News & Analysis as of

Limited Liability Company (LLC) Derivative Suit

Akin Gump Strauss Hauer & Feld LLP

Texas Enacts New Pro-Business Law to Expand Its Appeal as a Hub for Business Incorporations

On May 14, 2025, Gov. Greg Abbott (R-TX) signed Texas Senate Bill 29 (SB29) into law. This legislation introduces notable amendments to the Texas Business Organizations Code (TBOC) and is part of a broader strategy to...more

Fox Rothschild LLP

A(nother) Cautionary Tale on the Importance of Operating Agreements

Fox Rothschild LLP on

To practitioners familiar with internal disputes involving closely held companies, the allegations in Lafayette Village Pub, LLC v. Burnham, 2025 NCBC 8, are nothing new. The member running the business (allegedly) made bad,...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.

Check Your Footing: $36 Million Money Judgment Eviscerated in Brutal Appellate Standing Loss

Farrell Fritz, P.C. on

To prevail on a cause of action in a business divorce lawsuit, the plaintiff has many essential boxes to check. Pleading requirements vary from one claim to another, but all business divorce cases have one thing in common....more

Allen Matkins

Court Finds Usurpation Of LLC Opportunity To Be Derivative

Allen Matkins on

My last few posts have been devoted to the Court of Appeal's opinion in Tuli v. Specialty Surgical Center of Thousand Oaks, LLC, 2024 WL 4499271 (Oct. 16, 2024).  The case relates to the plaintiff's "decade-long litigation...more

Allen Matkins

Does Personal Animosity Vitiate The Business Judgment Rule?

Allen Matkins on

Under the business judgment rule, "a director is not liable for a mistaken business judgment which is made in good faith and in what he or she believes to be in the best interest of the corporation, where no conflict of...more

Farrell Fritz, P.C.

Limo Company Shareholders Can't Hitch a Ride in Derivative Litigation

Farrell Fritz, P.C. on

Closely-held business entities come in all shapes and sizes. By definition, under Partnership Law § 10, it takes “two or more” owners to form a general partnership. But corporations and LLCs have no such impediment, ranging...more

Farrell Fritz, P.C.

Limo Company Shareholders Can’t Hitch a Ride in Derivative Litigation

Farrell Fritz, P.C. on

Closely-held business entities come in all shapes and sizes. By definition, under Partnership Law § 10, it takes “two or more” owners to form a general partnership. But corporations and LLCs have no such impediment, ranging...more

Holland & Knight LLP

Delaware Bankruptcy Court Grants Creditors' Committee of Debtor LLC Derivative Standing

Holland & Knight LLP on

In a recent opinion, In re Pack Liquidating, LLC (Pack Liquidating), the U.S. Bankruptcy Court for the District of Delaware held that under Official Committee of Unsecured Creditors of Cybergenics Corp. v. Chinery...more

Morris James LLP

Chancery Addresses Pleading-Stage Arguments for Dismissal in LLC Dispute

Morris James LLP on

Principal Growth Strategies LLC v. AGH Parent LLC, C.A. 2019-0431-JTL (Del. Ch. January 25, 2023) - This decision provides helpful guidance to practitioners to address pleading-stage arguments for dismissal. The plaintiff...more

Patton Sullivan Brodehl LLP

Derivative Claim Upheld for Estate of Deceased LLC Member

Asserting claims derivatively on behalf of an LLC, as opposed to directly on behalf of an LLC member, can be tricky business for even experienced litigators.  The requirements for derivative claims have been explored in...more

Farrell Fritz, P.C.

New York LLC Caselaw’s Greatest Hits

Farrell Fritz, P.C. on

I recently had the privilege of speaking to an audience of judges of the New York Supreme Court Commercial Division at Fordham Law School’s Eileen Bransten Institute on Complex Commercial Litigation. Naturally, the topic was...more

Farrell Fritz, P.C.

Damages or Rescission? When Electing Fraud Remedies Choose Wisely

Farrell Fritz, P.C. on

Imagine devoting years of costly litigation to rescinding a $1 million equity investment in an LLC for fraudulent inducement, prevailing on the merits by clear and convincing evidence after a full trial, but losing anyway...more

Farrell Fritz, P.C.

Greetings from the American Bar Association’s 2023 LLC Institute

Farrell Fritz, P.C. on

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

Farrell Fritz, P.C.

Winter Case Notes: Punitive Damages Awarded for Breach of Fiduciary Duty and Other Recent Decisions of Interest

Farrell Fritz, P.C. on

Notwithstanding that the pictured snow globe is the only snow I’ve seen in my neck of the woods this balmy winter, I’m pleased to present my annual Winter Case Notes collection of recent court decisions of interest....more

Allen Matkins

Nevada Supreme Court Affirms Contemporaneous Ownership Requirement In LLC Derivative Action

Allen Matkins on

In a short order of affirmance issued last week, the Nevada Supreme Court affirmed a basic requirement of derivative litigation. J. McDonald Co. v. Tropical & Losee, LLC, 2022 WL 6833521 (Nev. Oct. 11, 2022).  The case...more

Farrell Fritz, P.C.

A Recurring Business Divorce Feature: Usurpation of Corporate Opportunity

Farrell Fritz, P.C. on

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

Farrell Fritz, P.C.

Business Divorce, Brooklyn Style

Farrell Fritz, P.C. on

The pictured architectural rendering of the sunlit Kings County Supreme Courthouse at 360 Adams Street, completed in 1957, doesn’t quite capture the reality of its dour, hulking presence in downtown Brooklyn. Its design...more

Patton Sullivan Brodehl LLP

Derivative Claim Standing: Both Contemporaneous And Continuous Membership Required

When an LLC suffers primary harm that also indirectly harms the LLC’s members, the cause of action generally belongs to the LLC, not its members. Only if the LLC (through its duly authorized management) fails to pursue the...more

Farrell Fritz, P.C.

LLCs, Direct vs. Derivative Claims, and Special Litigation Committees: A Lively Debate

Farrell Fritz, P.C. on

The current issue of The Business Lawyer, a quarterly publication of the ABA’s Business Law Section that rightly bills itself as “the premier business law journal in the country,” features a pair of dueling articles of great...more

Farrell Fritz, P.C.

Gordon Ramsay’s The Fat Cow: Dishing Up Damages and Dissolution

Farrell Fritz, P.C. on

You know you’re in big trouble if the post-trial decision in a lawsuit you filed begins like this: “The court finds the plaintiff, Rowen Seibel, not credible. This is primarily because it appears he fabricated evidence...more

Sheppard Mullin Richter & Hampton LLP

California Court of Appeal Clarifies that a Derivative Plaintiff Must Demonstrate Both “Contemporaneous” and “Continuous”...

In Sirott v. Superior Court, 2022 Cal. App. LEXIS 389 (Cal. App. May 5, 2022), the First Appellate District of the California Court of Appeal (Humes, J.) analyzed the ownership requirements a plaintiff must satisfy to pursue...more

Bradley Arant Boult Cummings LLP

Derivative Lawsuits by Private Company Minority Owners: Procedures for Protecting the Company from Insider Misconduct

By definition, a minority owner in a private company does not have control over the business or the right to make decisions for the company. But minority owners do have legal recourse when the company’s majority owners –...more

Fox Rothschild LLP

When Finding a Corporate Stalemate is Like Searching for Bobby Fischer

Fox Rothschild LLP on

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

Farrell Fritz, P.C.

Limitations on the Rights of Minority Owners in Closely-Held Businesses

Farrell Fritz, P.C. on

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

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