There is perhaps no provision in an LLC operating agreement more susceptible to abuse than one allowing those in control of the LLC to make mandatory capital calls. For one, that authority often comes with very few...more
It’s difficult to assess the potency of section 417(a) of New York’s LLC law. The provision starts off with a seemingly broad rule: “The operating agreement may set forth a provision eliminating or limiting the personal...more
In addition to blooming trees and longer days, spring in New York has ushered in a fresh crop of noteworthy decisions on intra-LLC disputes. Headliners include a boost to members’ rights to compel an accounting courtesy of...more
It’s been 15 years since the Second Department’s decision in Matter of 1545 Ocean Avenue, LLC, 72 AD3d 121, 2010 NY Slip Op 00688 (2d Dept Jan. 26, 2010), which established the standard for judicial dissolution of limited...more
“There is only going to be one winner here, and it’s not going to be you—give in while there is something still left in it for you,” said one LLC member to the other. With co-owners like that, who needs enemies?...more
I am increasingly encountering businesses that straddle across several different entities, especially LLCs. The popularity of LLCs, their relatively low cost of organization, and business owners’ apparent desire to...more
November was a whirlwind month for New York LLC litigation. It featured disputes over how to wind up a judicially dissolved LLC, a bitter intra-family emergency indemnification/advancement injunction, and the finale of a...more
The limited liability company is relatively young. Though origin research is always a dubious task, my efforts tell me that the first LLC was created in 1977 in Wyoming, followed by other LLCs in Florida in 1982. The years...more
In the world of business divorce litigation, this summer saw everything but a slowdown. We witnessed (and blogged about) Justice Crane cap a long-running fair value proceeding with helpful guidance on appraisals and...more
“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
Just a few weeks ago, I commented on a recent uptick in disputes centered on the breakup of professional services firms. In those disputes, we expect that the demands of the legal, accounting, and medical professions draw...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
When a closely-held business is profitable, self-interested owners naturally want a bigger slice of the pie, especially where the personal relationships among the owners are frayed. Perhaps that’s why we often discuss the...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
11/20/2023
/ Books & Records ,
Business Disputes ,
Business Divorce ,
Business Litigation ,
Inspection Rights ,
Limited Liability Company (LLC) ,
Membership Interest ,
Merger Clause ,
Ownership Interest ,
Shareholder Rights ,
Shareholders
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
Over its three-decade rise to the closely-held business entity of choice, the Limited Liability Company has won a special place in our hearts. The majority of disputes we litigate and blog about concern ownership of or...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
4/10/2023
/ Board of Directors ,
Business Disputes ,
Business Divorce ,
Business Litigation ,
Contract Terms ,
Corporate Governance ,
Director Nominations ,
Limited Liability Company (LLC) ,
Private Right of Action ,
Shareholders ,
Voting Rights
Having spent the better part of my career litigating disputes between minority and majority owners of closely-held businesses, I can comfortably say that all else equal, I would prefer to be a minority shareholder of a New...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
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
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