Title: The Dunbar Group LLC v. Tignor
Citation: N/A
Docket Number: 030638
State: Virginia
Issuer: Virginia Supreme Court
Date: March 5, 2004

P
 
RESENT:  All the Justices 
THE DUNBAR GROUP, LLC, ET AL. 
 
v.  Record No. 030638   OPINION BY JUSTICE BARBARA MILANO KEENAN 
 
 
                          March 5, 2004 
ARCHIE F. TIGNOR, ET AL. 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Theodore J. Markow, Judge 
 
 
In this appeal from a judgment ordering the dissolution of 
a limited liability company, the dispositive issue is whether 
the evidence was sufficient to support the chancellor's 
judgment. 
 
XpertCTI, LLC (Xpert), is a limited liability company that 
provides "computer telephony integration" (CTI) software to 
dealers and manufacturers for installation in certain telephone 
systems and equipment.  CTI software enables the use of 
computers to "interface" with and control telephone systems. 
 
Xpert was formed in March 2000, by The Dunbar Group, LLC 
(Dunbar), and Archie F. Tignor, who each owned a membership 
interest of 50 percent in Xpert.  Edward D. Robertson, Jr., a 
computer software developer and consultant, was the sole member 
and manager of Dunbar. 
 
Tignor, a commercial telephone and telecommunications 
equipment dealer and installer, owned 50 percent of the stock of 
X-tel, Inc. (X-tel), a telecommunications sales firm.  Tignor 
served as the president of X-tel, which was a dealer in 
equipment for Samsung Telecommunications America, Inc. 
(Samsung), a manufacturer, distributor, and seller of 
telecommunications equipment. 
 
Dunbar and Tignor executed an "Operating Agreement" for 
Xpert under which they were the sole managers of Xpert.  Dunbar 
created Xpert's proprietary software, or "source code," and 
conducted the daily operations of the company.  Tignor's main 
function was to provide Xpert with access to his business 
contacts in the telecommunications industry, including Samsung. 
 
Xpert's operating agreement provided a procedure for a 
company member to assert a breach of the agreement by another 
company member.  The agreement specified that if the breach was 
not timely cured by the defaulting member, the complaining 
member had the "right to petition a court of competent 
jurisdiction for dissolution of the Company."  The agreement 
also stated that the "dissolution of a [m]ember or occurrence of 
any other event that terminates the continued membership of a 
[m]ember in the Company shall not cause the dissolution of the 
Company." 
 
In December 2000, Xpert entered into a contract with 
Samsung to supply Samsung with software-driven security devices 
called "dongles," which were to be included in all 
telecommunications systems sold by Samsung.  Xpert received 
about $20,000 per month from the Samsung contract.  The Samsung 
 
2
contract contained a provision specifying the contract's 
duration: 
This Agreement shall come into force and effect on the 
date written above [December 5, 2000] and shall remain 
in full force and effect for consecutive periods of 
thirty-six (36) months thereafter . . . .  After this 
time the contract will continue on an annual basis 
unless terminated by either party giving 90 days 
notice before the anniversary of the contract date. 
 
 
Certain disputes arose between Robertson and Tignor over 
matters primarily related to the management and disbursement of 
Xpert's assets.  In May 2002, Dunbar's counsel sent a letter to 
Tignor's counsel stating that it was apparent to Robertson that 
"his continued working relationship with Mr. Tignor [was] no 
longer possible."  Dunbar's counsel further stated that "Mr. 
Robertson is of the opinion that it is in the parties' best 
interest to sever their ties as fully and quickly as possible." 
 
In September 2002, Dunbar, Xpert, and Robertson, in his 
capacity as a manager of Xpert, (collectively, Dunbar) filed an 
amended bill of complaint against Tignor and X-tel requesting, 
among other things, entry of an order "expelling and 
dissociating Tignor as a member of Xpert pursuant to Virginia 
Code § 13.1-1040.1(5)."  Dunbar alleged that Tignor engaged in 
"numerous acts of misconduct as a member and manager of Xpert," 
including the commingling of Xpert's funds with the funds of 
Tignor and "his corporate alter ego, X-tel." 
 
3
 
Code § 13.1-1040.1, which provides for a court-ordered 
expulsion of a member of a limited liability company, states in 
relevant part: 
[A] member is dissociated from a limited liability 
company upon the occurrence of any of the following 
events: 
. . . . 
 
