An LLC member in the District of Columbia has something a corporate shareholder does not: an express statutory right to sue directly. D.C. Code § 29–808.01 lets a member maintain a direct action against another member, a manager, or the company itself. Combined with the statutory right to inspect company records (§ 29–804.10) and the duties in § 29–804.09, that makes the LLC route materially faster than the derivative path a shareholder must take.
Can a member sue directly?
A D.C. LLC member may sue directly in the Superior Court to enforce the member\u{2019}s own rights, provided the member pleads and proves an injury that is not solely an injury to the company.
(a) Subject to subsection (b) of this section, a member may maintain a direct action in the Superior Court against another member, a manager, or the limited liability company to enforce the member\u{2019}s rights and otherwise protect the member\u{2019}s interests, including rights and interests under the operating agreement or this chapter or arising independently of the membership relationship.
(b) A member maintaining a direct action under this section shall plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company.
D.C. Code § 29–808.01 — Direct action by member
Compare the corporate position, where a shareholder must satisfy standing requirements before a derivative proceeding — see shareholder disputes.
What records is a member entitled to?
This is usually the first move, and it is statutory rather than discretionary.
(a) In a member-managed limited liability company, the following rules shall apply: (1) On reasonable notice, a member may inspect and copy during regular business hours, at a reasonable location specified by the company, any record maintained by the company regarding the company’s activities and affairs, financial condition, and other circumstances, to the extent the information is material to the member’s rights and duties under the operating agreement or this chapter.
D.C. Code § 29–804.10 — Right to information
What duties do members and managers owe?
A member-managed LLC imposes a statutory duty of loyalty on its members, requiring them to account for company property and opportunities, avoid adverse dealing, and refrain from competing with the company.
(b) The duty of loyalty of a member in a member-managed limited liability company shall include the duties to: (1) Account to the company and to hold as trustee for it any property, profit, or benefit derived by the member: (A) In the conduct or winding up of the company’s activities and affairs; (B) From a use by the member of the company’s property; or (C) From the appropriation of a limited liability company opportunity; (2) Refrain from dealing with the company in the conduct or winding up of the company’s activities and affairs as or on behalf of a person having an interest adverse to the company; and (3) Refrain from competing with the company in the conduct of the company’s activities and affairs before the dissolution of the company.
D.C. Code § 29–804.09(b) — Standards of conduct
Where a member has actually taken money or diverted an opportunity, see partner diverting company funds.
Leaving, and being made to leave
A member may dissociate from a D.C. LLC at any time, but dissociation is wrongful where it breaches an express provision of the operating agreement or occurs before winding up is complete.
(a) A person may dissociate as a member at any time, rightfully or wrongfully, by withdrawing as a member by express will under § 29-806.02(1) . (b) A person’s dissociation from a limited liability company shall be wrongful only if the dissociation: (1) Is in breach of an express provision of the operating agreement; or (2) Occurs before the completion of the winding up of the company and: (A) The person withdraws as a member by express will; (B) The person is expelled as a member by judicial order under § 29-80.602(5) [ § 29-806.02(5) ]; (C) The person is dissociated under § 29-806.02(7)(A) by becoming a debtor in bankruptcy; or (D) In the case of a person that is not a trust (other than a…
D.C. Code § 29–806.01 — Member’s power to dissociate; wrongful dissociation
Note the statute contemplates dissociation that is wrongful as well as rightful — the power to leave is not the same as the right to leave without consequence.
(a) A limited liability company is dissolved, and its activities and affairs shall be wound up, upon the occurrence of any of the following: (1) An event or circumstance that the operating agreement states causes dissolution;…
D.C. Code § 29–807.01 — Events causing dissolution
⭐ The list begins with whatever the operating agreement says causes dissolution. Read the agreement before the statute.
Which D.C. LLC provisions decide a member dispute?
