Top 10BI’m pleased to present my 9th annual list of this past year’s ten most significant business divorce cases. The list includes important appellate rulings by the First and Second Departments on dissolution of foreign business entities, shareholder rights to inspect book and records, and valuation of partnership interests, along with an interesting mix of trial court rulings on issues affecting LLC members and fair value appraisals. I’ve also included a likely bellwether New Jersey Supreme Court ruling concerning grounds for LLC member expulsion. All ten were featured on this blog previously; click on the case name to read the full treatment. And the winners are:

  1. Matter of Raharney Capital, LLC v Capital Stack LLC, 138 AD3d 83, 2016 NY Slip Op 01425 [1st Dept Feb. 25, 2016], which brought to an end a longstanding departmental split over the question whether New York courts have jurisdiction over dissolution suits involving foreign business entities, with the First Department in Raharney agreeing there is no jurisdiction.
  2. Matter of Pokoik v 575 Realties, Inc., 143 AD3d 487, 2016 NY Slip Op 06648 [1st Dept Oct. 11, 2016], an appellate ruling of apparent first impression in New York in which the court upheld shareholder inspection rights concerning the books and records of the corporation’s wholly-owned subsidiary.
  3. Huang v Northern Star Management LLC, 2016 NY Slip Op 32194(U) [Sup Ct NY County Oct. 24, 2016], one of only a handful of New York cases involving challenges to cash-out LLC mergers in which Justice Charles E. Ramos of the Manhattan Commercial Division denied a preliminary injunction sought by a minority shareholder who alleged that the merger violated the LLC’s operating agreement.
  4. IE Test, LLC v Carroll, 2016 WL 4086260 [NJ Sup Ct Aug. 2, 2016], an important ruling by the New Jersey Supreme Court in which it reversed the lower court’s judicial expulsion of an LLC member under a narrowed construction of that state’s enabling statute mirroring the Revised Uniform LLC Act’s expulsion provision.
  5. La Verghetta v Lawlor, 2016 NY Slip Op 30423(U) [Sup Ct Westchester County Mar. 9, 2016], a highly detailed and thorough fair-value appraisal opinion by Westchester County Commercial Division Justice Alan D. Scheinkman involving a chain of fitness clubs in which the court confronted dueling expert appraisals whose methodology and conclusions of value were light years apart and ultimately fashioned its own appraisal that, among other important findings, rejected a discount for lack of marketability.
  6. Congel v Malfitano, 141 AD3d 64, 2016 NY Slip Op 03845 [2d Dept May 18, 2016], a controversial ruling currently before the New York Court of Appeals on a pending application for leave to appeal, in which the Second Department upheld a wrongful dissolution judgment against a minority partner and further imposed a 66% discount for lack of control on the value of the partner’s interest.
  7. Gilbert v Weintraub, Short Form Order, Index No. 602290/15 [Sup Ct Nassau County Jan. 29, 2016], presenting the novel issue whether a co-manager of an LLC with no operating agreement can resign as manager while retaining his member status and engage in competitive business activity, where Nassau County Commercial Division Justice Timothy S. Driscoll held that further factual development was needed to determine whether it was reasonable for the resigned manager’s fiduciary duty to extend beyond his resignation and, if so, for how long.
  8. Matter of Hudson (Pure Lime USA, Inc.), Short Form Order, Index No. 600127/16 [Sup Ct Nassau County June 16, 2016], in which Nassau County Commercial Division Justice Stephen A. Bucaria dismissed a 50% shareholders’ dissolution petition alleging director deadlock where the governing shareholders’ agreement authorized one of the respondent’s designees on the four-member board to cast the deciding vote in case of a tie vote.
  9. MFB Realty LLC v Eichner, 2016 NY Slip Op 31242(U) [Sup Ct NY County June 24, 2016], in which Manhattan Commercial Division Justice Saliann Scarpulla dismissed derivative claims by a purported LLC member for lack of standing based on the plaintiff’s failure to obtain the required super-majority consent to its admission as a full-fledged member of the LLC notwithstanding it having obtained such consent to the initial assignment of the interest.
  10. Fakiris v Gusmar Enterprises LLC, 53 Misc 3d 1215(A), 2016 NY Slip Op 51665(U) [Sup Ct Queens County Nov. 21, 2016], where Queens County Commercial Division Justice Martin E. Ritholtz denied a motion to dismiss claims for breach of fiduciary duty brought against a non-member designated as tie-breaker under the LLC’s operating agreement, finding factual issues whether the tie-breaker engaged in any misconduct.

