Haley v. Talcott
Delaware Court of Chancery
864 A.2d 86 (Del. Ch. 2004)
Matthew Haley (plaintiff) and Greg Talcott (defendant) were effectively partners in a joint venture called the Redfin Grill (Redfin), a restaurant. The two had an option to purchase the land on which the Redfin was situated and they chose to exercise the option. They formed an LLC to do so, called Matt & Greg Real Estate, LLC (the LLC). Each owned 50 percent of the LLC. The LLC took out a mortgage to finance the purchase and both Haley and Talcott signed personal guaranties for the entire amount of the mortgage. Subsequently, the two had a bitter falling out and their relationship deteriorated quickly. Talcott tried to get Haley to resign from his employment at Redfin, but Haley took the attempt as a breach of their Redfin contract. Haley also voted to reject a new lease that Talcott proposed for Redfin, and voted to put the property they had purchased up for sale. Talcott was against each of these votes and because each owned 50 percent of the LLC, they were stuck in a stalemate with the status quo prevailing, which was in accord with Talcott’s wishes. The two had not interacted since. The LLC agreement that the parties signed contained an exit mechanism in the event the parties could no longer operate together. However, both Haley and Talcott wanted to keep the LLC for themselves and the exit mechanism did not say which party would keep the LLC in the event of a falling out. In addition, the exit mechanism would not relieve Haley of his personal liabilities on the mortgage even if Talcott retained full control of the LLC. As a result, Haley brought suit seeking a court ordered dissolution of the LLC. He moved for summary judgment.
Rule of Law
Holding and Reasoning (Strine, V.C.)