Most business owners think the rules are clear: if there’s a dispute among members in a limited liability company (LLC), the operating agreement and California’s LLC statues control what happens. But a recent case shows that courts can sometimes go off-script.

Consider this scenario: you co-own a small business in an LLC with two partners. They vote you out as manager of the company and bring an action to have the court determine that they acted properly. You counter-sue but do not seek to dissolve the company. You claim your partners breached the operating agreement and their fiduciary duties. The court agrees.

At this point, you might expect the court to award damages to you and that would end the affair. Instead, the judge says (and you are fine with this): “Here’s the deal if you want it — in addition to paying  you damages, they have to buy you out. You’ll be paid the fair value of your ownership, and you’re out of the business.” That’s what happened in Reliant Life Shares v. Cooper (2023) 90 Cal.App.5th 14. The court awarded damages and then ordered a forced buyout based on a valuation of the LLC as an ongoing business.

Normally, California law allows a court to order a buyout under Corporations Code section 17707.03 of the Revised Uniform Limited Liability Company Act (RULLCA) only if someone moves for good cause to dissolve the LLC and there is notice of election by those who did not bring the claim for dissolution. Nobody asked for dissolution in Reliant. The ousted member did not sue for dissolution presumably because he did not want to give his partners the right to buy him out at a discount under RULLCA. But the judge — and later the Court of Appeal — said the statute didn’t tie the judge's hands. Courts sitting “in equity” (meaning they focus on fairness, not just rigid rules) can craft remedies that fit the circumstances.

The Reliant case doesn’t create a shortcut for forcing a buyout whenever you want. What it shows is that courts have flexibility. The Court rejected the argument by the members who wrongfully removed their partner — and who were forced to do the buyout — that no one had specifically sought dissolution or a statutory buyout in the pleadings.

Reliant holds that it is within a court’s equitable powers to order a buyout, even where the parties have not requested one pursuant to the statute. The lesson is that in a serious LLC dispute, the remedy could be something no one explicitly asked for — like a forced buyout.

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