Top 10aI’m pleased to present my eighth annual list of the past year’s ten most significant business divorce cases. In previous years my lists rarely included cases outside New York, but this year’s batch includes three important decisions by the Delaware Court of Chancery. Also, reflecting the growing predominance of limited liability companies over close corporations, this year’s selections include seven LLC cases and only three involving corporations. All ten were featured on this blog previously; click on the case name to read the full treatment. And the winners are:

  1. Chiu v Chiu, 125 AD3d 824 [2d Dept 2015], in which the appellate court affirmed without comment a 0% discount for lack of marketability in fixing the fair value of a membership interest in a single asset realty company pursuant to LLC Law § 509, but disagreed with the lower court’s assignment of a 10% interest to the withdrawn member — rather than 25% as reflected in the LLC’s initial tax returns — based on additional capital contributions made by the other member that, according to the appellate court, should have been characterized as loans.
  2. In re Carlisle Etcetera LLC, 2015 WL 1947027 [Del. Ch. Apr. 30, 2015], in which the Delaware Chancery Court held that the assignee of an LLC membership interest, who as a non-member and non-manager lacked standing to seek involuntary dissolution under Section 18-802 of the Delaware LLC Act, nonetheless had standing to seek equitable dissolution under the Chancery Court’s common-law authority as a court of equity.
  3. Barone v Sowers, 128 AD3d 484 [1st Dept 2015], an LLC dissolution case in which the appellate court found inadequate at the pleading stage a non-controlling member’s allegations of “oppression” involving a functioning, financially viable realty-owning LLC, and also dismissed the petitioner’s derivative claims for failure to plead facts showing demand futility.
  4. Meyer Natural Foods LLC v Duff, 2015 WL 3746283 [Del. Ch. June 4, 2015], another novel ruling by Chancery Court where, in granting dissolution of an LLC based on the termination of a supply agreement between its two members, the court looked beyond the LLC’s stated purpose in its operating agreement and instead adopted the petitioner’s “contextual interpretation” of the purpose clause.
  5. Sansum v Fioratti, 128 AD3d 420 [1st Dept 2015], a highly unusual case involving a 6% shareholder’s claim for common-law dissolution of close corporation that operated an art gallery, in which the appellate court ordered the claim’s dismissal without a hearing based on the petitioner’s “unclean hands” stemming from his guilty plea to criminal charges of embezzlement from the company, and invoked the in pari delicto doctrine in rejecting the plaintiff’s argument that the defendants used unlawful means to obtain the money he took.
  6. Goldstein v Pikus, 2015 NY Slip Op 31455(U) [Sup Ct NY County July 20, 2015], in which the court granted summary judgment dismissing an LLC dissolution petition involving a realty-holding company where the petitioner’s allegations of deadlock and misconduct by the managing member failed to establish that the LLC was financially infeasible or was unable to function in accordance with its purpose as stated in its operating agreement.
  7. Shapiro v Ettenson, 2015 NY Slip Op 31670(U) [Sup Ct NY County Aug. 16, 2015], a case of apparent first impression in which the court held enforceable under LLC Law § 402(c)(3) an operating agreement executed by the majority members over a year after the LLC’s formation, which included provisions for additional capital contributions and adjustment of member percentage interests for failure to make a requested contribution.
  8. Matter of Digeser v Flach, 49 Misc 3d 1213(A) [Sup Ct Albany County 2015]  , which I referred to as a “classic case” of minority shareholder oppression, where the court’s post-trial decision found that the petitioner established grounds for dissolution under BCL § 1104-a after the majority shareholder terminated his employment, cut off all salary and benefits, and removed him from the board of directors.
  9. Matter of Activity Kuafu Hudson Yards LLC, Index No. 650599/15 [Sup Ct NY County Apr. 14, 2015], in which the court dismissed for lack of subject matter jurisdiction a petition to dissolve an allegedly deadlocked Delaware LLC, notwithstanding a provision in its operating agreement waiving the members’ right to bring an action relating to the agreement in any court outside New York County, New York.
  10. Shawe v Elting, C.A. No. 9661-CB [Del. Ch. Aug. 13, 2015], a case in which the two 50/50 owners of an immensely successful business found themselves “locked in corporate hell” due to their personal animosity, leading the Delaware Chancery Court to grant an application under DGCL § 226 to appoint a custodian to sell the company either to one of the two owners or to an outside buyer.

