“It all started when the distributions stopped.” In my travels as a business divorce litigator, I’ve seen many disputes between LLC co-owners that begin with that message. A minority owner is content to remain a “silent...more
The last time we featured a notable decision on a claim for dissolution of a restaurant-operating LLC was in 2017, with a post by Frank McRoberts titled, “LLC’s Purpose Being Achieved? Business Doing Fine? Good Luck Getting...more
One need not peruse the pages of this blog for long to learn that its authors strongly advise against entering into an owners’ agreement that calls on the members to “annually” (or worse, “regularly”) update a critical aspect...more
The owners’ agreement is the backbone of the closely-held business. In intracompany LLC disputes, few things are more important than what the operating agreement has to say on the subject. As a consequence, the pages of...more
One of the most difficult periods in the lifecycle of a closely-held company is the period following the death of an owner. Apart from having to fill whatever business responsibilities the deceased owner left behind, the...more
The members of Nite Cap’s owner, Bull-Poet, LLC, recently traded the full sheets and gentle seas of the Hudson for the strum and drang of litigation in New York’s Supreme Court. But the squall has passed; thanks to New York...more
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
New York’s default rules regarding LLC members’ rights to transfer their interests appear in sections 603 and 604 of the LLC Law. Section 603 provides that a membership interest is fully assignable, but the assignee does not...more
9/19/2022
/ Acquiescence ,
Business Divorce ,
Business Litigation ,
Contract Terms ,
Default ,
Equitable Defenses ,
Limited Liability Company (LLC) ,
Loans ,
Membership Interest ,
Operating Agreements ,
Transfer of Interest ,
Void ab initio
Nestled between Broadway and Church Street in New York City’s hottest neighborhood is the landmarked, stone-façade building at 66-68 Reade Street. Now marketed as the superluxury boutique condominium complex 66 Reade, the...more
8/22/2022
/ Breach of Duty ,
Business Disputes ,
Business Divorce ,
Business Litigation ,
Buy-Sell Agreements ,
Capital Calls ,
Fiduciary Duty ,
Fraudulent Inducement ,
Operating Agreements ,
Real Estate Development ,
Self-Dealing
The emergence of the Limited Liability Company as the preferred form of closely-held business association in New York has spawned a glut of litigation over disputed membership status in LLCs, many of which are covered in the...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
“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
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
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
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
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