Thursday, November 21, 2013

Mission Residential, LLC v. Triple Net Properties, LLC case brief

Mission Residential, LLC v. Triple Net Properties, LLC case brief summary
654 S.E.2d 888 (2008)

A firm (firm one) sought a declaratory judgment that there was no agreement to arbitrate between it and a limited liability company (LLC) which was created by it and another firm (firm two). The Circuit Court of Fairfax County (Virginia) found the arbitrator correctly decided the issue of arbitrability and denied firm one's motion to stay arbitration proceedings. Firm one appealed.

The two firms entered into a joint venture for the purpose of identifying, purchasing, managing and selling multi-family properties for investors. They agreed to form the LLC and executed an "Operating Agreement" which provided that they were to be the sole members of the LLC, with equal membership interests, and were to manage the LLC jointly. Firm two commenced an arbitration proceeding against firm one, asserting a direct claim for breach of contract and also a derivative claim against firm one on behalf of the LLC. The arbitrator ruled that firm two lacked standing to assert the direct claim, but allowed its derivative claim on behalf of the LLC to go forward.


  • The appellate court held firm two's argument that the derivative claim was nothing more than a dispute regarding firm one's duties under the operating agreement, ignored the separate existence of the LLC, which was not a party to the operating agreement. 
  • Although the two firms might have chosen to employ language that would have committed them to arbitrate their disputes with the LLC, they did not do so. 
  • Thus, there was no contractual undertaking by which firm one had agreed to arbitrate any dispute with the LLC.

The judgment of the trial court was reversed and the matter was remanded for further proceedings.

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