Dismissal Of Dissolution Cause Of Action Negated Buyout Rights Of Both Corporations And Limited Liability Companies.

Two men each hold a 50 percent interest in numerous corporations and limited liability companies. One of the men, the plaintiff, sued the other, the defendant, for various causes of action alleging misconduct and breach of fiduciary duty. The involuntary dissolution claim seeks the appointment of a receiver to take possession of all of the companies’ assets and an order requiring they be sold to a third party. Defendant filed a motion to stay dissolution and appoint appraisers so he could buy out plaintiff’s interest in the companies. Defendant’s motion vis-à-vis the corporations was brought pursuant to Corporations Code section 2000 and with regard to the limited liability companies the motion was brought under Corporations Code section 17707.03, subdivision (c). A few weeks later, plaintiff dismissed his involuntary dissolution cause of action with prejudice. Figuring that once plaintiff dismissed the cause of action for dissolution, there was no dissolution to avoid, the trial court denied defendant’s motion. The appellate court noted that Code of Civil Procedure section 581, subdivision (c), generally grants a plaintiff an unfettered right to dismiss a cause of action before commencement of trial. Agreeing with the trial court, the Court of Appeal affirmed, stating the dismissal of the involuntary dissolution cause of action prevented defendants from invoking their buyout rights. (Kennedy v. Kennedy (Cal. App. Second Dist., Div. 5; April 20, 2015) 235 Cal.App.4th 1474, [186 Cal.Rptr.3d 198].)