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Limited Liability Company (LLC) Contract Terms Business Litigation

Morris James LLP

Chancery Upholds Expulsion of LLC Investor, Awards Fees and Expenses Caused by Breach

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PJT Holdings, LLC v. Costanzo, C.A. No. 2023-0665-JTL (Del. Ch. May 15, 2025) - In anticipation of launching a chain of restaurants, three restaurant operators joined an outside investor to form a four-member,...more

Cadwalader, Wickersham & Taft LLP

Court of Appeals Upholds Contract Merger Clause

In Behler v. Kai-Shing Tao, the New York Court of Appeals found that the merger clause contained in a limited liability company agreement governed by Delaware law superseded an alleged prior oral agreement between the...more

Troutman Pepper Locke

Delaware Court of Chancery Allows Amendment of LLC Agreement to Permit Disparate Consideration Where Amendment Provisions Were...

Troutman Pepper Locke on

In Faiz Khan and Ralph Finger v. Warburg Pincus, LLC et al., the Delaware Court of Chancery held that the implied covenant of good faith and fair dealing was not applicable to a private equity sponsor’s amendment of a limited...more

Jackson Walker

Business Court of Texas Rebuffs Member’s Duty Claim, Reaffirms Freedom of Contract in LLC Agreement

Jackson Walker on

A recent opinion from the Business Court of Texas, Eighth Division (Fort Worth), provides a crisp reminder that an LLC’s company agreement can all but eliminate fiduciary duties among its members and managers. In Tall v....more

Patton Sullivan Brodehl LLP

You Come at the LLC Manager, You Best Not Miss

In a popular TV series (The Wire), a well-known quote is: “You come at the king, you best not miss.” The idea is that if you’re taking the risk of attacking someone at the top, you better not miss your shot....more

Morris James LLP

Chancery Finds Merger Validly Amended LLC Agreement and Effectively Removed the LLC’s Manager

Morris James LLP on

Campus Eye Management Holdings LLC v. DiDonato, C.A. No. 2024-0121-LWW (Del. Ch. Aug. 30, 2024) - This case arose out of a dispute between an optometrist who sold a majority stake in his company to a private equity buyer,...more

Farrell Fritz, P.C.

New York Top Court’s Advice to Prospective Investors in Delaware LLCs: Pay Close Attention to Controller’s Power to Amend LLC...

Farrell Fritz, P.C. on

Opinions by the Court of Appeals, New York’s highest court, construing the state’s LLC Law enacted 30 years ago are almost but not quite as rare as hen’s teeth. The great majority of important rulings under the statute...more

Morris James LLP

Chancery Says Litigation Privilege No Shield Against LLC Interest Repurchase

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Seva Holdings Inc. v. Octo Platform Equity Holdings, LLC, C.A. No. 2022-0437-PWR (Del. Ch. Aug. 29, 2024) - In deciding limited cross motions for summary judgment, the Court of Chancery held that the absolute litigation...more

Venable LLP

Despite Chancery Court Decisions in Recent Years, Agreements Continue to Include Transfer Restrictions That May Not Be Enforceable

Venable LLP on

Despite recent decisions by the Delaware Court of Chancery, many key corporate documents continue to include restrictions on indirect transfers of equity that may not be enforced if challenged in court....more

Morris James LLP

Key Takeaways from Recent Delaware Restrictive Covenant Case Law

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Partners Vincent Cannizzaro and Barnaby Grzaslewicz recently presented Recent Developments in Delaware Restrictive Covenant Case Law: The Alternative Entity Creep, providing key insights into how Delaware’s courts are...more

DarrowEverett LLP

LLC's Failure to Execute Operating Agreement Opens Legal Trapdoor

DarrowEverett LLP on

While entity distinctness is a bedrock principle of corporate law, it may often appear redundant and unnecessary for a limited liability company (“LLC”) to sign its own operating agreement. That was likely the thinking of the...more

Farrell Fritz, P.C.

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

Farrell Fritz, P.C. on

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

Hogan Lovells

Holifield v XRI: Delaware Supreme Court reinforces primacy of freedom of contract for LLC agreements

Hogan Lovells on

In Holifield v. XRI Investment Holdings LLC, No. 407, 2022 (Del. Sept. 7, 2023), the Delaware Supreme Court affirmed the lower court’s determination that the defendant violated XRI Investment Holdings’ LLC agreement when he...more

Farrell Fritz, P.C.

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

Farrell Fritz, P.C. on

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

Farrell Fritz, P.C. on

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

Farrell Fritz, P.C. on

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?

Farrell Fritz, P.C. on

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

Farrell Fritz, P.C. on

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...

Farrell Fritz, P.C. on

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

Farrell Fritz, P.C. on

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

Hicks Johnson

The Importance of “Plain and Unambiguous Language” When Eliminating Fiduciary Duties in Delaware

Hicks Johnson on

The Delaware Limited Liability Company Act allows for the fiduciary duties of a member to be expanded, restricted, or eliminated by provisions in the operating agreement of a limited liability company (“LLC”). If drafters...more

Patton Sullivan Brodehl LLP

Does an Operating Agreement’s Arbitration Clause Apply to a “Purported” LLC Member?

If an LLC’s Operating Agreement contains a sufficiently broad arbitration clause, most disputes raised by the LLC’s members relating to the LLC will be sent to arbitration (instead of the court system) for resolution. But...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

Farrell Fritz, P.C. on

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

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