A published California appellate decision confirms that an LLC operating agreement cannot strip members of their statutory right to ask a court for judicial dissolution when the circumstances specified by law are present. For California LLCs, that means some member protections remain in place even if the operating agreement tries to say otherwise.

Judicial dissolution is a protected statutory remedy operating agreements cannot waive everything California LLC members retain court access

Why this matters

If an LLC relationship breaks down because of deadlock, abandonment, abuse of authority, or similar serious problems, members may still be able to ask the court for dissolution even if the operating agreement says dissolution can happen only in limited situations.

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What the Court Decided

In Meads v. Driggers, the California Court of Appeal held that an LLC operating agreement could not validly waive a member’s right to seek judicial dissolution under the governing California LLC statute.

Main takeaway

The court concluded that the waiver language in the operating agreement was contrary to law and therefore void and unenforceable.

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What Happened in the Case

The dispute arose after long-time business owners partnered with a new member to expand their business through an LLC.

• The LLC was formed in 2011
• The operating agreement named one member as manager
• The agreement attempted to make only a few events trigger dissolution
• The agreement also said members would not take other action to dissolve the LLC

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How the Dispute Reached Court

Years later, the member-owners sued, alleging money had been improperly diverted from the business. Their complaint included a cause of action for judicial dissolution.

The opposing party then filed a cross-complaint, claiming the members breached the operating agreement by filing for judicial dissolution despite the waiver language.

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Why the Waiver Failed

The Court of Appeal looked at the older California LLC law that governed the agreement and found that the statute did not expressly allow an operating agreement to vary or eliminate the statutory grounds for judicial dissolution.

• The statute allowed members to govern many internal matters by agreement
• But it only allowed variation of certain rights when the law expressly said so
• The judicial dissolution section did not expressly authorize waiver of that remedy
• Because of that, the attempted waiver was unenforceable

Bottom line

The court held that members cannot contract away the right to ask the court for judicial dissolution in the circumstances identified by statute.

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When Judicial Dissolution May Be Available

Under current California law, a court may decree dissolution of an LLC in several serious situations.

• It is not reasonably practicable to carry on the business in conformity with the articles or operating agreement
• Dissolution is reasonably necessary to protect the rights or interests of the complaining members
• The business has been abandoned
• Management is deadlocked or subject to internal dissension
• Those in control have engaged in persistent fraud, mismanagement, or abuse of authority

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Why the Same Result Should Apply Today

California’s current LLC statute is even clearer than the former law. Corporations Code section 17701.10 states that an operating agreement may not vary the power of a court to decree dissolution in the circumstances specified by section 17707.03.

That means California LLCs should not assume a broad dissolution waiver in an operating agreement will be enforceable.

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What This Means for LLC Members and Managers

This decision is an important reminder that operating agreements are powerful, but not unlimited. California law protects certain core member rights, and judicial dissolution is one of them.

Important practical lesson

If an operating agreement tries to eliminate a statutory right that California law preserves, the provision may not hold up in court. LLC owners should review dissolution, deadlock, and dispute-resolution language carefully instead of assuming every waiver is valid.

_{Disclaimer: This article is for educational purposes only and does not constitute legal, tax, or financial advice. For advice specific to your situation, consult a qualified professional.}

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