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Limited Liability Company (LLC) Contract Terms Business Divorce

Bradley Arant Boult Cummings LLP

The Risks of 50-50 Owned Business Partnerships: This Marriage of Equals Does Not Guarantee Success

During Valentine’s Day month, we are taking a look at 50-50 owned private businesses. Forming a co-owned company may sound like a good idea on paper because the two partners are close friends or family members who are making...more

Farrell Fritz, P.C.

Did Chancery Court Just Crack Open the Door to Equitable Dissolution of LLCs?

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Delaware Chancery Court’s contractarian approach to all things LLC, embedded statutorily in Section 18-1101(b) of the Delaware LLC Act (“It is the policy of this chapter to give the maximum effect to the principle of freedom...more

Farrell Fritz, P.C.

Crossing the Hudson: Recent Business Divorce Decisions from Yonder States

Farrell Fritz, P.C. on

Folks who’ve been following this blog for years know that periodically I like to venture beyond New York’s borders to find and report on interesting decisions from other states in business divorce cases....more

Farrell Fritz, P.C.

New York Appellate Court’s Split Decision Involving Delaware LLC Pits “Harsh” Contractarianism Against “Fundamental Fairness”

Farrell Fritz, P.C. on

Last week, the Manhattan-based Appellate Division, First Department, handed down one of the more intriguing decisions by a New York court I’ve seen in a long time involving a dispute between LLC members....more

Farrell Fritz, P.C.

Dissolution Defined: The First Department’s Recent Guidance on Interpreting Operating Agreements

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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

Farrell Fritz, P.C.

First Department Recognizes Cause of Action for Specific Performance of LLC Member Voting Agreement

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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

Farrell Fritz, P.C.

Scrivener’s Error Keeps Sailboat-Owning LLC Afloat

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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

Farrell Fritz, P.C.

And a Time to Every Purpose Under . . . the Operating Agreement?

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It’s a bit of a stretch to suggest that King Solomon prophesied the standard for judicial dissolution of LLCs, but there it is: under New York’s judicially construed standard for involuntary dissolution under Section 702 of...more

Farrell Fritz, P.C.

The Contract is King: Advancement and Indemnification Under Delaware Law

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In last week’s New York Business Divorce, we wrote about an important decision from New York’s highest court, Sage Sys., Inc. v Liss (___ NY3d ___, 2022 NY Slip Op 05918 [Ct App Oct. 20, 2022]). In Sage, the Court of Appeals...more

Farrell Fritz, P.C.

Warning: If You Want Legal Fee Advancement or Indemnification, You May Need to Amend Your Partnership, Shareholder, or Operating...

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The universe works in mysterious ways. Four days ago, when I sat down to write this article, my plan was to feature a decision from Manhattan Commercial Division Justice Andrea J. Masley denying dismissal of a closely-held...more

Farrell Fritz, P.C.

Magic Words Still Matter, and Equitable Defenses Can’t Save a “Void” Transfer

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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

Farrell Fritz, P.C.

Anti-Dissolution Provisions and Public Policy

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In Congel v Malfitano, New York’s highest court wrote that business partners are free to include in partnership contracts practically “any agreement they wish,” including about “the means by which a partnership will dissolve,...more

Bradley Arant Boult Cummings LLP

Avoiding the Pitfalls of Assigning an Interest in an LLC

One of the goals in a business divorce is finality – ending a business relationship once and for all. But what if the end isn’t really the end?...more

Farrell Fritz, P.C.

The Operating Agreement Controls, Unless Public Policy Says Otherwise

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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

Farrell Fritz, P.C.

A Two-Act Play of LLC Default Rules and Manager Removal

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“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

Farrell Fritz, P.C.

The Skinny on Arbitrability of Judicial Dissolution Claims

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Are claims for judicial dissolution of business entities arbitrable? - It’s a question I’m occasionally asked by business owners and, surprisingly, by lawyers. I say surprisingly because here in New York, the courts long...more

Farrell Fritz, P.C.

Disguised Agreements and Dissolution

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Appearances can be deceiving. - That, essentially, was the argument made in two recently decided cases involving claims for judicial dissolution. ...more

Farrell Fritz, P.C.

Cooked or Raw? Enforceability of Partly Signed Operating Agreements

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The harried realities of modern life are such that business entity organizational documents, like LLC operating agreements, sometimes do not get drafted or executed until long after the entity’s initial formation with the...more

Farrell Fritz, P.C.

Too Little, Too Late: Court Sides with Ousted Member, but Denies Preliminary Injunction Undoing Termination

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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

Farrell Fritz, P.C.

Court Cancels Capital Call For Want of a Postage Stamp

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Who says email is more efficient and cheaper than regular mail? - Not the manager of the McGuire family real estate business after winning a lower court ruling only to see it reversed on appeal last month in a decision...more

Gray Reed

Villareal v. Saenz: Fiduciary Duties Will Go On

Gray Reed on

In Villareal v. Saenz, a district court magistrate judge for the Western District of Texas, San Antonio Division, has recognized that members exiting a limited liability company may continue to hold fiduciary duties despite...more

Farrell Fritz, P.C.

Summer Shorts: Business Divorce Cases From Across the Country

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Welcome to this 11th annual edition of Summer Shorts! This year’s edition features brief commentary on half a dozen business divorce cases of interest from across the country. ...more

Farrell Fritz, P.C.

Business Divorce Alert: Forum Selection Clauses Do Not Confer Subject Matter Jurisdiction in Foreign Entity Dissolution Cases

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As I wrote here, in 2016 the Manhattan-based Appellate Division, First Department decided Raharney Capital LLC v Capital Stack LLC, overruling its own precedent and joining appellate rulings by the other Departments holding...more

Farrell Fritz, P.C.

Holes in Shotgun Buy-Sell Agreement Keep Deadlock Dissolution Petition Alive

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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

Farrell Fritz, P.C.

Be Careful What You Say. It May Get You Expelled From Your LLC.

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Now that I’ve got your attention, relax. At least for New York LLCs, a member can be expelled from an LLC only if expressly authorized by the operating agreement....more

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