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How an LLC Member’s Indirect Ownership Interest in a Georgia Apartment Complex Stopped It From Obtaining an Injunction

In any LLC, there are limits to what the managing member can do. There are also, however, limits to what an associate member can do to stop a managing member from acting in a way it opposes. Experienced Georgia business litigation counsel can help you determine what your options are when it comes to an LLC dispute.

A recent example was a case that pitted two LLCs against each other, each of whom was in the business of buying, selling, and managing commercial properties, including shopping centers, apartments, office buildings, and others. The two LLCs jointly formed a third LLC, with this one’s purpose being the purchase and ownership of an apartment complex in Columbus, Ga. The LLC that served as the managing member had a 25% ownership, while the other LLC, serving as the associate member, had a 75% stake.

After making the purchase, the managing member identified what it believed was a problem. GDOT had recently installed a median running down the center of the parkway that the complex faced. This meant that residents, as they sought to enter the parkway via the complex’s only exit, could only turn in one direction. This inconvenience allegedly had triggered a downturn in the complex’s occupancy rate.

With these things in mind, the managing member began pursuing the construction of a second entrance and exit for the complex. The associate member opposed this idea and sought immediate relief from the courts to put an instant end to the construction. Moreover, the associate member asked the judge to enter an order that barred the managing member from spending money on anything other than the “routine daily expenses” of the complex.

The trial court granted the injunction. Ultimately, the Supreme Court reversed that ruling. The court pointed out that, in some situations, an owner of a piece of real property (like an apartment complex) might be entitled to an injunction if that party successfully proves that an injunction is the only way to protect the land from irreparable harm.

The problem for the associate member in this case was that it wasn’t an owner of real property. It directly owned exactly 0% of the apartment complex. Its ownership interest was in another LLC, rather than the complex. This was a major problem for the associate member because you can only request an injunction to prevent an action being taken on a piece of land if you are an owner of the land. The associate member wasn’t a direct owner of the complex and, as an indirect owner, wasn’t entitled even to seek the injunction.

The other thing you need to show in order to obtain an injunction is that, without the issuance of the court order you’ve requested, irreparable harm will take place. The associate member lacked that evidence as well. According to the Supreme Court, there was no harm that the associate member alleged in its court papers that could not, if proven, be made right through an award of money damages. If the payment of money damages can completely compensate a party for its harm, issuing an injunction isn’t proper.

Whether your LLC-related dispute involves the need for an injunction or entails a claim for money damages, you need experienced litigators on your side. The skilled Atlanta real estate litigation attorneys at Poole Huffman, LLC have been working for many years to help their clients defend their rights and protect their business interests. Contact our attorneys online or by calling (404) 373-4008 to schedule your confidential consultation.

More blog posts:

Property Investors Beware: “Self-Help” Evictions are Never an Option, Atlanta Business Litigation Attorneys Blog, June 18, 2015

Commercial Real Estate Broker’s Liens, Atlanta Business Litigation Attorneys Blog, Sept. 23, 2013

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