A watershed moment or a forgettable outlier? It is often difficult to predict how much a novel decision will impact the body of laws governing closely-held corporations and their shareholders. Decisions that seem the most...more
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
3/21/2022
/ Accounting ,
Books & Records ,
Breach of Contract ,
Business Disputes ,
Business Divorce ,
Business Litigation ,
Derivative Suit ,
Fiduciary Duty ,
Minority Shareholders ,
Operating Agreements ,
Shareholder Distributions
Two principles often guide courts’ interpretation and enforcement of contracts. First, courts respect parties’ freedom of contract, mostly. So long as an agreement is not illegal or violative of a strong public policy,...more
In an earlier post, I offered a broader-than-usual overview of certain key rights that a minority owner holds in a closely-held business: the right to vote on company action, the right to inspect books and records, the right...more
“Except as provided in the operating agreement. . . ” -
By my count, this phrase and its close relative, “unless otherwise provided in the operating agreement,” appear 59 times in New York’s LLC Law, most often to...more
The pages of this blog are filled with cases pitting a minority owner of a closely-held business—most often a corporation or an LLC—against the majority. Books and records proceedings, derivative actions brought on behalf of...more
The books and records proceeding often is the first time that a dispute between a minority shareholder and the majority enters the courtroom. Suspicious of misconduct or mismanagement, the minority shareholder demands to...more
1/10/2022
/ Books & Records ,
Business Disputes ,
Business Divorce ,
Corporate Misconduct ,
Fair Valuation ,
Financial Statements ,
Inspection Rights ,
Shareholder Litigation ,
Shareholders ,
Stocks ,
Tax Returns
For owners of closely-held businesses, there are few provisions meriting more attention in an owners’ agreement than the buy-sell agreement. Buy-sell agreements come in many different forms, and the best ones are designed to...more
We often cover preliminary injunctions on the pages of this blog because they are a powerful tool in the business divorce litigator’s toolbox: they force court action early in the case, they can protect rights that are...more
10/18/2021
/ Business Divorce ,
Business Litigation ,
Closely Held Businesses ,
Contract Terms ,
Limited Liability Company (LLC) ,
Membership Interest ,
Motion To Enjoin ,
Operating Agreements ,
Preliminary Injunctions ,
Reorganizations ,
Right of Reinstatement ,
Termination Rights
In March 2020, the New York State Courts and attorneys’ offices all over the state shut down as part of the public’s broad effort to slow the spread of the Coronavirus, and the legal profession quickly transitioned to remote...more
Business divorce has a way of drawing quick and often lopsided battle lines. Many disputes in closely-held companies feature one outspoken owner feuding with a united group of the remaining owners over management or...more
Of all the factors considered by business divorce lawyers and appraisers when valuing an owner’s interest in a closely-held company, the calculation and applicability of a discount for lack of marketability (“DLOM”) is among...more
Commercial Division justices have been trailblazers in the bench’s efforts to improve the diversity and inclusiveness of the attorneys appearing before them. For example, many Commercial Division justices include in their...more
The right of shareholders to elect a corporation’s directors is one of the most valuable rights attendant to share ownership. Election of directors is where shareholders can directly exert their influence on the corporation,...more
7/26/2021
/ Board of Directors ,
Business Disputes ,
Business Divorce ,
Business Litigation ,
Closely Held Businesses ,
Corporate Governance ,
Director Nominations ,
Director Removal ,
Fine Art ,
Injunctions ,
Likelihood of Success ,
Minority Shareholders ,
Motion To Enjoin ,
Shareholder Meetings ,
Shareholders ,
Voting Rights
Parties to a contract generally can include in their agreement a provision preventing assignment of the agreement’s rights and remedies without the consent of both parties. ...more
Under both New York and Delaware law, members of an LLC may petition for judicial dissolution on the grounds that the management is so hopelessly deadlocked that the LLC can no longer function in accordance with its purpose...more
The statute of limitations to recover on a breach of contract is six years. Parties can extend that limitations periods by agreement, and New York General Obligations Law 17-101 governs the form of such agreements. ...more
In most of the business valuation cases that I’ve litigated, it’s not long before one side accuses the other’s valuation expert of mixing apples and oranges. And at the risk of endorsing the overused expression, it’s easy to...more
One of the more attractive features of LLCs as a business organization is that they are, in large part, creatures of contract. Most provisions in the NY LLC Law are default rules, and members are free to adopt those or...more
The New York Commercial Division was created in 1993 “to test whether it would be possible, by concentrating on commercial litigation, to improve the efficiency with which such matters were addressed by the court and, at the...more
BCL 626 governs shareholder derivative actions, or suits brought by individual shareholders on behalf of, and for injury to, the corporation. Subsection (e) provides that if the plaintiff—the individual shareholder asserting...more
The statutes of limitations set forth in the CPLR are default rules, and parties generally are free to modify default rules by agreement. But statutes of limitations also further the important public interests, such as...more
11/18/2020
/ Construction Defects ,
Construction Project ,
Contract Disputes ,
Contract Terms ,
CPLR ,
Indemnification ,
Public Projects ,
Public Works ,
State Contractors ,
Statute of Limitations ,
Tolling
A minority shareholder petitioning for dissolution under BCL § 1104-a must establish, by a preponderance of the evidence, that the majority shareholders have engaged in “illegal, fraudulent or oppressive actions,” (BCL §...more
In 2015, our colleagues in the white-collar criminal defense bar braced for the impact of a memorandum penned by then Deputy Attorney General Sally Yates. The Yates Memo encouraged both federal prosecutors and civil...more
9/16/2020
/ Commercial Court ,
Consultants ,
Contract Terms ,
Corporate Misconduct ,
Defense Strategies ,
Derivatives ,
Deutsche Bank ,
Financial Crisis ,
Securities and Exchange Commission (SEC) ,
Settlement Agreements ,
Third-Party ,
Unconscionable Contracts ,
Whistleblower Awards ,
Whistleblowers ,
White Collar Crimes ,
Yates Memorandum
Several weeks ago, I had the pleasure of first appearing on this blog, with a piece about a Delaware Chancery Court decision considering—as a matter of apparent first impression—whether an LLC could exercise, then walk back a...more