Commence an Arbitration or Civil Claim Submission
Before a Neutral Arbitrator on an Expedited Basis

I. Arbitrator, Authority, and Nature of Award

I, Zarak O. Ali, Arbitrator, was appointed to determine the disputes submitted in this matter pursuant to the arbitration clause contained in Section 14 of the parties’ Limited Liability Company Operating Agreement dated March 3, 2021. That clause requires arbitration of disputes arising out of or relating to the governance, management, finances, ownership rights, member conduct, or continuation of the Company. The parties’ agreement incorporates commercial arbitration procedures and authorizes the arbitrator to grant legal and equitable relief within the scope of the submission.

This is a final reasoned award as to the claims and counterclaims submitted and decided below. To the extent any request for relief is not expressly granted herein, it is denied.

II. Procedural History, Notice, and Opportunity to Be Heard

Claimant filed a written demand for arbitration on June 4, 2026, together with the Operating Agreement, exhibits, and a request for expedited treatment. Notice of the demand, the appointment process, and the preliminary scheduling order was transmitted to Respondent by email and overnight delivery to the addresses used by the parties in company communications and in the Operating Agreement. Respondent appeared through counsel, objected to certain requested relief, submitted documentary evidence, and participated in the preliminary conference held remotely on June 10, 2026.

At that conference, both sides agreed that the matter could proceed on an expedited basis with a written record, supplemented by a focused one-day hearing if necessary. The parties thereafter submitted witness statements, financial summaries, email chains, accounting extracts, member notices, and written arguments. Neither side objected to my jurisdiction after appearance. The evidentiary record closed on June 21, 2026, after both parties confirmed that they had no further evidence to offer.

III. Issues Submitted for Decision

1. Whether the Company’s 50/50 management structure reached an operational deadlock that prevents continued governance in conformity with the Operating Agreement.
2. Whether Respondent exercised unilateral managerial control in a manner inconsistent with the Agreement and with duties owed in the management of the Company.
3. Whether Claimant is entitled to books-and-records relief, a monetary adjustment for unauthorized distributions, valuation and buyout procedures, or alternative separation relief.
4. Whether any counterclaim defeats or materially reduces the relief sought by Claimant.

IV. Findings of Fact

The Company is a New York limited liability company owned equally by Claimant and Respondent, each holding a 50% membership interest. Under the Operating Agreement, major decisions require equal approval, including distributions, debt obligations, compensation changes, extraordinary expenditures, transfers of material assets, and any decision materially affecting the Company’s continuation or ownership structure.

From approximately October 2025 through the filing of the arbitration demand, the parties were unable to obtain joint approval on payroll changes, vendor financing proposals, member compensation, allocation of marketing expenditures, and proposed buyout terms. The written record demonstrates repeated impasse, not isolated disagreement.

The evidence further establishes that during that same period Respondent continued to act as the sole practical controller of the Company’s operating accounts, caused member distributions and reimbursements to be made without equal written approval, and failed to produce complete financial records after repeated written demand. On the present record, the amount of distributions or reimbursements lacking required parity approval is established at $68,500.00.

Respondent contends that these payments were necessary, ratified by custom, or offset by Company obligations allegedly attributable to Claimant. I do not find that position persuasive on this record. The Agreement required parity approval for the category of actions at issue, and the documentary record does not establish waiver, amendment, or ratification sufficient to override that requirement.

I further find that the management breakdown has materially impaired the Company’s ability to operate in accordance with its governance structure. The Company has functioned, but not in conformity with the decision-making structure the parties bargained for.

V. Analysis and Conclusions

The central question is not whether the parties dislike one another, nor whether the business could theoretically continue under some new arrangement. The question submitted is whether the Company can continue to be governed in accordance with the Operating Agreement that presently controls their rights. On that question, the answer is no.

The Agreement created a parity-based management system. It did not authorize one member to continue unilateral operation whenever joint decision-making became inconvenient. The record instead shows a prolonged and consequential deadlock on core governance matters coupled with unilateral financial conduct during the impasse. That combination makes continued governance under the current structure commercially and contractually unworkable.

