Welcome to this 14th annual edition of Summer Shorts. This year’s edition features brief commentary on three recent decisions by New York courts in business divorce cases. The featured cases involve a suit pitting three...more
8/12/2024
/ Bankruptcy Court ,
Bonds ,
Business Disputes ,
Business Divorce ,
Chapter 11 ,
Dissolution ,
Fair Valuation ,
Family Businesses ,
Limited Liability Company (LLC) ,
Minority Shareholders ,
Operating Agreements ,
Partnership Agreements
Delaware Chancery Court’s contractarian approach to all things LLC, embedded statutorily in Section 18-1101(b) of the Delaware LLC Act (“It is the policy of this chapter to give the maximum effect to the principle of freedom...more
Business divorce and non-judicial (a/k/a voluntary) dissolution of a business entity rarely intersect. But when they do, or even in a non-business divorce setting, if a business owner needs to rescind a certificate of...more
Someday, perhaps, I’ll find the comedic inspiration to come up with a joke that begins, “An LLC, a partnership, and a close corporation walk into a bar . . ..” Until then, I’ll have to satisfy myself with writing about an...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
Unlike the vast majority of states, New York hasn’t adopted the Revised Uniform Partnership Act (1997) (“RUPA”). A recent appellate decision by a court in a neighboring RUPA state — New Jersey — highlights the very different...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
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
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
“The Company is formed for any valid business purpose”
Nine seemingly benign words in the garden-variety operating agreement of a realty holding LLC. Nine words that, as one judge opined under similar circumstances some...more
There’s tremendous diversity from state-to-state when it comes to statutory and judge-made law in business divorce cases. The basic fact patterns one sees in cases from across the country, however, don’t vary nearly as much....more
9/14/2020
/ Business Divorce ,
Business Valuations ,
Buyouts ,
Dissolution ,
Distribution Rules ,
Fair Value Standard ,
Family Businesses ,
Fiduciary Duty ,
Limited Liability Company (LLC) ,
Receivership ,
Shareholders ,
Shareholders' Agreements ,
Stock Transfer
With apologies to the King James Bible, what the Manhattan real estate market giveth, a poorly conceived partnership agreement taketh away.
It’s the best explanation I can offer for three successive lawsuits lasting almost...more
FGLS Equity LLC was one of many feeder funds caught up in the maelstrom that followed the exposure and meltdown in 2008 of the Bernie Madoff Ponzi scheme. It lost virtually all of its money in its account with Bernard L....more
I’ve yet to see him make a court appearance, and hope I never do, but the Grim Reaper sure has a knack for disrupting business divorce litigation involving LLCs and limited partnerships....more
2/10/2020
/ Assignments ,
Automatic Stay ,
Breach of Duty ,
Business Disputes ,
Business Divorce ,
Business Litigation ,
Commercial Court ,
Controlling Person ,
Decedent Protection ,
Derivative Suit ,
Dissolution ,
Family Businesses ,
Fiduciary Duty ,
Fraud ,
Limited Liability Company (LLC) ,
Limited Partnerships ,
Ownership Interest ,
Partnership Interests ,
Partnerships ,
Real Estate Market ,
Statutory Interpretation ,
Transfer of Control ,
Unfair Dealing
Not for the first time, I find myself intrigued by the federal courts’ resistance to hearing state law claims for judicial dissolution of business entities where subject matter jurisdiction otherwise exists based on diversity...more
1/13/2020
/ Breach of Duty ,
Business Divorce ,
Business Entities ,
Business Litigation ,
Commercial Court ,
Commercial Leases ,
Common Law Claims ,
Contract Renewal ,
Damages ,
Derivative Suit ,
Dissolution ,
Fiduciary Duty ,
First Impression ,
Holding Companies ,
Investment ,
Judicial Dissolution ,
Nonprofits ,
Shareholder Litigation ,
Shareholder Rights ,
Shareholders ,
State Law Claims ,
Statutory Interpretation ,
Statutory Violations ,
Subject Matter Jurisdiction ,
Unjust Enrichment
This year’s list offers a good mix of business entities: six involve disputes among LLC members, two involve law firms organized as limited liability partnerships, one involves an accounting firm organized as a professional...more
12/30/2019
/ #MeToo ,
Bad Faith ,
Business Divorce ,
Conflicts of Interest ,
Corporate Culture ,
Corporate Deadlock ,
Damages ,
Defense Strategies ,
Dissolution ,
Employer Liability Issues ,
Employment Litigation ,
Family Businesses ,
First Impression ,
General Partner ,
Holding Companies ,
Hostile Environment ,
Judicial Dissolution ,
K-1 ,
Limited Liability Company (LLC) ,
Minority Shareholders ,
Sexual Harassment ,
Shareholder Oppression
In 2018, two members of a realty holding LLC sought judicial dissolution based on the death of one of the other members. The operating agreement defines a member’s death as an event of “Dissociation.”...more
11/18/2019
/ Appeals ,
Business Divorce ,
Business Litigation ,
Contract Disputes ,
Contract Negotiations ,
Contract Terms ,
Decedent Protection ,
Dismissals ,
Dissolution ,
Inheritance ,
Judicial Dissolution ,
Limited Liability Company (LLC) ,
Membership Interest ,
Operating Agreements ,
Property Valuation ,
Real Estate Market ,
Rental Property
It’s Not Too Late to Register for the LLC Institute!
