In the menagerie of closely held companies, those owned and controlled by 50/50 business partners pose unique benefits and challenges.
On the benefit side, co-equal ownership and control can foster cooperation,...more
Our federal courts by and large are not hospitable to business divorce litigation. The two mainstays of the federal courts’ limited subject matter jurisdiction — federal question and diversity of citizenship — typically are...more
Longtime readers of this blog may recall a post I wrote three years ago titled Minority Shareholder Oppression in the #MeToo Era. The post highlighted an apparent first-of-its-kind decision in a judicial dissolution case...more
A limited partnership without a general partner cannot lawfully continue. That’s why it’s critical that the limited partnership agreement thoughtfully address general partner succession and, when triggered, the agreement’s...more
For the second time in two years, the Connecticut Supreme Court has ventured into uncharted waters of LLC governance under the Revised Uniform LLC Act which, to date, has been adopted by 22 states and awaits legislative...more
11/22/2021
/ Books & Records ,
Business Divorce ,
Business Litigation ,
Closely Held Businesses ,
CT Supreme Court ,
Inspection Rights ,
Judicial Dissolution ,
Limited Liability Company (LLC) ,
Membership Interest ,
Minority Shareholders ,
RULLCA ,
Shareholder Oppression ,
Trust Distributions ,
Wealth Management
Valuation discounts can and often do play an outsized role in contested appraisal proceedings involving the valuation of equity interests in closely held business entities for which there is no public market....more
11/1/2021
/ Appraisal ,
Business Divorce ,
Buyers ,
Buyouts ,
Closely Held Businesses ,
Dissolution ,
Fair Market Value ,
Fair Value Standard ,
Limited Liability Company (LLC) ,
Minority Discount ,
RULLCA ,
Sellers
If ever there was a ticking time bomb of a family-owned, closely held business more likely to result in business divorce litigation than the one in Matter of Brady v Brady, 2021 NY Slip Op 02705 [4th Dept Apr. 30, 2021], I...more
10/25/2021
/ Books & Records ,
Business Disputes ,
Business Divorce ,
Business Ownership ,
Closely Held Businesses ,
Declaratory Relief ,
Derivative Complaint ,
Derivative Suit ,
Family Businesses ,
Judicial Dissolution ,
Share Transfer ,
Shareholder Oppression ,
Stock Ownership
The Cummins Nursery in upstate New York grows, harvests, plants, and grafts fruit trees — mainly apple trees — which along with scions and rootstocks it sells by the tens of thousands each year. There’s also a farm stand and...more
Of late I’ve been ruminating on New York’s membership in the shrinking pool of states that don’t recognize oppression of an LLC minority member by the controlling members or managers as ground for judicial dissolution....more
4/19/2021
/ Books & Records ,
Breach of Duty ,
Business Divorce ,
Business Litigation ,
Closely Held Businesses ,
Contract Terms ,
Dissolution ,
Fiduciary Duty ,
Judicial Dissolution ,
Limited Liability Company (LLC) ,
Minority Shareholders ,
Operating Agreements ,
Shareholder Distributions ,
Shareholder Oppression
Fine dining and business divorce crossed paths in a recently decided case featuring a lengthy battle between co-equal ownership factions of the corporation that operates Delmonico’s, the renowned Manhattan restaurant...more
It’s not unusual to find buy-out provisions in shareholder and operating agreements that commit the pricing of the buy-out to the “final and binding” determination of one or more appraisers. The same agreements also may...more
2/15/2021
/ Appraisal ,
Arbitration Agreements ,
Arbitration Awards ,
Business Divorce ,
Buy-Out Agreements ,
Closely Held Businesses ,
Contract Terms ,
Fair Market Value ,
Limited Liability Company (LLC) ,
Membership Interest ,
Operating Agreements ,
PricewaterhouseCoopers ,
Repurchase Agreements ,
Shareholders
In 2011 and 2012, the New York Court of Appeals decided a series of difficult cases addressing the circumstances under which a contractual waiver or release included in a buyout or other agreement between co-owners of closely...more
When the management of a closely held business is controlled equally by two owners, it’s wise both to anticipate possible deadlock over major decisions and to provide in the constitutive documents a deadlock breaking...more
Many thousands of closely held corporations, limited liability companies, and limited partnerships formed under Delaware law (and, to a much lesser extent, other foreign states) make their home in New York....more
The limited liability company did not exist as a legally recognized business entity in New York when I first began handling business divorce cases in the 1980s. Decades later, the LLC is “King of the Hill,” having displaced...more
Normally you don’t associate the lucrative sale of a closely held business with bitter disputes among the co-owners leading to judicial dissolution proceedings. When the cake is big enough, the thinking goes, each owner walks...more
6/24/2019
/ Business Ownership ,
Business Succession ,
Business Transfer Agreements ,
Closely Held Businesses ,
Family Businesses ,
Forum Selection ,
Judicial Dissolution ,
Post-Closing Rights ,
Selling a Business ,
Stock Ownership ,
Succession Planning
What’s become known as the bad-faith petitioner defense in judicial dissolution proceedings first emerged in Matter of Kemp & Beatley, 64 NY2d 63 [1984]...more
I’m very pleased to present my 11th annual list of this past year’s ten most significant business divorce cases.
This year’s list includes four important appellate decisions, including one likely to stand as a landmark...more
12/31/2018
/ Appeals ,
Article III ,
Breach of Duty ,
Business Divorce ,
Business Ownership ,
Business Valuations ,
Closely Held Businesses ,
Corporate Counsel ,
Corporate Dissolution ,
Derivative Suit ,
Family Businesses ,
Fiduciary Duty ,
First Impression ,
Limited Liability Company (LLC) ,
Minority Shareholders ,
Partnerships ,
Standing
Almost always there are elements of acrimony and intense emotion in litigation between co-owners of closely held business entities. The degree of toxicity can vary widely from case to case, although it tends to show up more...more
The combination of majority rule and lack of exit rights leaves minority members of LLCs vulnerable to oppressive conduct by the majority, yet unlike legislation in most states giving dissolution and buy-out remedies to...more
There’s little doubt in my mind that “business divorce” has achieved name recognition as a distinct subgenre of commercial litigation whose regular practitioners, by dint of experience dealing in and out of court with the...more
1/10/2017
/ Appraisal ,
Business Entities ,
Business Valuations ,
Choice-of-Law ,
Closely Held Businesses ,
Contract Terms ,
Corporate Dissolution ,
Dissolution ,
Freeze-Out Mergers ,
Internal Controls ,
Jurisdiction ,
Mergers ,
Reverse Stock Splits
What makes a shareholder a shareholder? What makes an LLC member a member?
The simplicity of the questions belies the difficulties and endlessly unique fact patterns encountered in case after case involving close...more
12/19/2016
/ Breach of Duty ,
Closely Held Businesses ,
Declaratory Judgments ,
Fiduciary Duty ,
Hiring & Firing ,
Judicial Dissolution ,
Likelihood of Success ,
Limited Liability Company (LLC) ,
Members ,
Membership Interest ,
Operating Agreements ,
Preliminary Injunctions ,
Shareholders ,
Standing ,
Stock Purchase Agreement ,
Stock Transfer Restrictions