News & Analysis as of

Business Litigation Derivative Suit

Farrell Fritz, P.C.

Breach of Fiduciary Duty: A More “Lenient Standard” for Damages?

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If Sisyphus were a judge, he’d be assigned the Fuks case. Fuks began on December 26, 1996. Fire up your mental time machine, travel back in time, and picture what was going on in your life those many years ago....more

Farrell Fritz, P.C.

Limo Company Shareholders Can't Hitch a Ride in Derivative Litigation

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Closely-held business entities come in all shapes and sizes. By definition, under Partnership Law § 10, it takes “two or more” owners to form a general partnership. But corporations and LLCs have no such impediment, ranging...more

Farrell Fritz, P.C.

Limo Company Shareholders Can’t Hitch a Ride in Derivative Litigation

Farrell Fritz, P.C. on

Closely-held business entities come in all shapes and sizes. By definition, under Partnership Law § 10, it takes “two or more” owners to form a general partnership. But corporations and LLCs have no such impediment, ranging...more

A&O Shearman

Delaware Supreme Court Holds MFW Is Applicable To Controlling Stockholder Transactions Even Outside Of Freeze-Out Context

A&O Shearman on

On April 4, 2024, in an opinion authored by Chief Justice Collins J. Seitz, Jr., the Supreme Court of Delaware sitting en banc held that the framework articulated in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014)...more

Farrell Fritz, P.C.

The Flexible “For Cause” Standard for Director and Officer Removal

Farrell Fritz, P.C. on

Sections 706 (d) and 716 (c) of the Business Corporation Law (the “BCL”) both contain a “for cause” standard for judicial removal of corporate directors and officers. Complaints with claims for judicial corporate director and...more

Farrell Fritz, P.C.

Damages or Rescission? When Electing Fraud Remedies Choose Wisely

Farrell Fritz, P.C. on

Imagine devoting years of costly litigation to rescinding a $1 million equity investment in an LLC for fraudulent inducement, prevailing on the merits by clear and convincing evidence after a full trial, but losing anyway...more

DarrowEverett LLP

Diversity Driven Derivative Suits: Culture Wars Come to the Boardroom

DarrowEverett LLP on

Traditionally deployed to protect a corporation from its board’s imprudent investment or financial decision-making, in recent years shareholders have taken to bringing derivative actions on a corporation’s behalf for its...more

Farrell Fritz, P.C.

Derivative into Direct and Waived into Preserved: The Transformative Power of the Implied Covenant of Good Faith and Fair Dealing

Farrell Fritz, P.C. on

The distinction between direct and derivative claims pervades business divorce litigation.  Whether a dissident owner’s claim against his or her co-owners is a direct claim (one that the owner can assert in their individual...more

Epstein Becker & Green

Potential Restraints on Counterclaims Interposed in a Derivative Suit

Shareholders who sue derivatively on behalf of a corporation are often faced with counterclaims against them as individuals. The issue of whether such counterclaims are properly interposed against a shareholder in their...more

Farrell Fritz, P.C.

Can a Shareholder Suing Derivatively Face Countersuit Individually?

Farrell Fritz, P.C. on

That was the interesting, infrequently-litigated question addressed in a recent decision by Manhattan Commercial Division Justice Melissa A. Crane. Simon v FrancInvest, S.A. (2023 NY Slip Op 32422[U] [Sup Ct, NY County...more

Farrell Fritz, P.C.

Legal Déjà Vu: The Law of Preclusion and Re-Litigation of Standing-Based Dismissals

Farrell Fritz, P.C. on

Dismissals for lack of standing are routine in business divorce cases. Examples abound on this blog. Litigation over standing to sue takes an outsized role in business divorce cases for many reasons....more

Farrell Fritz, P.C.

