Background
Scheer Farms, LLC is a Kansas manager-managed limited liability company organized in 2013 to hold and manage agricultural land. Three brothers — Kendall, Brick, and Tibb Scheer — are its members. Brick and Tibb each hold a 10 percent membership interest and serve as co-managers. Kendall accumulated a 30 percent interest by purchasing the stakes of two other minority members. The LLC’s operating agreement vests day-to-day management in the co-managers but requires a majority-in-interest vote before any sale, transfer, or disposition of LLC assets.
The co-managers negotiated two sales of the LLC’s farm real estate to outside buyers. They convened a properly noticed member meeting at which all interest holders attended and voted. The sales passed with a 60 percent majority. Kendall was present, voted against both transactions, and was outvoted. He sued, arguing that the co-managers relied on outdated appraisals, that the deals were not at arm’s length, and that the sales would cause a $147,000 loss that would unfairly diminish his minority interest. He sought a temporary restraining order to block the closings, alleging irreparable harm and breach of fiduciary duty under K.S.A. 17-76,134(e). The Sedgwick County District Court denied that request and later granted summary judgment in favor of Scheer Farms, LLC, finding the sales shielded by the business judgment rule.
Kendall appealed pro se, reasserting his fiduciary-duty and good-faith-and-fair-dealing claims and raising procedural due process challenges.
The Court’s Holding
The Court of Appeals affirmed. Writing for the panel, Judge Hill applied the business judgment rule — a Kansas rebuttable presumption that, “in making business decisions not involving direct self-interest or self-dealing, corporate directors act on an informed basis, in good faith, and in the honest belief that their actions are in the corporation’s best interest,” Becker v. Knoll, 291 Kan. 204, 208-09 (2010). The rule “shield[s] internal business decisions from second-guessing by the courts,” and the challenging party bears the threshold burden of demonstrating “self-dealing or other disabling factor” before the presumption can be overcome.
The court identified four independent reasons why Kendall failed to carry that burden. First, the co-managers followed the operating agreement by obtaining a 60 percent majority vote at a duly held member meeting. Second, Brick and Tibb each held only a 10 percent interest and would receive sale proceeds on the same pro rata basis as Kendall — “no one director stood to benefit in any manner different from the other members.” Third, Kendall offered no admissible evidence that the sales were not at arm’s length; “[w]ords alone do not rebut the business judgment rule.” Fourth, the right-of-first-refusal provision in the operating agreement applied only to member-to-member interest transfers, not to LLC asset sales.
Judge Pickering wrote separately to address an increasingly common issue: Kendall’s brief contained “several fake case citations.” The concurrence cited United States v. Hayes, 763 F. Supp. 3d 1054 (E.D. Cal. 2025), for the characteristics of AI-“hallucinated” citations. The concurrence held that self-represented status is no shield — K.S.A. 60-211(b)(2) requires any person presenting a court paper to certify that legal contentions are “warranted by existing law.” Citing nonexistent cases “degrades or impugns the integrity of the Court” and constitutes an “abuse of the adversary system” equivalent to failing to brief an issue, meaning those arguments are waived or abandoned.
Key Takeaways
- In a Kansas manager-managed LLC, a minority member who votes against an asset sale at a properly conducted member meeting and loses cannot use the courts as a second veto. The business judgment rule will protect that decision unless the challenger produces admissible evidence of self-dealing.
- Pro rata participation in sale proceeds is powerful evidence against a self-dealing claim: when co-managers share the same economic upside and downside as all other members, there is no personal financial benefit “in the sense of self-dealing” that would trigger heightened scrutiny.
- Right-of-first-refusal clauses in LLC operating agreements should be drafted with explicit scope language; this one was construed narrowly to apply only to membership-interest transfers, not to the LLC’s own disposition of assets.
- Both represented and self-represented litigants in Kansas courts must verify every case citation. The Pickering concurrence signals that panels will treat arguments supported by fabricated authority as waived, with no safe harbor for pro se parties using AI tools.
Why It Matters
For Kansas business lawyers, Scheer is a clean restatement of how the business judgment rule operates in the LLC context. The opinion applies corporate-governance doctrine from Becker v. Knoll directly to a manager-managed LLC — confirming that the same presumption protecting corporate directors also protects LLC co-managers who follow their operating agreement and obtain the required member vote. Counsel advising agricultural or family-business LLCs should note that compliance with voting procedures is both necessary and, where no self-dealing exists, sufficient to win summary judgment against a dissenting minority. Drafters of operating agreements should also revisit right-of-first-refusal provisions to state clearly whether they cover asset dispositions or only membership-interest transfers.
The Pickering concurrence will resonate beyond Kansas. Courts across the country are grappling with how to sanction litigants who submit briefs containing AI-hallucinated citations. The concurrence’s framework is pragmatic: treat the affected arguments as unbriefed and therefore waived, with no separate sanctions motion required. For any practitioner or client considering using generative AI as a research shortcut, this opinion is a pointed reminder that Kansas’s certification rule under K.S.A. 60-211 applies with full force regardless of how the brief was assembled.