A member seeking to dissolve an LLC which owns a mothballed amusement park in Maggie Valley, North Carolina, didn’t have a “ghost of a chance” to close out a struggling, yet functional, company.
In McClure v. Ghost Town in the Sky, 2024 NCBC 33, the Business Court took to the dusty streets of a defunct “Wild West” attraction that enjoyed decades of success with tourists who enjoyed the views, cowboy aesthetic, and roller coasters. Ghost Town hadn’t operated since 2009 and the current owners, hoping for a comeback, also hadn’t secured financing to redevelop or jump-started an income flow. Id. ¶ 17. But Judge Conrad reminded that involuntary dissolution is an “extraordinary” equitable remedy that ill suits a young company that, to date, has simply endured “an underwhelming return,” Id. ¶¶ 13, 17 (citing Brady v. Van Vlaanderen, 2017 WL 3090171 (N.C. Super. Ct. July 19, 2017)).
Plaintiff inherited her interest in Ghost Town from her aunt, Alaska Presley, who had co-founded the LLC with Coastal Development, LLC in 2020. Presley had hoped to open a Christian-themed amusement park, and the company’s holdings also included 250 acres of surrounding mountain property. Id. ¶¶ 3, 6.
Plaintiff filed for dissolution just four months after Presley’s death, claiming the company was insolvent, had almost no income, and couldn’t pay its taxes or insurance premiums. Plaintiff conceded that the “property holds great actual and potential value” and may have viewed dissolution as a more expedient value proposition over the development path which the LLC’s managing member, Coastal, had elected. Id. ¶¶ 7, 17.
In November 2022, Ghost Town contracted with Storyland Studios to develop a design plan that could be realized if financing eventually came through. Id. ¶ 10. But the Court noted that its job in a dissolution setting is not to “dissolve an LLC merely because the LLC has not experienced a smooth glide to profitability or because events have not turned out exactly as the LLC’s owners originally envisioned.” Id. ¶ 18 (quoting In re Arrow Inv. Advisors, LLC, 2009 WL 1101682 (Del. Ch. Apr. 23, 2009)).
By statute, judicial dissolution is allowed upon a showing “it is not practicable” for the LLC to act in conformance with its operating agreement or that liquidation is necessary to protect member rights and interests. Id. ¶ 13 (citing N.C.G.S. § 57D-6-02(2)). The Court noted that a “managerial deadlock” is the most common instance of this unfeasibility. But here, while Plaintiff “mistrusts” the managing member, the Court found it undisputed that Coastal Development had unilateral authority to run the company’s day-to-day affairs. Id. ¶¶ 14-15.
Moreover, the Court was unwilling to declare that it was impracticable for such a young company, with no known creditors and valuable assets, to conduct the broadly stated business objectives in its operating agreement. While investor patience may not have been baked into the operating agreement, the Court noted that (Id. ¶ 18):
“[n]o evidence suggests that the company’s founders expected it to complete development of an amusement park and turn a profit in that short period.”
The Court also declined to extend Meiselman v. Meiselman, 309 N.C. 279 (1983), to a dissolution setting apart from its normal application to guard against the frustration of “substantial reasonable expectations” of minority shareholders. Even if the principle governed, Judge Conrad observed that plaintiff had no expectation of dividends in light of the company’s operating agreement and its intended business line. Id. ¶ 23.
Takeaways
- For a nifty look at a forgotten amusement park, check out here for a video tour of Ghost Town in the Sky that’s a little bit Blair Witch Project with a touch of Last of Us for good measure.
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