Can One 50% Shareholder Sue the Other in the Company Name on the Company Dollar? Answer: It Depends

Farrell Fritz, P.C. on

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

Katten Muchin Rosenman LLP

Texas (Business) Courts to Open for Business: Law Creating Specialized Business Courts in Texas Becomes Official

Last Friday, June 9, Texas Governor Greg Abbott signed Texas House Bill 19, which codifies a business court system in Texas. Similar to the commercial court systems that exist in Delaware and New York, Texas's business court...more

Farrell Fritz, P.C.

Greetings from the American Bar Association’s 2023 LLC Institute

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Over its three-decade rise to the closely-held business entity of choice, the Limited Liability Company has won a special place in our hearts.  The majority of disputes we litigate and blog about concern ownership of or...more

Freiberger Haber LLP

Derivative Standing and The Internal Affairs Doctrine

Freiberger Haber LLP on

By: Jeffrey M. Haber The internal affairs doctrine is a “conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs—matters peculiar to the...more

Farrell Fritz, P.C.

Derivative Standing and the Internal Affairs Doctrine

Farrell Fritz, P.C. on

Choice-of-law questions in shareholder derivative lawsuits venued in New York courts involving out-of-state or international entities can be confoundingly difficult, even for appeals court judges....more

Farrell Fritz, P.C.

Misappropriated Watering Hole Becomes Money Judgment Sinkhole

Farrell Fritz, P.C. on

Occasionally, we come across post-trial decisions with such scathing rebuke of one side that it’s difficult to imagine why the loser ever chose to take the case to trial. O’Mahony v Whiston is a perfect example....more

Robson & Robson, P.C.

Pennsylvania’s Alternative Path For Minority Shareholders Who Can’t Pass Federal Rule Of Civil Procedure 23.1’s “Adequate...

Robson & Robson, P.C. on

When shareholders of a company believe the leaders of the company have breached their fiduciary duties to it, they can bring a lawsuit against those leaders in one of two ways. Shareholders can bring the suit in their own...more

Farrell Fritz, P.C.

A Recurring Business Divorce Feature: Usurpation of Corporate Opportunity

Farrell Fritz, P.C. on

One of the earliest signs that a closely-held business is headed for divorce lies in how its owners treat new opportunities. When the relationship among the owners reaches a certain level of distrust, an owner presented with...more

Farrell Fritz, P.C.

The “Conflict of Interest” Defense to Shareholder Derivative Standing

Farrell Fritz, P.C. on

In shareholder derivative litigation, defendants occasionally argue that the plaintiff – who ostensibly sues on behalf of the company and its owners in a fiduciary capacity – has some form of conflict of interest with the...more

Farrell Fritz, P.C.

Business Divorce, Brooklyn Style

Farrell Fritz, P.C. on

The pictured architectural rendering of the sunlit Kings County Supreme Courthouse at 360 Adams Street, completed in 1957, doesn’t quite capture the reality of its dour, hulking presence in downtown Brooklyn. Its design...more

Patton Sullivan Brodehl LLP

Derivative Claim Standing: Both Contemporaneous And Continuous Membership Required

When an LLC suffers primary harm that also indirectly harms the LLC’s members, the cause of action generally belongs to the LLC, not its members. Only if the LLC (through its duly authorized management) fails to pursue the...more

Farrell Fritz, P.C.

LLCs, Direct vs. Derivative Claims, and Special Litigation Committees: A Lively Debate

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The current issue of The Business Lawyer, a quarterly publication of the ABA’s Business Law Section that rightly bills itself as “the premier business law journal in the country,” features a pair of dueling articles of great...more

Farrell Fritz, P.C.

Equitable Standing in Shareholder Derivative Suit Bows to the Contemporaneous Ownership Rule

Farrell Fritz, P.C. on

In 2008, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery — one of the many intellectual giants and gifted writers who’ve occupied seats on that bench — published an article in the Delaware Journal of...more

Farrell Fritz, P.C.

But What of the Equitable Accounting?

Farrell Fritz, P.C. on

I can’t say what the number is, but my own experience tells me that a significant percentage of lawsuits by a minority owner of a closely-held company against those in control of the company include a demand for an...more

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