I’m pleased to present my seventh annual list of the past year’s ten most significant business divorce cases. This year’s crop includes noteworthy rulings on a variety of issues in dissolution, appraisal, books-and-records, and other cases involving closely held corporations and limited liability companies. All ten were featured on this blog previously; click on the case name to read the full treatment. And the winners are:

  1. Zacharius v Kensington Publishing Corp., 42 Misc 3d 1208, 2014 NY Slip Op 50011(U) [Sup Ct, NY County Jan. 6, 2014], a lawsuit involving a family-owned publishing business in which Justice Eileen Bransten upheld a stock voting agreement that gave board control to the minority shareholders/step-children of the majority shareholder, although she allowed the majority owner’s suit to proceed on a claim challenging the authenticity of her late husband’s signature on the voting agreement.
  2. Pokoik v Pokoik, 115 AD3d 428, 2014 NY Slip Op 01502 [1st Dept Mar. 6, 2014], a first impression ruling in which the Appellate Division, First Department, in granting summary judgment against an LLC manager for breach of fiduciary duty, rejected the manager’s reliance on the safe-harbor provisions of LLC Law § 409.
  3. Mintz v Pazer, Decision and Order, Index No. 502127/13 [Sup Ct, Kings County Mar. 12, 2014], in which Justice David Schmidt enforced an unusual, “quick draw” buy-sell provision in the shareholders’ agreement of a real estate holding company owned 50/50 by two families, compelling a sale to the family that gave the first notice of purchase following unsuccessful mediation of a deadlock.
  4. JPS Partners v Binn, 2014 NY Slip Op 31204 [Sup Ct, NY County May 6, 2014], in which Justice Melvin Schweitzer held that the restructuring of an LLC, in which substantially all of its assets were transferred to a subsidiary, unintentionally triggered the LLC’s dissolution under a provision in the operating agreement.
  5. Budis v Skoutelas, Short Form Order, Index No. 702060/13 [Sup Ct, Queens County July 16, 2014], in which Justice Orin Kitzes held that the estate of a deceased LLC member had no standing to assert derivative claims on the LLC’s behalf.
  6. Retirement Plan for General Employees v McGraw-Hill Cos., 120 AD3d 1052, 2014 NY Slip Op 06154 [1st Dept Sept. 11, 2014], in which the Appellate Division, First Department, reversed the trial court’s ruling dismissing a books-and-records proceeding brought against McGraw-Hill, and held that the petitioning pension fund’s stated purpose of the requested inspection, to investigate the board’s oversight of McGraw-Hill’s subsidiary, Standard & Poor’s, was a proper purpose even if the inspection ultimately establishes that the board engaged in no wrongdoing.
  7. Zelouf International Corp. v Zelouf, 45 Misc 3d 1205(A), 2014 NY Slip Op 51462(U) [Sup Ct, NY County Oct. 6, 2014] [click here for Part 2], a post-trial ruling in a dissenting shareholder appraisal case in which, among other significant rulings, Justice Shirley Kornreich rejected a discount for lack of marketability and granted the petitioner a separate award on her quasi-derivative claims against the controlling shareholders.
  8. Ferolito v AriZona Beverages USA, LLC, 2014 NY Slip Op 32830(U) [Sup Ct, Nassau County Oct. 14, 2014], in which Justice Timothy Driscoll awarded close to $1 billion (that’s not a typo) to the 50% owner of the AriZona Iced Tea business in a fair value buy-out proceeding under BCL § 1118. The court’s many significant rulings included its sole reliance on the DCF method and its rejection of potential acquirers’ expressions of interest.
  9. Cortes v 3A N. Park Ave. Rest Corp., 2014 NY Slip Op 24329 [Sup Ct, Kings County Oct. 28, 2014], in which Justice Carolyn Demarest conditionally ordered the dissolution of a restaurant business from which the controlling shareholders were found to have skimmed about $3.7 million cash, unless they purchased the minority owner’s shares for about $1.2 million.
  10. Slayton v Highline Stages, LLC, 2014 NY Slip Op 24333 [Sup Ct, NY County Oct. 30, 2014], in which Justice Shirley Kornreich ruled that LLC Law § 407’s default rule, permitting members to act by written consents without a meeting, trumped the meeting requirement in LLC Law § 1002(c) governing member approval of mergers.

Two of the above cases — Ferolito and Zelouf — also made it onto the nationwide top-ten list published in the January 2015 issue of Business Valuation Update, the business valuation profession’s leading monthly newsletter.

 

I’m pleased to present my sixth annual list of picks for the past year’s ten most significant business divorce cases. This year’s selections, featuring seven appellate decisions, include significant rulings on a variety of issues in dissolution and appraisal cases involving closely held corporations, partnerships and limited liability companies. All ten were featured in this blog previously; click on the case name to read the full treatment. And the winners are:

 

