Background
MERA RD LLC (the “JV”) is a Delaware limited liability company formed to operate concessions at Raleigh-Durham International Airport under the FAA’s Airport Concession Disadvantaged Business Enterprise (“ACDBE”) program. The JV has three members: MERA USA, LLC (“MERA”), which holds a 67% majority interest, MCS Burbank, LLC (“MCS”), the ACDBE partner holding a 28% interest, and La Farm Bakery Bistro RD, LLC. The JV’s governance is controlled by an LLC agreement and a 2019 Letter Agreement, both governed by Delaware law. Under federal regulations and the Lease Agreement with the Raleigh-Durham airport authority (“RDUA”), an ACDBE partner like MCS may only be removed with RDUA’s prior written consent upon a showing of “good cause.”
In January 2024, MERA — acting through written consents executed by a majority of JV members and managers — removed MCS’s designee, Tamara Mora, from her roles as Operational Director, Vice President, and Manager, and purported to repurchase MCS’s membership interest at a value determined by a valuation firm MERA retained unilaterally. MERA also obtained RDUA’s written approval in April 2024, with RDUA finding “good cause” for the removal. MCS contested the validity of the removals and the buyout, challenged the RDUA’s determination before the FAA and in federal court, and filed counterclaims. MERA then moved for partial judgment on the pleadings on its declaratory judgment count seeking a ruling that the removals and repurchase were valid.
MCS raised several defenses: that its contractual right to designate a manager protected its designee from majority-member removal; that the removal constituted a “substantial change in business” requiring unanimous member consent; that it was coerced into signing the Letter Agreement; and that the repurchase mechanism violated federal ACDBE regulations. The case was stayed pending FAA proceedings, but the FAA deferred jurisdiction to the Court of Chancery, and the stay was lifted in October 2025. The Court heard argument in May 2026.
The Court’s Holding
Vice Chancellor Zurn granted MERA’s motion for partial judgment on the pleadings in part. The Court held that a majority of JV members validly removed MCS’s designated Manager under Section 12.1 of the JV Agreement, which expressly authorizes removal “with or without cause” by written consent of a majority of members. The Court rejected MCS’s argument that MCS’s contractual right to designate one manager shielded that designee from removal by the majority, finding the two provisions coexist without conflict. It also rejected the argument that manager removal requires unanimous consent as a “substantial change in the business,” holding that Section 12.1’s specific majority-vote removal provision controls over the more general unanimity requirement, and that applying unanimous consent to manager removal would render Section 12.1 surplusage.
The Court further held that a majority of managers validly removed Mora as Vice President and Operational Director under Section 10.4.1, which authorizes the managers to remove any officer or operational director with or without cause at any time. Because the JV Agreement was silent on whether such removal could occur by written consent, the Court applied 6 Del. C. § 18-404(d), which permits managers to act by written consent absent a contrary contractual provision. The Court rejected MCS’s duress defense to the Letter Agreement, finding MCS accepted its benefits — a 1.6% interest increase — and cannot simultaneously disclaim its burdens. It also rejected MCS’s illegality defense, finding it was waived by failure to plead it as an affirmative defense in the Answer and, in any event, the JV Agreement itself conditions MCS’s dilution on RDUA approval, which RDUA granted.
However, the Court held that the January 25 Written Consent’s determination of the Interest Purchase Price was defective because it did not follow the contractually prescribed valuation procedure. The JV Agreement and Letter Agreement require the price to be determined by mutual agreement of a majority of members or, failing that, by a neutral CPA appointed through a specific bilateral process. MERA’s unilateral retention of a valuation firm contravened that procedure. The Court ordered the parties to follow the agreed-upon valuation mechanism and lifted the status quo order, recognizing MCS as a Terminated Member with the right to participate in the neutral CPA selection process.
Key Takeaways
- A majority member’s contractual right to remove managers “with or without cause” by written consent operates independently of a minority member’s right to designate a manager — the designation right does not immunize the designee from majority removal.
- Specific contractual provisions governing particular acts (such as manager removal) control over general unanimity requirements; applying a unanimous-consent standard to manager removal would render the specific removal provision meaningless under Delaware contract interpretation principles.
- A party that accepts the financial benefits of a contract amendment — here, a membership interest increase — cannot later avoid its burdens by claiming duress or coercion.
- An illegality defense to a contract must be affirmatively pleaded under Court of Chancery Rule 8(c); failure to raise it in the Answer results in waiver.
- Where an LLC agreement prescribes a specific bilateral valuation procedure for buyouts, a majority member’s unilateral deviation from that procedure — even if the buyout trigger itself is valid — renders the price determination defective and subject to court-ordered correction.
Why It Matters
This decision reinforces Delaware’s contract-first approach to LLC governance disputes, confirming that minority members holding designation rights do not thereby gain veto power over the removal of their designees unless the LLC agreement expressly says so. For practitioners drafting LLC agreements involving ACDBE or other regulated program participants, the case illustrates the importance of clearly delineating which actions require supermajority or unanimous consent — ambiguity will be resolved by reading specific provisions to control over general ones, and courts will not stretch unanimity requirements to cover acts the parties chose to govern with a lower threshold.
The decision also serves as a practical reminder that complying with the valid substantive right to trigger a buyout is not enough — parties must also scrupulously follow the contractually prescribed valuation mechanics. MERA’s failure to use the agreed CPA-appointment process, despite successfully establishing every predicate for the repurchase, required the Court to void the price determination and send the parties back to the contractual process. In industries like airport concessions where federal regulatory approval overlays private contractual rights, the ruling further clarifies that obtaining the required regulatory consent (here, RDUA’s “good cause” finding) forecloses after-the-fact illegality arguments — particularly where such defenses are not timely pleaded.