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“Under any standard of value, the true economic value of a business enterprise will equal the company’s accounting book value only by coincidence . . .” says the late business valuation expert and author Shannon Pratt. So...more
In my business divorce practice I deal with many closely held corporations that have only a few or perhaps just two shareholders, each of whom is actively involved in running the business. Within that category are many...more
There are many paths to a fair value appraisal proceeding. A road less traveled begins at Section 910 of the Business Corporation Law (the “BCL”). ...more
Welcome to this year’s Winter Case Notes where, amidst the arctic blast currently sweeping most of the nation, I offer shortish takes on several court decisions in recent business divorce cases. This year’s edition...more
Some years are easier than others to select the most significant business divorce cases. In this, the 16th year I’ve published this top-10 list, the task is made especially difficult by a veritable flood of court decisions...more
The books and records demand often is the opening act in business divorce litigation. The relatively low burden that an owner must meet in order to obtain access to a company’s books and records, and the availability of an...more
New York courts are not in the vanguard when it comes to devising less drastic, alternative remedies in LLC judicial dissolution cases. In their defense, there’s nothing in Article 7 of New York’s LLC Law that expressly...more
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
MiniCorp has five shareholders, all of whom are employees. Each shareholder’s employment agreement states that they are an at-will employee of MiniCorp, and the shareholders agreement provides that when a shareholder’s...more
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
Driscoll and King were partners in a venture operating a restaurant. Their relationship soured, and so as not to sour matters for their customers, they sought to separate amicably. The deal was to be that King would buy out...more
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
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
There is arguably no more prevalent legal claim in business divorces than a claim of breach of a fiduciary duty. Simply put (and I do mean simply), when one person owes a fiduciary duty to another, the person with the duty...more
In 1941, two of the three shareholders of Ringling Bros.-Barnum & Bailey Combined Shows, Inc. entered into an agreement stating that they would vote their combined 630 of the outstanding 1000 shares of Ringling Bros. stock...more
De facto dividend. Disguised dividend. Constructive dividend. They all refer to the same thing: monies in excess of reasonable compensation taken by owners of closely held companies, booked as deductible employment...more
Nine months ago, we wrote about a 20% shareholder, Alvin Clayton Fernandes, whose bare bones petition Manhattan Supreme Court Justice Frank P. Nervo found stated sufficient grounds to judicially dissolve a seemingly...more
In Pennsylvania, Manufactured Deadlocks are Unlikely to Trigger Judicial Dissolution - In disputes among the owners of a closely held company, involuntary judicial dissolution is the nuclear option....more
This blog frequently covers cases considering a shareholder’s request to dissolve a corporation under New York’s oppression-based corporate dissolution statute, BCL 1104-a. That statute allows a shareholder to petition for...more
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
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
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
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
Very few divorces end with a clear “winner” as famously observed by the late, great Jerry Reed in “She Got the Goldmine (I Got the Shaft).” That is as true in a personal divorce as it is a “business divorce.” Business...more
David F. Johnson presented his paper “Business Divorce: Minority Shareholder Rights In Texas” to the State Bar of Texas’s Business Disputes Course on September 2-3, 2021. This presentation addressed shareholder oppression...more