The most Franco cryptically offered is that he no longer consents to Houghton’s continued service as tiebreaker “for reasons unrelated to this action.” His complaint essentially alleged: Neither in his complaint nor in the motion papers that followed did he identify the underlying dispute with Bombard, or refer to any specific matter to be voted upon by the directors, or allege any specific reason or disqualifying conduct by Houghton warranting his removal. The Lawsuitįranco brought suit in Delaware Chancery Court against Avalon and the tiebreaker, Houghton.

Any vacancy in a Board seat may be filled only by the vote or action of the director entitled to designate and elect such seat. The fifth (5th) director shall be mutually agreed upon and appointed by Bombard and Franco, who shall initially be Doug Houghton. Franco shall be entitled to designate and elect one additional Board member, who shall initially be Richard J. Bombard shall be entitled to designate and elect one additional Board member, who shall initially be Timothy A. Two of the directors shall be Greg Bombard (“Bombard”) and Harley V. Subject to the provisions of the Act and any limitations in the Certificate of Formation and this Agreement as to the action required to be authorized or approved by the Member, the business and affairs of the Company shall be managed and all of its powers shall be exercised by or under the direction of the board of directors of the Company (the “Board”). Section 3.1 of Avalon’s operating agreement vests its management in a five-member board of directors: two aligned with Franco, two aligned with Bombard, and one tiebreaker director: Franco and Bombard equally control the parent company as the two sole members of its board of directors. It has a single member, GH Channel Holding LLC, which is owned and controlled 50/50 by one faction led by Harley Franco and the other by Greg Bombard. as the defendants argued, referred only to the one-time, past event of designating and appointing the tiebreaker director without any reference to future or ongoing agreement regarding the continued service of the tiebreaker and therefore did not authorize unilateral removal.Īvalon Freight Services LLC (“Avalon”) is a maritime freight transportation services provider that primarily operates in California.as the plaintiff agued, required the continually renewed, mutual agreement of the two factions to his appointment such that either faction could at any time withdraw its agreement and unilaterally demand removal, or.The novel issue presented to the court was whether the terms of the governing provision, which did not address removal of any directors, 2020-0608-MTZ, in which the plaintiff, representing a 50% ownership faction of a Delaware LLC, sought a declaration that he had the right unilaterally to remove the mutually agreed tiebreaker director designated in the LLC agreement. The latter scenario generally describes what happened in Franco v Avalon Freight Services LLC, C.A. Or, if prior to putting a decision in the tiebreaker’s hands, faction #1 perceives that the tiebreaker has developed a bias favoring faction #2, faction #1 may seek to remove or otherwise disenfranchise the tiebreaker. If the deadlock concerns a heated, major issue, the tiebreaker’s vote favoring one of the two factions is likely to alienate and sow mistrust or worse in the other. It also could be ascribed albeit less comedically to tiebreakers assigned the often thankless task of resolving deadlock between 50/50 owners or managers of closely held business entities. “I don’t get no respect” was a famous Rodney Dangerfield comedy routine.

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