written operating agreement contains a provision to the effect that any amendment to the operating agreement of the limited liability company shall be in writing and adopted in accordance with the provisions of the operating agreement, then the provision shall be enforceable in accordance with its terms, and any agreement as to the conduct of the business and affairs of the limited liability company which is not in writing and adopted in accordance with the provisions of the operating agreement shall not be considered part of the operating agreement and shall be void and unenforceable.

Id.

Significant to the present dispute, the only requirement imposed by KRS 275.177 is that modifications must be in writing if required by the operating agreement. It does not require modifications be in set forth in any specific type of written document or even technically labeled as such. Therefore, to the extent that KRS 275.177 is implicated, it was complied with in this case. The parties’ agreements with respect to the sale and ownership of the LLCs were reduced to writing—first in the original Sales Agreement and later in the Settlement Agreement.

Id. at *5-6.