New York’s appellate courts are breaking new ground in 2025.
Until a month ago, I would have said that “deadlock” most certainly is not enough on its own to dissolve a New York LLC. But as Becky Baek reported two blogs ago, in mid-January, the Appellate Division – Third Department became the first among the four Departments of the Appellate Division to hold that “deadlock” – at least under the right set of facts – not only justifies, but may require, a court to judicially dissolve a New York limited liability company.
In Amici v Mazza (___ AD3d ___, 2025 NY Slip Op 00259 [3d Dept Jan. 16, 2025]), an Albany appeals court “modified, on the law,” the grant of summary judgment dismissal of a petition for LLC dissolution, and, “upon searching the record,” dissolved the LLC, holding that the existence of “deadlock” between two 50/50 members of an LLC requiring majority vote for any action made it “not reasonably practicable for the LLC to carry on its business” under Section 702 of the Limited Liability Company Law.
And until two weeks ago, I would have said that a total, or near-total prohibition on an owner’s right to seek judicial dissolution of a New York closely-held business most certainly is not enforceable.
Challenging conventional wisdom again, in TZ Vista, LLC v Helmer (___ AD3d ___, 2025 NY Slip Op 00694 [2d Dept Feb. 5, 2025]), a Brooklyn appeals court enforced an anti-dissolution provision in an operating agreement providing that each member “irrevocably waives” the right to sue for the LLC’s “dissolution.”
The State of the Law of Anti-Dissolution Provisions
To call TZ Vista anomalous would be understatement. We’ve written before about anti-dissolution provisions. The basic rules: “Statutory dissolution” rights may be “restricted (but not nullified) by contract” (Ferolito v Vultaggio, 99 AD3d 19 [1st Dept 2012]).
Under this principle, a “provision in a shareholders agreement which purports to prohibit judicial dissolution of a corporation violates public policy as expressed by the Legislature and under the common law” (Schimel v Berkun, 264 AD2d 725 [2d Dept 1999]).
Examples of enforceable restrictions on the right to judicial dissolution include arbitration agreements or optional or mandatory buy-sell provisions triggered upon an owner’s filing of a petition to dissolve.
So how did TZ Vista reach a different outcome than that which the same court reached in Schimel? The answer may be that no one alerted the court to its own prior case law.
The Operating Agreement’s Waiver-of-Dissolution Provisions
In early 2015, three members of TZ Vista, LLC (the “Company”), an entity formed for a large, mixed-use waterfront development project on the Hudson River in Nyack, New York, adopted an Operating Agreement with three members and two member-managers, William Helmer (“Helmer”) and Drazen Cackovic (“Cackovic”).
The Operating Agreement had not one, but two anti-dissolution provisions.
Section 3.5 (d) of the Operating Agreement provided, “[E]ach Member hereby irrevocably waives any right or power that such Member might have . . . [t]o file a complaint, or to institute any proceeding at law or in equity, to cause the termination, dissolution or liquidation of the Company.”
Section 3.6 (b) of the Operating Agreement provided, “The Members shall not have the right or power to . . . cause the termination or dissolution of the Company by court decree or as may be permitted by the Law, such rights being specifically waived by the Members.” The only exception was the unanimous vote of both Managers, defined in Section 1.4 (f) as the “Required Vote.”
The Complaint and Countercomplaint
In early 2020, the Company sued Helmer and his separate company, Foot of Main, LLC (“Foot of Main”), to specifically enforce a purchase option in the Operating Agreement for the Company to acquire a piece of property from Foot of Main.
In 2021, Helmer counterclaimed to judicially dissolve the Company, alleging that Cackovic “refused to abide by the Operating Agreement,” “refused to coordinate decisions regarding the management or administration of the Company with Helmer,” ran the Company “as if it were his own,” and “violated and breached the letter and spirit of the Operating Agreement.”
The Motion Court’s Decision
In 2022, former Rockland County Supreme Court Justice Robert M. Berliner issued a decision on Helmer and Cackovic’s dueling motions for summary judgment. The court granted Cackovic specific performance, and denied Helmer judicial dissolution, finding the latter’s showing “fraught” with conclusory allegations “without evidentiary support.” The court made no mention of the existence or legal effect of the Operating Agreement’s dissolution waiver provisions.
The Appeal Briefs
Helmer appealed, advocating for reversal of both holdings – denial of dissolution; grant of specific performance – making no mention of anti-dissolution provisions in either his appellant’s or reply brief.
Cackovic, on the other hand, devoted a short section of his respondent’s brief – Point I.B – to the argument that Helmer “waived” the legal remedy of judicial dissolution. “Although the lower court did not reach the merits of the claim for dissolution,” Cackovic wrote, “had it done so, it would have concluded that dissolution is not available” because “Helmer expressly and repeatedly waived his right to dissolution through the Operating Agreement.”
Cackovic argued, “To grant Helmer involuntary judicial dissolution of TZ Vista in the face of this unambiguous language would render” the anti-dissolution provisions “superfluous and useless” and “violate long-standing New York law that no provision of a contract should be left without force and effect” (quotations omitted).
But, of course, even if a contract is “unambiguous,” courts will decline to enforce it as “void” where it is “against public policy” (Connolly v Peninsula Group, 48 AD3d 365 [1st Dept 2008]).
The Appellate Decision
Sadly for us, no one in TZ Vista briefed the public policy problems with the Operating Agreement’s anti-dissolution provisions, so, unsurprisingly, the appeals court never considered them.
Instead, the court ruled, without any accompanying legal citation:
Here, pursuant to paragraph 3.5 (d) of the Operating Agreement, the members of TZ Vista waived their right to seek judicial dissolution of TZ Vista. Specifically, they waived their right to ‘file a complaint, or to institute any proceeding at law or in equity, to cause the termination, dissolution, or liquidation of [TZ Vista].’
The court then went a step further:
In any event, even if the members of TZ Vista had not waived their right to seek judicial dissolution of TZ Vista, the defendants failed to demonstrate, prima facie, that the purpose of TZ Vista had been frustrated or that continuing TZ Vista had become financially unfeasible.
What Does it Mean?
The hardest question about TZ Vista is what weight to give it.
Some would argue that because TZ Vista reached the merits of the dissolution claim, affirming denial on the merits, its anti-dissolution holding is mere dicta.
Others would argue that TZ Vista is an important, first-of-its-kind New York appeals court decision relaxing courts’ historic disfavor of anti-dissolution provisions due to public policy concerns, for the first time authorizing close business owners to contractually negate judicial dissolution rights.
I think the correct answer lies somewhere in between.
TZ Vista most certainly provides a foothold for litigants and business practitioners to argue business owners may now, at last in some circumstances, opt out of judicial dissolution remedies. If I were representing a client seeking to enforce an anti-dissolution provision in New York, TZ Vista would now be the first case I would cite.
But because no party in TZ Vista briefed the public policy limitations on owners’ freedom to contract out of New York judicial dissolution statutes, in a future case where the parties carefully brief that issue, the same appeals court might easily distinguish, or simply decline to follow, TZ Vista. And who knows if the other Departments of the Appellate Division would follow TZ Vista.
Ultimately, TZ Vista may not so much clarify the law as add to its opacity.
Personally, I would argue that in a legal environment like New York, where it is exceptionally difficult, sometimes impossible, for LLC owners to extricate themselves from even profoundly antagonistic business relationships, courts should be looking for ways to make it easier, not harder, for owners to find a way out via the legal process.
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