5.  On application by the limited liability company or 
another member, the member's expulsion by judicial 
determination because: 
 
a.  The member engaged in wrongful conduct that 
adversely and materially affected the business of the 
limited liability company; 
 
b.  The member willfully or persistently committed a 
material breach of the articles of organization or an 
operating agreement; or 
 
c.  The member engaged in conduct relating to the 
business of the limited liability company which makes 
it not reasonably practicable to carry on the business 
with the member. 
 
 
Tignor filed a separate "Application for Judicial 
Dissolution" against Dunbar and Xpert.  Tignor requested, among 
other things, the dissolution of Xpert under Code § 13.1-1047 on 
the ground that "it is not reasonably practicable to carry on 
the business of [Xpert] in conformity with the Articles of 
Organization and [the] Operating Agreement."  Tignor alleged 
that "serious differences of opinion as to company management 
have arisen between the members and managers" of Xpert, and that 
the company was "deadlocked" in its ability to conduct its 
business affairs, including contracting with customers for goods 
 
4
and services and the "receipt and disbursement of [Xpert's] 
assets and company funds." 
 
The chancellor consolidated for trial Dunbar's amended bill 
of complaint and Tignor's application for judicial dissolution.  
At a hearing, the chancellor received evidence relating to both 
pleadings. 
 
The evidence showed that Tignor commingled Xpert's funds 
with X-tel's funds by placing several checks, which were made 
payable to Xpert, into X-tel's bank account.  Tignor provided 
inaccurate information to Robertson concerning one of those 
checks, which was made payable to Xpert in the amount of about 
$47,000.  Tignor used the proceeds from that check to pay some 
of X-tel's expenses and to meet X-tel's payroll, including the 
payment of Tignor's own salary. 
 
Without informing Robertson, Tignor also authorized a 
change in the status of Xpert's checking account that prevented 
checks from being written on the account.  When Robertson, who 
was unaware of the change, wrote a check payable to one of 
Xpert's vendors, the check "bounced." 
 
Although Dunbar had been renting office space from X-tel, 
Tignor evicted Robertson from X-tel's premises.  Tignor also 
restricted Robertson's access to various testing equipment 
located in X-tel's offices, reducing Robertson's ability to test 
Xpert's products.  Robertson needed access to this equipment to 
 
5
ensure the quality of Xpert's products before they were 
delivered to Xpert's customers.  Due to Robertson's restricted 
ability to test Xpert's products, Xpert's customers did not 
receive their orders in a timely manner and products were sent 
to customers "in less than quality condition." 
 
Tignor also terminated Robertson's e-mail account with 
Xpert without giving him prior notice.  This sudden termination 
of Robertson's e-mail account created "a lot of confusion" among 
Xpert's customers, giving the appearance that Xpert had "gone 
out of business." 
 
In December 2002, the chancellor entered an order in which 
he found that Tignor commingled Xpert's funds with his own funds 
and the funds of X-tel.  The chancellor also concluded that 
Tignor's actions had been contrary to Xpert's best interests and 
had "adversely affected Xpert's ability to carry on its 
business."  The chancellor further determined that Tignor had 
acted "in violation of" subparagraph five of Code § 13.1-1040.1. 
 
The chancellor ordered that Tignor be "immediately expelled 
as an active member of Xpert" and that Robertson "shall continue 
to operate Xpert" and provide to Tignor a monthly accounting of 
Xpert's finances.  The chancellor also ordered: 
Xpert . . . shall continue the arrangement pursuant to 
this order until its contract with [Samsung] expires 
or otherwise terminates, including any extensions.  
Following the fulfillment or non-renewal of the 
[Samsung] contract, the court orders that Xpert . . . 
 
6
be dissolved and its assets distributed pursuant to 
the Virginia Code and the operating agreement of 
Xpert. 
 
Dunbar appeals. 
 
