Second Department Clarifies: LLC Law § 414 Does Not Permit Majority Removal of Member-Managers in Member-Managed LLCs Absent Express Contractual Authority

Case: Lengyel-Fushimi v. Bellis, 2025 NY Slip Op 05229 (App Div, 2d Dept Oct. 1, 2025)

Introduction

Lengyel-Fushimi v. Bellis arises from a governance showdown among three co-founders of Kings County Brewers Collective, LLC (KCBC), a Brooklyn brewery organized under New York’s Limited Liability Company Law (LLC Law). In 2014, the founders—plaintiff Peter Lengyel‑Fushimi and defendants Anthony Bellis and Zachary Kinney—executed an operating agreement that designated them as equal “Class A Members.” The agreement provided that KCBC “shall be managed by the Class A Members,” who also held “sole voting rights on [KCBC’s] day to day operations.” In 2021, Bellis and Kinney purported, by majority vote, to terminate the plaintiff as an employee and “Class ‘A’ Managing Member,” and to recategorize his equity into a new, non-existent “Class D.”

The plaintiff commenced an action for declaratory and injunctive relief. The Supreme Court (Kings County) initially granted a preliminary injunction restraining defendants from removing him as a Class A member and, in effect, as a manager. On reargument, the court adhered to the injunction preserving his Class A membership but vacated the injunction preventing his removal as a manager. The plaintiff appealed. The Second Department reversed, restoring the preliminary injunction that restrained removal of the plaintiff’s management rights.

The central legal issue is whether, in a member-managed LLC whose operating agreement lacks an express expulsion or removal mechanism, a majority of member-managers can use LLC Law § 414—the statute addressing removal of “managers”—as a default mechanism to remove a co-founder’s management authority. The Second Department held they cannot.

Summary of the Opinion

The court reversed the Supreme Court’s August 25, 2021 order insofar as it denied preliminary injunctive relief against the plaintiff’s removal as a manager and vacated the later October 26, 2021 order as academic. It held:

The operating agreement explicitly vests management in the Class A members (i.e., the founders), not in appointed “managers.”
Nothing in Articles 4.1 or 6.1 authorizes the majority to strip a Class A member of management rights by majority vote.
LLC Law § 414—which allows members to remove “managers” by majority vote absent contrary agreement—does not apply to this member-managed LLC to supply a removal mechanism.
Ross v. Nelson (1st Dept) is distinguishable; there, the operating agreement clearly evinced an intent to allow expulsion of a member-manager, permitting § 414 to act as a procedural mechanism. No such clear intent exists here.
Accordingly, removing the plaintiff’s management rights would require amending the operating agreement, which under Article 10.1 demands a unanimous, written instrument executed by all members—something that did not occur.
The plaintiff established the preliminary injunction elements: likelihood of success, irreparable harm, and balance of equities, warranting restoration of the injunction preserving his managerial status pending adjudication on the merits.

Analysis

Statutory framework and contractual baseline

New York’s LLC Law is next-level contractarian: courts defer to the operating agreement (LLC Law § 417[a]) and apply statutory defaults only where the agreement is silent. The default managerial structure is member-management unless the articles of organization provide for manager-management (LLC Law § 401[a]); if management is vested in managers, § 408 governs. Section 401(b) further provides that members exercising management powers are “deemed to be a manager for purposes of applying the provisions of this chapter, unless the context otherwise requires.”

Against that backdrop, § 414 provides a default removal rule for “managers”: “Except as provided in the operating agreement, any or all managers of a limited liability company may be removed or replaced with or without cause by a vote of a majority in interest of the members entitled to vote thereon.”

The Second Department’s key move is to treat the context as “otherwise requiring” a different outcome: where the operating agreement vests management in members (not appointed managers) and does not clearly authorize expulsion or removal of a member’s management role, § 414 cannot be invoked to strip management authority by majority vote. Doing so would be a structural change to the agreed governance model and thus an amendment requiring unanimous written consent under Article 10.1.

Operating agreement provisions

Article 4.1: KCBC “shall be managed by the Class A Members.” This is a member-managed LLC.
Article 6.1: Class A members have “sole voting rights on [KCBC’s] day to day operations,” and disputes are resolved by majority vote of Class A members.
Article 10.1: The operating agreement “shall not be modified or amended in any respect except by a written instrument executed by all of the Members.”

