LLCs and the Private Ordering of Dispute Resolution

21 Pages Posted: 2 Jan 2016 Last revised: 31 May 2017

See all articles by Peter Molk

Peter Molk

University of Florida Levin College of Law

Verity Winship

University of Illinois College of Law

Date Written: January 2, 2016

Abstract

An emerging question in U.S. business law is how the organizational documents of a business entity set the rules for resolving internal disputes. This practice is routine in commercial contracts, which may specify where or how disputes must be resolved. Recent use of litigation provisions in corporation charters and bylaws have sparked controversy, ultimately leading to legislative action to preserve shareholder suits from contractual waiver. Yet despite accounting for the majority of business organizations and sharing features with corporations, non-corporate business entities and their internal dispute resolution process have been largely ignored. How do these non-corporate entities set ex ante rules for resolving disputes among their constituents? This paper begins to map this uncharted area with an empirical study of the practice of limited liability companies (LLCs). We find widespread use of contract to alter the default dispute resolution practices. This study helps not only to inform the evolving statutory and judicial framework for LLC regulation, but also to predict how corporations may respond in the future to recent judicial and legislative changes.

Keywords: LLCs, operating agreements, litigation, fee shifting, dispute resolution, arbitration, forum

JEL Classification: K22, K41

Suggested Citation

Molk, Peter and Winship, Verity, LLCs and the Private Ordering of Dispute Resolution (January 2, 2016). 41 Journal of Corporation Law 795 (2016); University of Illinois College of Law Legal Studies Research Paper No. 16-3. Available at SSRN: https://ssrn.com/abstract=2710159

Peter Molk (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

Verity Winship

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
217-244-8161 (Phone)

HOME PAGE: http://law.illinois.edu/faculty-research/faculty-profiles/verity-winship/

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