Think a Business Dispute Automatically Means Deadlock? Not Necessarily.

One of two sibling co-managers asked Delaware's Court of Chancery to shut down their company, claiming the managers were hopelessly deadlocked.

The court let him bring the suit—then dismissed it.

For anyone who co-owns a business, the reasons are worth knowing.

The setup: in 2015, a brother and sister launched a venture firm to run life-sciences funds, operating through a manager-managed Delaware LLC. Both siblings were named managers. The brother, a lawyer, drafted the operating agreement.

Years later, the relationship broke down, and the brother petitioned to dissolve the LLC under Section 18-802 of the Delaware Limited Liability Company Act—the provision that lets a court wind up a company when it is "not reasonably practicable" to carry on the business. The classic deadlock remedy.

Two things sank the argument.

First, the way the operating agreement was actually drafted. Unlike most LLCs, major decisions did not require both managers to agree. Instead, they required approval from members holding a majority of the ownership. The LLC had three members, each with a minority ownership stake, meaning any two of them could approve a significant action. A two-manager stalemate could not freeze anything.

Second, an earlier fight. Before Delaware, the siblings arbitrated this dispute, and a New York court confirmed the award as a judgment. The arbitrator had found that the brother "never assumed any responsibilities beyond his general counsel role" and had no unilateral authority to make management decisions without majority approval.

That mattered. The Delaware court did not get to reinterpret who ran the company. Under issue preclusion, the arbitrator's findings bound it. On those findings, the sister effectively held sole management authority — so there were never two co-equal managers to deadlock in the first place.

Motion to dismiss granted. Not reasonably conceivable that a deadlock existed.

What I would take from it:

→ Being named a manager is not the same as holding management power. Courts read what the agreement assigns and what you actually did, not the title on the page.

→ Deadlock is a structural test, not a feeling. Here, if any two of the three members approved, the business could act; it was that simple.

→ Old rulings travel. Findings from an arbitration—even in another state—can bind a later court and dismantle the story you want to tell.

If you are signing a Delaware operating agreement, settle now, in writing, who holds management power and how decisions get made once people stop getting along.

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