The court reads Articles 4.1 and 6.1 as granting operational decision-making power—not as silently authorizing the majority to divest a co-equal founder of his status as a member-manager. Removing management status is not a “day-to-day” decision; it alters the governance allocation memorialized in Article 4.1 and therefore requires an amendment under Article 10.1.

Precedents cited and their influence

Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 NY3d 839, 840: Cited for the familiar three-part standard for preliminary injunctions (probability of success on the merits, danger of irreparable injury absent an injunction, and balance of equities favoring the movant; see CPLR 6301). This frames the relief analysis.
Tzu Yen Cheung v. Dolar Shop Rest. Group, LLC, 229 AD3d 738, 741: Emphasizes legislative deference to operating agreements and the role of statutory default rules only where the agreement is silent. Supports the primacy of the KCBC operating agreement in defining management and removal.
Garcia v. Garcia, 187 AD3d 859, 861–862: Reinforces deference to the operating agreement and, at 862, is cited for the proposition that where an operating agreement does not “clearly and unambiguously” permit removal/expulsion, parties may not rely on § 414 to supply a mechanism. This directly supports rejecting § 414 as a backdoor removal tool here.
Matter of 1545 Ocean Ave., LLC, 72 AD3d 121, 128–129: A leading Second Department case on LLC dissolution, often cited for its contractarian approach: courts look first to the operating agreement to resolve internal governance questions. This undergirds the court’s methodology.
Ross v. Nelson, 54 AD3d 258 (1st Dept): Defendants’ principal case. There, an operating agreement clearly reflected an intent to allow expulsion of a member-manager (through dissolution and reorganization upon “expulsion”), but lacked a detailed mechanism; the First Department permitted reliance on § 414 as the procedural vehicle for removal. The Second Department distinguishes Ross: the KCBC agreement contains no clear, unambiguous indication that expulsion or removal of a member’s management role is permitted, so § 414 cannot be used to create that power.
Man Choi Chiu v. Chiu, 71 AD3d 646, 647: Cited to support the proposition that in the absence of clear contractual authorization, parties cannot expel or alter a member’s status by a unilateral or majority act. Reinforces the requirement of explicit authority for expulsion/removal.
Reichman v. Reichman, 88 AD3d 680, 682: Supports the irreparable harm and balance-of-equities analysis in closely held entity governance disputes—loss of management rights and control is not readily compensable by money damages, favoring injunctive relief.

Legal reasoning

The court proceeds in three steps.

It characterizes KCBC as a member-managed LLC by virtue of Article 4.1, then reads Articles 4.1 and 6.1 narrowly: the majority’s authority extends to “day-to-day operations” and dispute resolution, not to structural removal of a co-founder’s management rights or reclassification of his equity. There is no clause authorizing expulsion or management-stripping.
It rejects reliance on LLC Law § 414, distinguishing “managers” as contemplated by § 414 from members who hold management rights by virtue of the agreement’s member-managed design. Although § 401(b) deems managing members “managers” for some statutory purposes, the court treats the context as “otherwise” requiring that § 414 not be used to displace member-management where the agreement contains no clear expulsion authorization.
It concludes that any act to remove the plaintiff’s management status would be an amendment to the operating agreement’s governance allocation, triggering Article 10.1’s unanimity requirement. Because no unanimous written amendment occurred, the plaintiff showed a likelihood of success on the merits; coupled with irreparable harm (loss of governance rights and control) and favorable equities, a preliminary injunction was warranted.