A D.C. LLC dispute usually turns on information rights first — what the member is entitled to see — and only then on duties, exit and dissolution. The records right in § 29–804.10 is the one that matters immediately, because it is exercisable before any suit.
| The question | D.C. Code provision | Official heading |
|---|---|---|
| What am I entitled to see? | § 29–804.10 | “Right of members, managers, and dissociated members to information” |
| What duties are owed? | § 29–804.09 | “Standards of conduct for members and managers” |
| Can I sue directly? | § 29–808.01 | “Direct action by member” |
| How does a member leave? | § 29–806.01 | “Member’s power to dissociate; wrongful dissociation” |
| What triggers dissociation? | § 29–806.02 | “Events causing dissociation” |
| What dissolves the company? | § 29–807.01 | “Events causing dissolution” |
| What happens after? | § 29–807.02 | “Winding up” |
Frequently asked questions
Do I have to bring a derivative claim?
Not necessarily. D.C. Code § 29–808.01 gives an LLC member an express right to maintain a direct action, subject to subsection (b). That is a real structural advantage over the corporate derivative route.
Can the company refuse to show me the books?
§ 29–804.10 gives a member the right, on reasonable notice, to inspect and copy records material to the member’s rights and duties. Refusal is itself a problem the court can address.
Can I just resign from the LLC?
§ 29–806.01 lets a person dissociate at any time, rightfully or wrongfully — the statute expressly contemplates wrongful dissociation, which can carry consequences.
Does the operating agreement override these rules?
In part. § 29–807.01 starts with the operating agreement, and § 29–804.09 is expressed subject to other provisions. The agreement is the first document to read.
Who can investigate a derivative claim on the company’s behalf?
A special litigation committee. Under D.C. Code § 29–808.05 an LLC named in a derivative proceeding may appoint one to investigate the claims and decide whether pursuing them is in the company’s best interests, and on the committee’s motion the Superior Court shall, except for good cause shown, stay discovery while it investigates.
Why does the direct-versus-derivative distinction matter so much?
Because it decides who owns the claim and therefore who controls it. A direct action under § 29–808.01 requires an injury that is not solely the company’s; anything else belongs to the company and runs the derivative route, where a special litigation committee can be interposed.
When is leaving an LLC treated as wrongful?
Under D.C. Code § 29–806.01 a person may dissociate at any time, rightfully or wrongfully. It is wrongful only where the dissociation breaches an express provision of the operating agreement, or occurs before the winding up of the company is complete in the circumstances that section lists.
Where is an LLC member dispute litigated?
In the Superior Court of the District of Columbia. Section 29–808.01 names that court for a direct action, and D.C. Code § 11–921 gives it jurisdiction over civil matters brought in the District.
How does a member actually get the company’s records?
By statutory demand rather than negotiation. D.C. Code § 29–804.10(a)(1) lets a member of a member-managed company, on reasonable notice, inspect and copy during regular business hours any record regarding the company’s activities, affairs and financial condition, to the extent material to the member’s rights and duties.
Who pays when the company investigates a member’s claim?
The company funds the special litigation committee it appoints under § 29–808.05. Whether a member recovers the cost of a successful derivative claim depends on the operating agreement and the statutory framework, not on any general fee-shifting rule.
Sources and legal authorities
- D.C. Code § 29–808.01 — Direct action by member
- D.C. Code § 29–804.09 — Standards of conduct for members and managers
- D.C. Code § 29–804.10 — Right to information
- D.C. Code § 29–806.01 — Member’s power to dissociate
- D.C. Code § 29–806.02 — Events causing dissociation
- D.C. Code § 29–807.01 — Events causing dissolution
- D.C. Code § 29–807.02 — Winding up
General information about D.C. law, not legal advice. Which rule applies depends on the entity, the agreement and the facts.
Related: Business Ownership & Partner Disputes · Shareholder Disputes · Breach of Fiduciary Duty · Business Dissolution · Business Litigation. Call (301) 901-3109 or use the contact page.