Dunbar does not challenge that part of the chancellor's 
order expelling Tignor as a member of Xpert, but attacks only 
the portion of the order providing for the dissolution of Xpert.  
Dunbar argues that the evidence is insufficient to support the 
dissolution of Xpert because the evidence did not satisfy the 
standard required by Code § 13.1-1047 for the judicial 
dissolution of a limited liability company.  In support of this 
argument, Dunbar primarily asserts that the record fails to show 
that after the expulsion of Tignor as a member of Xpert, it 
would not be reasonably practicable to carry on Xpert's 
business.* 
 
In resolving Dunbar's claim, we first observe that an 
established standard of review governs our inquiry.  Because the 
chancellor heard the evidence ore tenus, his decree is entitled 
to the same weight as a jury verdict.  Shooting Point, L.L.C. v. 
Wescoat, 265 Va. 256, 264, 576 S.E.2d 497, 501 (2003); 
Chesterfield Meadows Shopping Ctr. Assocs., L.P. v. Smith, 264 
Va. 350, 355, 568 S.E.2d 676, 679 (2002).  Therefore, on appeal, 
we will not set aside the chancellor's findings unless they are 
plainly wrong or without evidence to support them.  Shooting 
 
7
Point, L.L.C., 265 Va. at 264, 576 S.E.2d at 501; Tauber v. 
Commonwealth, 263 Va. 520, 526, 562 S.E.2d 118, 120 (2002). 
 
The chancellor resolved the dissolution issue in Tignor's 
favor.  Thus, we consider the evidence relating to the 
dissolution determination in the light most favorable to Tignor.  
See Barner v. Chappell, 266 Va. 277, 283, 585 S.E.2d 590, 594 
(2003); Jenkins v. Bay House Assocs., L.P., 266 Va. 39, 41, 581 
S.E.2d 510, 511 (2003). 
 
This appeal presents our first opportunity to consider the 
statutory standard provided in Code § 13.1-1047 for the judicial 
dissolution of a limited liability company.  The statute states 
that  
[o]n application by or for a member, the circuit court 
of the locality in which the registered office of the 
limited liability company is located may decree 
dissolution of a limited liability company if it is 
not reasonably practicable to carry on the business in 
conformity with the articles of organization and any 
operating agreement. 
 
Id. 
 
Because this statutory language is plain and unambiguous, 
we apply the plain meaning of that language.  See Woods v. 
Mendez, 265 Va. 68, 74-75, 574 S.E.2d 263, 266 (2003); 
Industrial Dev. Auth. v. Board of Supervisors, 263 Va. 349, 353, 
559 S.E.2d 621, 623 (2002).  The statutory standard set by the 
General Assembly for dissolution of a limited liability company 
                                                                  
 
* Tignor did not file a brief in this appeal. 
 
8
is a strict one, reflecting legislative deference to the 
parties' contractual agreement to form and operate a limited 
liability company.  Only when a circuit court concludes that 
present circumstances show that it is not reasonably practicable 
to carry on the company's business in accord with its articles 
of organization and any operating agreement, may the court order 
a dissolution of the company. 
 
The record here, however, does not show that the chancellor 
evaluated the evidence in light of the fact that Tignor was 
being expelled as a member and manager of Xpert.  Although 
Tignor's actions in those capacities had created numerous 
problems in the operation of Xpert, his expulsion as a member 
changed his role from one of an active participant in the 
management of Xpert to the more passive role of an investor in 
the company.  The record fails to show that after this change in 
the daily management of Xpert, it would not be reasonably 
practicable for Xpert to carry on its business pursuant to its 
operating authority. 
 
Moreover, we observe that the terms of the chancellor's 
dissolution order refute a conclusion that dissolution was 
appropriate under the statutory standard of Code § 13.1-1047.  
While the chancellor concluded that judicial dissolution of 
Xpert was warranted, he nevertheless ordered that Xpert continue 
operating as a limited liability company for as long as the 
 
9
 
10
Samsung contract remained in effect.  This provision in the 
chancellor's order indicates that he concluded that Tignor's 
expulsion from Xpert would make it reasonably practicable for 
Xpert to continue to operate for an extended period of time. 
 
Accordingly, we hold that the evidence does not support 
that part of the chancellor's order providing for the 
dissolution of Xpert.  Further, because the evidence is 
insufficient to support such a judicial dissolution, we do not 
reach Dunbar's additional argument that the chancellor erred 
under Code § 13.1-1047 in ordering that Xpert be dissolved at an 
uncertain, future date. 
 
For these reasons, we will affirm that part of the 
chancellor's judgment expelling Tignor as a member of Xpert, 
reverse that part of the judgment ordering the dissolution of 
Xpert, and enter final judgment. 
Affirmed in part, 
reversed in part, 
and final judgment.