The annual LLC Institute is a unique gathering of professionals and academics from across the country for two days of programs on transactional, litigation, and taxation...more
The nationwide landscape of statutes and case law governing judicial dissolution of limited liability companies exhibits more state-to-state similarity than dissimilarity....more
9/23/2019
/ Business Divorce ,
Business Litigation ,
Buyouts ,
Capital Contributions ,
Contract Terms ,
Corporate Purpose ,
Dissolution ,
Judicial Dissolution ,
Limited Liability Company (LLC) ,
Membership Interest ,
Operating Agreements ,
Sale of Assets ,
Statutory Interpretation
It’s that time of year again, when I offer some lighter fare for poolside consumption consisting of summaries of a few recent decisions of interest involving disputes between business co-owners....more
8/12/2019
/ Breach of Duty ,
Business Divorce ,
Buyouts ,
Contract Terms ,
Dissolution ,
Fiduciary Duty ,
Legal Representatives ,
Limited Liability Company (LLC) ,
Limited Partnerships ,
Minority Shareholders ,
Non-Reliance Clauses ,
Pass-Through Entities ,
Settlement Agreements ,
Shareholder Litigation ,
Shareholder Oppression
It’s commonly said there are three things that matter with real estate: location, location, location. Likewise, three things matter when choosing a lawyer to set up a limited liability company: experience,...more
6/18/2019
/ Agribusiness ,
Business Divorce ,
Business Formation ,
Business Litigation ,
Business Partners ,
Dissolution ,
Family Businesses ,
Farms ,
K-1 ,
Legal Representatives ,
Limited Liability Company (LLC) ,
Operating Agreements ,
Transfer of Interest
This is the story of a deadlock resolution provision that backfired. It is a long story — 94 pages long to be exact. That is the length of Chancellor Bouchard’s characteristically detailed and thorough post-trial opinion...more
5/20/2019
/ Business Divorce ,
Contract Terms ,
Corporate Deadlock ,
Delaware Limited Liability Company Act ,
Dissolution ,
Limited Liability Company (LLC) ,
Opioid ,
Pain Management ,
Pharmaceutical Industry ,
Prescription Drugs ,
Startups
The family-owned business at the center of Vaccari v Vaccari, 2018 NY Slip Op 30546(U) [Sup Ct NY County Mar. 28, 2018], decided last month by veteran Manhattan Commercial Division Justice Eileen Bransten, is a classic...more
4/9/2018
/ Accounting ,
Attorney's Fees ,
Breach of Duty ,
Business Litigation ,
Commercial Court ,
Conversion ,
Dissolution ,
Divorce ,
Failure To State A Claim ,
Family Businesses ,
Fiduciary Duty ,
Injunctive Relief ,
Joint Venture ,
Motion to Dismiss ,
Shareholder Oppression ,
Summary Judgment ,
Unjust Enrichment
There’s a lot to digest in last week’s decision by the Court of Appeals — New York’s highest court — affirming and modifying in part the intermediate appellate court’s ruling in Congel v Malfitano, a “wrongful dissolution”...more