Application for Judicial Dissolution of LLC By A Non-Member Dismissed

Application for Judicial Dissolution of LLC By a Non-Member Dismissed

      The Delaware Limited Liability Company Act, and specifically section 18-802 thereof, provides that an LLC may be judicially dissolved “[o]n application by or for a member or manager.” In a recent decision, an application for judicial dissolution brought by neither a member nor a manager was dismissed. SolarReserve CSP Holdings v. Tonopah Solar Energy, LLC, C.A. No. 2019-0791-J RS, 2020 WL 1291638 (Del. Ch. March 18, 2020).

      Tonopah Solar Energy, LLC was originally organized as a single member LLC in which SolarReserve CSP Holdings, LLC was the sole member. Over time and in connection with a variety of financings, SolarReserve conveyed its interests in Tonapah to several other holding companies and as well borrowed money from the US Department of Energy. In turn, SolarReserve also entered into a joint venture agreement with Cobra Thermosolar Plants, Inc. to build a solar power facility. Ultimately, after a default in the Department of Energy borrowing, SolarReserves was removed from its position of ultimate control over Tonopah. In connection with this suit, SolarReserve alleges that Tonopah was insolvent and being unable to build its plats, it was no longer practicable for Tonopah to carry on its business. On that basis, it was requested that the court dissolve Tonopah. Tonopah resisted, which led to this decision.

      Parsing the current ownership and control structure of Tonopah, the court determined that SolarReserve was not a member, but rather an indirect investor. Further, turning to the argument it should order dissolution on equitable principles, the court deferred, concluding that doing so would create rights in SolarReserve that it did not already have. Rather, to the extent in SolarReserve continue to hold any interest in Tonopah, there was an intervening holding company from which all of the membership interests in Tonopah had been pledged to secure the now defaulted Department of Energy loan.