The Case of Trolley Square Hospitality, LLC – A Call to Craftsmanship

We live in an era of quick fixes, cut and paste solutions, and AI at our fingertips. But these are not a replacement for wisdom and craftsmanship in contract drafting.

The Delaware Court of Chancery decided a case on June 4, 2025 with one such lesson. An investor engaged a general manager (GM) to help him open a restaurant, Trolley Square Oyster House in Delaware (over 1000 reviews and 4.5 stars on Google, for any interested). The investor promised 14% in sweat equity to keep the GM engaged and incentivized. When the investor let the GM go years later, there was a dispute over whether the investor had the power to do so. The GM sued. The court looked to the four corners of the operating agreement of Trolley Square Hospitality LLC, which stated that only members who contributed cash could remove other members, and only members who were non-cash contributing could be removed. However, an exhibit listed the GM with a contribution by his name of $14.

Vice Chancellor Zurn opened his opinion as follows, “The limited liability company affords great flexibility to those who adopt it to organize their enterprise. Many take advantage of that flexibility by drafting a bespoke limited liability company agreement. But if that agreement is contradictory or confusing, flexibility begets friction.”

The court determined that the drafter (on the investor side) took an exhibit from a different operating agreement and used it for this one, where that agreement listed contributions identical to the percentages of ownership. Since this was not the case in reality for Trolley Square Hospitality, LLC, the exhibit was a mistake. The defendant investor “won.”

While the defendant investor won the case against the GM, this was a loss in all other respects: a loss of the cost of attorney fees for defending the case and the ½ day trial, not to mention the loss of time and energy that could have spent in other areas of the investor’s business endeavors. Perhaps realizing this blunder, the defendant investor petitioned the court for attorney fees, but there was no provision affording such protection in the operating agreement. That petition was denied.

Had the drafter taken a step back and reviewed the agreement in its entirety, and thought through these relationships and the facts of this restaurant endeavor, this dispute would likely never have gotten to this point. Confusion and contradiction is costly, and that is one such job of the contract drafter – to eliminate it.

Jerome Fogel is co-founder of Fogel & Potamianos LLP, a firm recognized by Chambers & Partners’ California Spotlight Guide for excellence in corporate law. A partner in the Corporate Practice Group and Chair of the Sports & Entertainment Group, he is known as an innovator and dealmaker in the legal community. He serves as an offsite general counsel to privately held companies, including representation in mergers and acquisitions and capital markets transactions.  

Disclaimer: This content is not a substitute for obtaining legal advice from a qualified attorney for your company and its particular attenuating facts. This content may be considered attorney advertising in some states.