Being Bound by An Operating Agreement You Did Not Sign

Being Bound by An Operating Agreement You Did Not Sign

      In a recent decision, the Federal District Court for the Western District of Kentucky considered and rejected the assertion that a member of an LLC was not bound by its operating agreement because they had not signed it. Pure Marketing, LLC v. Got Matcha Premium Tea Co., LLC, 2020 WL 234658 (W.D. Ky. Jan. 15, 2020). 

      The back story of this decision is important. Pure Marketing, pursuant to a contribution agreement, made an investment in Got Matcha, becoming a member therein. The substantive rights of Pure Marketing were determined under the Got Motcha operating agreement. However, in connection with this suit, Pure Marketing apparently desired to avoid application of that operating agreement, or bring any claims under it, because it contained an arbitration clause. Pure Marketing asserted that it was not bound by the operating agreement because it never signed it. 

      The court first determined that any rights held by Pure Marketing were determined under the operating agreement, and not the contribution agreement; all parties had fully performed on it. Ultimately, the suit would be dismissed. In the course of doing so, the court, in reliance upon KRS § 275.275(3) and Del. Code Ann. tit. 6, § 18-101(9), would reject the assertion that a signature is necessary in an operating agreement to be bound thereby. Rather, “any member of an LLC, original or subsequently admitted, is bound by the terms of an operating agreement regardless of whether the party signed said agreement.”