Investcorp, L.P. v. Simpson Investment Co.

In 1991 brothers Donald and Alfred Simpson formed the Simpson Investment Company, L.C. (the corporation), a limited-liability corporation. Donald and Alfred’s families each owned 50 percent of the corporation. The corporation owned and managed commercial property worth over $10 million. According to its operating agreement (the agreement), upon dissolution the corporation would have to wind up and liquidate its business. The agreement also provided that if a member withdrew, the remaining members had to unanimously agree to continue the corporation. The agreement defined members of the corporation as the people who were members of the corporation from time to time. In 1996, after years of fighting, Alfred’s family (the withdrawing Simpsons) (plaintiffs) resigned from the corporation to force its dissolution. Donald’s family (the remaining Simpsons) (defendants) refused to allow the company to dissolve. The remaining Simpsons reasoned that because the other Simpsons had withdrawn, the remaining Simpsons were the only remaining members and had decided to continue the corporation by a majority. The withdrawing Simpsons argued that they were still members of the corporation under the agreement until the corporation was dissolved. The withdrawing Simpsons sued the remaining Simpsons and the corporation to dissolve the corporation. The district court held that the corporation was dissolved because there was not unanimous consent from the remaining members to continue the corporation, but that the withdrawing Simpsons were no longer members of the corporation. The district court determined that the withdrawing Simpsons were no longer members by interpreting the agreement’s definition of members to apply at the time of the case, after the withdrawing Simpsons had left the corporation. Therefore, the remaining Simpsons were in charge of the corporation’s dissolution. The withdrawing Simpsons appealed.