The Appellate Division of the Supreme Court of the State of New York has ruled against AMF Trust Ventures LLC in its appeal against i80 Group LLC. The court's decision, issued on June 11, 2026, means that AMF Trust will not be allowed to file a second amended complaint regarding its investment in i80 Group. This ruling has significant implications for the rights of members in limited liability companies (LLCs) and their ability to bring derivative claims.
AMF Trust Ventures LLC and other plaintiffs had purchased Class B interests in i80 Group LLC and its affiliated management entities between 2017 and 2020. The legal dispute arose after the management entities, which are Delaware LLCs, received a substantial investment from Iconiq Capital. Following this investment, the manager of the entities, Marc Helwani, offered to roll over the plaintiffs' investment into a new fund but with reduced revenue shares. When the plaintiffs objected to Helwani's actions, they were required to withdraw completely from the management entities.
The plaintiffs then filed separate lawsuits asserting both direct and derivative claims against i80 Group. The Supreme Court initially allowed AMF Trust to file a second amended complaint, but this decision was reversed by the Appellate Division. The court determined that the plaintiffs lacked standing to bring derivative claims on behalf of the management entities.
The Appellate Division's ruling highlighted that standing in derivative actions is governed by Delaware law, where the management entities are organized. Under Delaware law, a plaintiff must be a member of the LLC at the time of filing the action and at the time of the transaction in question. The court stated, "The second amended complaint is insufficient because plaintiffs lack standing to bring derivative claims on behalf of the Management Entities."
The court's decision was made by a panel of judges including Kennedy, Scarpulla, Friedman, Mendez, and Pitt-Burke. They concluded that the plaintiffs were no longer members of the management entities when they filed suit, thus failing to meet the continuous ownership requirement necessary for derivative actions.
Furthermore, the court discussed the exceptions to this requirement. There are two recognized exceptions under Delaware law: the reorganization exception and the fraud exception. The court found that neither exception applied in this case. The plaintiffs had not provided sufficient facts to support a claim of fraud regarding their expulsion from the management entities.
The Appellate Division emphasized that allowing a plaintiff to claim standing based on a subsequent merits determination about their expulsion would contradict the principle that standing is a threshold question. The court stated, "Standing is . . . a threshold question that the Court may not avoid." This ruling reinforces the importance of maintaining strict adherence to the continuous ownership requirement in derivative actions.
The impact of this decision is significant for investors and members of LLCs. It sets a clear precedent that members must maintain their status in order to bring derivative claims. This ruling may discourage future claims from former members who feel wronged by management decisions, as they must remain members to have standing in court.
Going forward, this ruling may influence how LLC agreements are structured and how members understand their rights. Investors in LLCs may need to be more vigilant about their membership status and the implications of management decisions on their ability to seek legal recourse.
As for next steps, AMF Trust Ventures LLC may consider appealing this decision to a higher court, although details regarding their plans were not available in the court filing. There may also be related cases pending, but specific information was not provided in this ruling.