The recent Chancery decision in Pearl City Elevator, Inc. v. Gieseke, C.A. No. 2020-0419-JRS (Del. Ch. March 23, 2021), addressed the issue of whether the procedures in an LLC Agreement were correctly followed, such that a party acquired sufficient ownership interest in order to control the board.
This decision is useful for its recitation of basic contract interpretation principles in connection with interpreting disputed provisions of an LLC Agreement. See Slip op. at 24-26.
Also noteworthy is the court’s explanation of the “mend the hold” doctrine, which applies to the change of a parties’ position during litigation on breach of contract claims which are inconsistent with positions taken prior to suit being filed. This can be compared to what is sometimes referred to as bad faith.
In sum, this decision is recommended for those interested in a careful analysis of how disputed provisions in an LLC Agreement should be addressed.