Claimant is therefore entitled to relief that restores financial transparency, corrects the presently proven imbalance, and establishes a definite path toward separation. A mere declaration of deadlock would not adequately resolve the submitted dispute. Nor would immediate liquidation be the only commercially rational remedy. The more disciplined course is to compel a full accounting, set a valuation process, allow an election to purchase, and direct orderly separation if no election occurs.

Respondent’s counterclaims do not alter this result. To the extent Respondent asserts that Claimant also contributed to the impasse, that is true in part, but it does not justify unilateral disregard of the Agreement’s approval requirements. To the extent Respondent seeks affirmative offsets, those assertions were not proven with sufficient clarity and documentary support to warrant reducing the relief ordered below, except as may emerge from the ordered accounting.

VI. Final Award

1. Books and Records Production. Within 10 calendar days of delivery of this Award, Respondent shall produce to Claimant and the Arbitrator complete Company books and records from January 1, 2025 through the date of compliance, including bank statements, general ledgers, payroll records, tax filings, member distribution records, accounts receivable reports, accounts payable reports, vendor contracts, member loan schedules, and records of any affiliated-party transfers.
2. Forensic Accounting. Within 7 calendar days after production is complete, the parties shall jointly designate a neutral accountant to prepare a limited accounting of member distributions, reimbursements, member loans, extraordinary expenditures, and affiliated-party payments for the same period. If they cannot agree on the accountant within that time, the Arbitrator shall designate one upon written request by either party.
3. Interim Monetary Equalization. Based on the present record, Claimant is awarded an interim equalization payment of $12,750.00, payable by Respondent within 10 calendar days of delivery of this Award. This payment is without prejudice to further adjustment in Claimant’s favor or Respondent’s favor upon completion of the accounting ordered herein.
4. Provisional Surcharge Finding. On the present record, the amount of distributions or reimbursements taken or caused without the required parity approval is provisionally found to be $68,500.00. The final surcharge amount, if any, shall be fixed after the neutral accounting is completed.
5. Valuation. The Company shall be valued by a neutral business appraiser selected within 7 calendar days after completion of the accounting. The valuation date shall be the date the arbitration demand was filed. Unless otherwise agreed, the appraiser shall determine fair market value of the entire Company as a going concern, subject to the accounting adjustments ordered herein.
6. Election to Purchase. Within 15 calendar days after delivery of the valuation report, either member may elect in writing to purchase the other member’s 50% interest at one-half of the appraised equity value, adjusted by the final accounting and surcharge determinations. If both elect, the purchasing right shall go first to Claimant because Claimant first requested buyout relief in the demand and maintained that position throughout the proceeding.
7. Failure of Election. If neither member timely elects to purchase, or if a member elects but fails to close within the period fixed below, the Company shall proceed to orderly separation under further arbitral supervision, including sale or wind-up directions as may be necessary to implement this Award.
8. Closing Deadline. Any buyout closing shall occur within 30 calendar days after the election period expires, unless extended by joint written agreement or further order.
9. Conduct Pending Separation. Effective immediately, neither party shall cause extraordinary expenditures, member distributions, new debt, asset transfers outside the ordinary course, or affiliated-party payments without written agreement of the other member or further arbitral order.
10. Costs. Arbitration costs are allocated 70% to Respondent and 30% to Claimant, reflecting the record as presently established, including Respondent’s unilateral conduct during the deadlock and Claimant’s substantial success on the principal claims submitted.
11. Retention of Limited Jurisdiction to Implement. The Arbitrator retains limited jurisdiction for the sole purpose of enforcing, interpreting, or implementing the accounting, valuation, election, and closing mechanics ordered in this Award.

VII. Finality

This Award is intended to resolve finally the issues submitted except to the limited extent expressly reserved for implementation of the accounting, valuation, election, and closing mechanisms set out above. All claims and counterclaims not expressly granted are denied.