Impact and implications

This decision clarifies—and, in the Second Department, effectively narrows—the circumstances under which § 414 can be used in member-managed LLCs:

In a member-managed LLC, a majority cannot strip a co-equal founder of management rights by invoking § 414 unless the operating agreement clearly and unambiguously indicates an intent to permit expulsion/removal of the member’s management role. Mere majority control over “day-to-day operations” is not enough.
Ross v. Nelson remains viable but limited: § 414 may serve as a procedural mechanism only where the operating agreement unmistakably contemplates expulsion/removal but omits the mechanics. Absent that clear intent, § 414 is off the table.
Drafting consequences: Operating agreements for founder-led companies should expressly address expulsion, removal of management rights, demotion or reclassification of units, and associated voting thresholds, buyout mechanics, and cause standards. If the intent is to permit majority removal of a member’s management rights, say so clearly and provide a procedure.
Litigation consequences: Parties seeking to preserve management rights in member-managed LLCs have a stronger path to preliminary injunctions when the agreement lacks an expulsion clause. Courts view loss of control and governance participation as irreparable harm not compensable by damages.
Governance stability: The decision promotes predictability by requiring structural changes to member-management to occur via the contractually agreed amendment process (here, unanimous written consent), not through opportunistic majority action.

Complex Concepts Simplified

Member-managed vs. manager-managed LLCs:
- Member-managed: Owners (members) collectively manage the company. This is the default unless the articles designate manager-management.
- Manager-managed: One or more non-owner managers (or designated manager-members) manage the business; members are more akin to passive owners.
Operating agreement primacy: The operating agreement is the LLC’s internal constitution. Courts enforce it as written; statutory defaults fill only genuine gaps.
LLC Law § 414: A default rule letting members remove “managers” by majority vote unless the operating agreement says otherwise. Lengyel-Fushimi teaches that § 414 does not let a majority remove a member’s management rights in a member-managed LLC unless the agreement clearly authorizes that outcome.
“Deemed manager” under § 401(b): Members who manage are treated as “managers” for some statutory purposes, but that deeming is limited by context. It does not automatically import § 414’s removal mechanism into a member-managed arrangement lacking an expulsion clause.
Preliminary injunction basics (Nobu Next Door):
- Likelihood of success: The movant shows a reasonable probability of winning on the merits (here, that removal violates the operating agreement).
- Irreparable harm: Harm that cannot be adequately remedied by money damages (loss of control and decision-making rights).
- Balance of equities: The hardship to the movant without an injunction outweighs hardship to the opponent with it.
Structural vs. operational decisions: Operational decisions concern day-to-day business. Structural decisions (e.g., changing who has management rights) alter governance allocations and typically require formal amendment procedures.

Practical Takeaways and Drafting Tips

Spell out expulsion/removal authority: If the founders intend that a member’s management rights can be removed, say so expressly and define triggers (with or without cause), voting thresholds, and procedures.
Provide mechanics: Include notice, cure periods, hearing/vote procedures, valuation and buyout terms, and post-removal roles (if any).
Separate roles: Distinguish clearly among employment status, membership class, equity ownership, and management rights—each can be treated differently with distinct removal standards.
Amendment clauses matter: A unanimity requirement (like Article 10.1 here) will often block unilateral governance changes. Consider calibrated thresholds for specific subjects.
Avoid ad hoc “reclassification”: Creating a new class (e.g., “Class D”) without following the amendment procedure is vulnerable to challenge.
Anticipate deadlock and misconduct: Include deadlock breakers (tie-break votes, third-party mediators, buy-sell triggers) and remedies for material breach or misconduct.
Litigation posture: Where an expulsion clause is absent or ambiguous, a displaced founder has a strong argument for a preliminary injunction to preserve the status quo.

What the Decision Does Not Decide

Final merits: The court adjudicated only preliminary relief, not a final declaration of rights or damages.
Employment issues: The decision addresses management rights; it does not resolve the plaintiff’s employment termination.
Ultimate removal with proper amendment: The opinion implies that management rights could be altered via a unanimous written amendment—but does not opine on what such an amendment could or should contain.

Conclusion

Lengyel-Fushimi v. Bellis is a significant Second Department clarification: in a member-managed LLC, a majority may not use LLC Law § 414 to remove a co-founder’s management rights absent a clear, unambiguous expulsion/removal provision in the operating agreement. Where the agreement vests management in members and sets a unanimity requirement for amendments, a majority vote to strip management rights is ultra vires and enjoinable. The decision narrows the reach of Ross v. Nelson to agreements that unmistakably contemplate expulsion and underscores New York’s strong contractarian approach to LLC governance.

Key takeaway: If the parties want majority removal power over member-managers, they must write it into the operating agreement. Courts will not retrofit § 414 to supply that power in a member-managed structure without clear contractual authorization.