Supreme Court of Virginia Clarifies Standards for Judicial Expulsion and Dissolution of LLCs
Ticonderoga Farms, LLC v. Knop, Record No. 240772 (Va. Nov. 6, 2025)
This case involves a deeply dysfunctional family farming business. Ticonderoga Farms, LLC, operating over 900 acres in Northern Virginia, was controlled by Peter Knop with his three children as minority members. The dysfunction ran so deep that Peter once declared he would fight any dissent “to my dying breath, irrespective of the financial cost.” After years of escalating litigation and acrimony, Peter issued a capital call demanding over $1 million from the minority members. They refused and sought court intervention, leading to competing court applications. Peter sought judicial expulsion of the minority members and the minority members sought judicial dissolution of the LLC along with a request to review the LLC’s financial records. All parties agreed that it was not reasonably practicable for the LLC to conduct business as it was constituted.
After a three-day bench trial, the circuit court made several preliminary rulings: (1) the LLC was governed by default Virginia LLC statutory provisions, (2) Peter lacked authority to make the capital call, and (3) the minority members were entitled to inspect the LLC’s records. Based on these rulings, the circuit court denied Peter’s application to expel the minority members but granted the minority members’ application to dissolve the LLC. It credited expert testimony offered by the minority members that revealed “significant red flags” in the LLC’s finances. Among other factual findings, it determined that the minority members’ request to inspect company records was “legitimate” and served “legitimate purposes,” the minority members’ conduct did not directly cause the company’s dysfunction, and that it was not reasonably practicable for the LLC to continue operating as all parties agreed they could not work with each other and the company had ceased performing even basic corporate functions.
Peter appealed to the Court of Appeals, and a divided panel affirmed. He further appealed to the Supreme Court, which affirmed.
With respect to Peter’s application to expel the minority members under Code § 13.1-1040.1(5)(c), the Supreme Court held that the word “makes” in the statute (“makes it not reasonably practicable to carry on the business with the member”) creates a causation requirement stronger than typical “proximate cause.” The member’s conduct must be the direct cause of the dysfunction—“not a relatively innocent link in a causal chain.” The court distinguished this subsection from subsection (5)(a), noting that while (a) requires “wrongful” conduct, subsection (c) does not—though wrongfulness remains a relevant factor in determining causation. Importantly, the court stated that exercising statutory rights like requesting company records “will rarely, if ever, be sufficient conduct” to justify expulsion, even if it triggers an unreasonable response from management.
With respect to the minority members’ application for judicial dissolution under Code § 13.1-1047, the court clarified that “not reasonably practicable to carry on the business” means something less than “impossible” but still sets “an exacting standard.” The court emphasized this standard is not met by routine disagreements or isolated litigation—only when litigation’s “distracting effect or the acrimony it engenders actually causes the company to cease to properly function.” The focus is on present circumstances and whether the business can currently function, not on who caused the dysfunction. Unlike expulsion, dissolution has no causation requirement. The court also distinguished its earlier decision in Dunbar Group, LLC v. Tignor, 267 Va. 361, 366-67 (2004), explaining that courts must consider “present circumstances” after any expulsion ruling—here, since expulsion was denied, the minority members remained active and Peter admitted he could not work with them.