Shareholder and LLC member disputes can be complex and contentious, especially when one party attempts a “freeze-out.” A freeze-out refers to the exclusion of a shareholder or member from the decision-making process or the benefits of ownership. In Illinois, recent court decisions have shed light on the legal principles surrounding these disputes. In this blog post, we will explore some of these notable cases and the lessons they offer for those facing or involved in freeze-out situations.
1. Ritchie Capital Management, LLC v. Gerard (2019 IL 124741)
In Ritchie Capital Management, LLC v. Gerard, the Illinois Supreme Court addressed the issue of “squeeze-outs” in limited liability companies (LLCs). The court emphasized that LLC managers owe fiduciary duties to the members, and a manager’s attempt to squeeze out another member for personal gain can lead to a breach of those duties. This decision underscored the importance of fairness and transparency in LLC operations and clarified the standards for assessing fiduciary duty violations.
2. Hagan v. Quinn (2020 IL 124989)
Hagan v. Quinn involved a shareholder dispute in a closely held corporation. The Illinois Supreme Court in this case held that shareholders in a closely held corporation owe each other a duty of utmost good faith and loyalty. The court emphasized that majority shareholders must act fairly and reasonably toward minority shareholders and avoid oppressive conduct. This decision reaffirmed the principles of fairness and equitable treatment among shareholders. Continue reading ›