By Andrew Scurria

The highest court in Delaware ended turnaround financier Lynn Tilton’s control of cosmetics maker Stila Styles LLC, affirming that investors in her Zohar investment funds have the right to replace her as its manager.

The Delaware Supreme Court affirmed a trial judge’s ruling earlier this year to oust Ms. Tilton from managerial control of Stila, one of the dozens of businesses she invested in using capital from the Zohar loan funds she created.
The Zohars, which raised money from outside investors for her corporate turnaround efforts, went bankrupt in 2019 and won court approval earlier this year to turn over their remaining debt and equity interest to their investors.
That includes a stake in Stila, which has been tied up in separate lawsuit between the Zohars, their investors and Ms. Tilton over an amendment she made in 2017 to its limited liability company agreement to give her effective control over its corporate governance in return for a $10 million investment.
The Zohar fund that owns Stila’s membership interests, Zohar III, later alleged that because the amendment required their consent, it wasn’t valid and she couldn’t remain as the company’s manager.
A Delaware Chancery Court judge agreed in May, finding Ms. Tilton “did not have the authority to amend the LLC agreement to strip Zohar of its right to remove and replace the manager and give that right to herself.”
The Delaware Supreme Court upheld the May ruling in a brief order on Thursday that didn’t elaborate on the trial judge’s reasoning.
A representative of Ms. Tilton said she is disappointed by the ruling and exploring next steps.
Her investors were owed more than $1.9 billion in senior debt when the Zohars filed for chapter 11 protection with debt claims or equity stakes with companies like helicopter manufacturer MD Helicopters Inc., auto supplier Global Automotive Systems LLC, and Stila.
Write to Andrew Scurria at andrew.scurria@wsj.com