A Forum Selection Clause in Entity Resolutions? Not Necessary! Think again . . . A NY Court disagrees.

In Meltzer v. Kentucky Hi Tech Greenhouses LLC, 2023 N.Y. Misc. LEXIS 160, the Manager of a Kentucky LLC filed a lawsuit in New York against the LLC to recover unpaid wages purportedly owed to the Manager by the Kentucky LLC. The LLC moved to dismiss the lawsuit in New York based on the Operating Agreement, which included clauses that govern the “compensation” of the Kentucky LLC’s Manager and set Kentucky as the “forum selection” in connection with the Operating Agreement.

At some point, the Members approved written resolutions that set the Manager’s actual compensation, but the resolutions omitted–as is customary–any “forum selection.” The NY Court held that the “compensation” and “forum selection” clauses in the Operating Agreement did not govern the Members’ resolutions regarding the Manager’s actual compensation. Instead, the Members’ resolutions themselves would have needed to reference Kentucky as the forum for any litigation in order for the “forum selection” to be enforced with respect to the Manager’s actual compensation.

To review in more detail the actual language in the LLC’s Operating Agreement, see below. Specifically, The LLC’s Operating Agreement included the following:
(1) A section on “Compensation,” describing that Managers would be paid “in such amounts as are approved by the Members” (Operating Agreement, § 5.1).
(2) A section on “Venue and Jurisdiction” which sets forth that the parties: irrevocably agree that any legal action, suit or proceedings against them, individually, jointly or severally, with respect to the enforcement of any other matter under or arising out of or in connection with this Agreement or for recognition or enforcement of any arbitration or other judgment rendered in any such action, suit or proceeding, shall be brought in the Jefferson (Ky.) Circuit Court or the Federal District Court for the Western District of Kentucky sitting in Jefferson County, Kentucky. (Operating Agreement, § 9.8).

For his work in his roles as CEO and COO, the Manager agreed to accept deferred compensation from Defendants. The parties formalized the compensation arrangement through resolutions the members of KHTG passed after member meetings held in September and October 2018 and June 2019. Under those resolutions, the members determined that the “fair market value of the services provided by Curt Meltzer, on a full-time basis, is not less than $200,200.00 per annum,” that he was owed a total of $408,741.93 as of September 17, 2018, and that, effective June 1, 2019, KHTG “did begin compensating Curt Meltzer with payments at an annualized rate of $120,000 per annum” (“Resolutions,” NYSCEF Doc. No. 2). Neither of the Resolutions contains any forum selection clause.