Law Brief ®: Alan Gaynor and Richard Schoenstein Explore Business Divorce
Episode 4: John Cunningham Interview on Avoiding LLC Deadlock
In matters of corporate divorce, deadlock, majority oppression, or usurpation of corporate opportunities are all well-tread grounds for disputes between co-owners of closely held entities. These disputes often culminate in...more
While no one enters a partnership expecting it to end in divorce, no one is immune to failure. In the world of business, partnerships can sometimes mirror the complexities of personal relationships. Often, it is the “we’ve...more
Resolving ownership disputes with a buyout at auction has a tempting simplicity. The buyout gives the owners the divorce they need. And the auction—particularly a blind auction, in which no owner is aware of the other’s...more
It seems a bit exaggerated to liken the deterioration of a relationship between 50/50 business partners to a fatal disease, but in the case of Pathology Associates of Ithaca, P.C., recently pronounced dead by act of judicial...more
Since its legislative birthing in New York in 1994, the limited liability company has become the preferred choice of entity New York and across the country. Over the ensuing 15 years or so, New York’s lower courts struggled...more
The statutes authorizing judicial dissolution of Delaware LLCs (LLC Act § 18-802) and New York LLCs (LLC Law § 702) essentially are the same: the petitioner must show that it is no longer “reasonably practicable” to carry on...more
Plaintiff Lee Norris and defendant James Schaafsma are the sole member-managers of a development company – defendant Greymont Development, LLC – and disagree about the propriety of a derivative action initiated by Schaafsma...more
The Coster v. UIP Companies, Inc. decision provides a framework for evaluating stockholder disenfranchisement claims. Directors should carefully consider how, and under what conditions, they will take actions that dilute...more
Despite being one of the more well-known doctrines in corporate law, the rule articulated in Blasius—that directors who act with the primary purpose of interfering with a stockholder vote must have a compelling justification...more
A Delaware Court of Chancery case decided earlier this year provides some useful guidance on the interpretation of LLC agreements and what constitutes a “deadlock” under Delaware law. The case, Mehra v. Teller, involved a...more
On the latest Law Brief ® episode, Corporate & Securities Partner Alan Gaynor joins Partner and Host Rich Schoenstein to discuss business divorces for closely-held corporations. They explore how the courts typically approach...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
Here in the New York metro area, for the first time in years winter is living up to its name. The snow-plowed streets and sub-freezing temperatures are a natural setting for this sixth annual edition of Winter Case Notes in...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
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
Usually I open my annual Summer Shorts post with some breezy comment about summer vacations, travel, or poolside reading. But this shelter-at-home year we find ourselves living and working in profoundly different...more
There are countless New York corporations in which the owners are equal 50/50 shareholders and co-members of a two-member board. Where one sues the other for judicial dissolution, and the ground for dissolution is “deadlock”...more
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
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
This week, I have been writing about Section 308 of the California Corporations Code. Subdivision (b) of the statute authorizes the Superior Court to appoint one or more provisional directors when "the shareholders of a...more
Monday's post concerned the appointment of one or more provisional directors pursuant to California Corporations Code Section 308. The statute requires that a provisional director be an "impartial person". In addition, the...more
Section 308 authorizes the Superior Court to appoint a provisional director in two different circumstances. Although both involve the existence of a deadlock, the conditions under which a provisional director may be appointed...more
Shareholders A and B are the sole shareholders of a real estate holding corporation. Their shareholders’ agreement includes provisions that...more
Mediation, as commonly understood in the context of alternative dispute resolution, employs a neutral third party to facilitate negotiation and voluntary agreement between the parties. Unlike arbitration, the mediator does...more
We call it deadlock dissolution when a 50% shareholder of a close corporation, who claims to be at an impasse with the other 50% shareholder, asks the court to dissolve and liquidate the corporation....more