Judicial Dissolution of a Delaware Limited Liability Company

In Decco U.S. Post-Harvest, Inc., v. Mirtech, Inc., C.A. No.2018-0100-JTL (Del. Ch. Nov. 28, 2018), the Court of Chancery was again called on to determine if judicial dissolution of an LLC with two deadlocked managers was appropriate.

The Court held a one-day trial with only two live witnesses and eleven exhibits that resulted in a “mercifully sparse” record.  Vice Chancellor Laster ruled that Essentiv LLC no longer was a viable business because the patented technology upon which its business purpose relied, and which was contributed through a licensing agreement by one of the 50% members, was not within the member’s ability to license because it had already entered into an agreement with a third-party whereby the third-party retained all rights to the patented technology.

In 2010, MirTech and a company called AgroFresh entered into an agreement that called for joint ownership of“any and all inventions conceived or reduced to practice jointly by the Parties.” The parties’ main goal was to commercialize products based on a gas used to delay the ripening of fruit and other produce – 1-MCP.  A year later the parties entered into a new commercial agreement and consulting agreement that granted AgroFresh sole ownership over the parties’ joint inventions.

Essentiv LLC was formed in 2016 as a joint venture by Decco and MirTech to commercialize products based on 1-MCP. MirTech represented that it owned the patented rights in certain inventions using 1-MCP and granted Essentiv a license to use the patented rights.  MirTech did inform Decco that it had partnered with AgroFresh to produce RipeLock, a modified atmosphere package that used 1-MCP but, Decco did not ask to see any of MirTech’s agreements with AgroFresh.

Soon after Essentiv went to market with its first 1-MCP product, AgroFresh filed an infringement suit based on its status as owner of the patented RipeLock technology Essentiv used for its product TruPick. In 2017, the court ruled in favor of AgroFresh in the infringement suit and Essentiv agreed to stop all activity related to TruPick. In a subsequent Consent Judgment, MirTech agreed to entry of judgment against it on 20 different counts of wrongdoing, including willful infringement, fraud,and misappropriation of trade secrets.

Decco filed this suit to dissolve Essentiv after MirTech refused to voluntarily dissolve the LLC based on the company’s loss of its sole technology. The court found that the Consent Judgment “prevents the Company from continuing to sell TruPick”; that the company “has no plans to develop any other products”; and that “there is no viable 1-MCP Business” and “no viable Non-1-MCP Business.”  Therefore, the court held, “it is not reasonably practicable for the Company to carry on its business” and that dissolution is required under Delaware LLC Act § 18-802.

Read the full opinion here.

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