  1. Holdrum Investments, N.V. v. Edelman, 2013 NY Slip Op 30369(U) (Sup Ct NY County Jan. 31, 2013), in which Manhattan Supreme Court Justice Anil C. Singh followed a 1994 First Department precedent in rejecting the argument that a New York court lacks subject matter jurisdiction to dissolve a foreign entity, in that case a Delaware limited partnership.
  2. Doyle v. Icon, LLC, 103 AD3d 440, 2013 NY Slip Op 00797 (1st Dept Feb. 7, 2013), where the First Department dismissed a complaint seeking judicial dissolution of an LLC, holding that allegations by a minority member of systematic exclusion by the controlling members, without more, fail to state adequate grounds for relief under LLC Law § 702.
  3. Sullivan v. Troser Management, Inc., 104 AD3d 1127, 2013 NY Slip Op 01634 (4th Dept Mar. 15, 2013), a 10-year litigation over a stock buy-out where the parties never updated the called-for Certificate of Value, in which the Fourth Department rejected the purchasing shareholder’s contention that the buy-out price should be based on book value.
  4. Gelman v. Buehler, 20 NY3d 534, 2013 NY Slip Op 01991 (Ct App Mar. 26, 2013), in which the Court of Appeals construed the phrases “definite term” and “particular undertaking is specified” as used in Section 62 of the Partnership Law in dismissing a complaint for wrongful termination of an oral partnership agreement.
  5. Mizrahi v. Cohen, 104 AD3d 917, 2013 NY Slip Op 02056 (2d Dept Mar. 27, 2013), where the Second Department ordered a buy-out of the defendant 50% member by the plaintiff 50% member as an equitable remedy in an LLC dissolution case.
  6. Born to Build LLC v. 1141 Realty LLC, 105 AD3d 425, 2013 NY Slip Op 02193 (1st Dept Apr. 2, 2013), in which the First Department ordered dismissal of a complaint for judicial dissolution of an LLC, brought by a party who purportedly acquired an undocumented membership interest at a judgment execution sale, where the LLC agreement negated the existence of the membership interest at issue.
  7. Matter of Sunburst Associates, Inc., 106 AD3d 1224, 2013 NY Slip Op 03368 (3d Dept May 9, 2013), an unusual case in which the Third Department dismissed a deadlock dissolution petition brought by a putative 50% shareholder on the ground that he had transferred his stock to the other 50% shareholder, notwithstanding evidence that, even after the transfer, the respondent shareholder had signed corporate tax returns reflecting the two of them as 50/50 shareholders. 
  8. Breidbart v. Wiesenthal, 108 AD3d 492, 2013 NY Slip Op 05040 (2d Dept July 3, 2013), where the Second Department held that a retired partner, or the estate of a deceased partner, who elects to receive post-withdrawal profits in lieu of interest under Section 73 of the Partnership Law is not entitled to recover appreciation on the value of the partnership assets.
  9. Ruggiero v. Ruggiero, 2013 NY Slip Op 31955(U) (Sup Ct Suffolk County July 29, 2013), in which Suffolk County Justice Emily Pines opted for one appraiser’s income approach over the other appraiser’s market approach in a stock valuation contest involving a family-owned kosher deli.
  10. Feinberg v. Silverberg, Decision and Order, Index No. 3120-11 (Sup Ct Nassau County Sept. 6, 2013), a decision by Nassau County Justice Vito DeStefano in which the court ruled that the petitioner’s alleged bad faith and creation of feigned deadlock is a cognizable defense in a proceeding for judicial dissolution under Business Corporation Law § 1104.

I’m pleased to present my fifth annual list of picks for the past year’s ten most significant business divorce cases. This year’s crop, five of which are appellate decisions, includes highly interesting and important rulings on a variety of issues in dissolution, buy-out, appraisal and fiduciary breach cases involving closely held corporations, partnerships and limited liability companies. All ten were featured in this blog previously; click on the case name to read the full treatment. And the winners are:

  1. Kagan v. HMC-New York, Inc., 94 AD3d 67, 2012 NY Slip Op 01514 (1st Dept Feb. 28, 2012), in which a closely divided panel of the Appellate Division, First Department, applied Delaware law to dismiss claims for breach of fiduciary duty against LLC managers based on the operating agreement’s provision limiting manager liability.
  2. Matter of Grande’ Vie, LLC, 93 AD3d 1281, 2012 NY Slip Op 02190 (4th Dept Mar. 23, 2012), another appellate decision, where the court reversed a lower court order and compelled arbitration over a disputed appraisal notwithstanding language in the buy-sell agreement making the appraisal “binding.”
  3. Matter of Clever Innovations, Inc., 94 AD3d 1174, 2012 NY Slip Op 02536 (3d Dept Apr. 5, 2012), a case of dueling dissolution petitions by 50/50 shareholders in which an upstate appellate panel affirmed an order compelling a buy-out of the shareholder who’d filed a BCL 1104-a petition as an oppressed shareholder by the shareholder who’d filed a BCL 1104 petition for deadlock. Continue Reading Top Ten Business Divorce Cases of 2012

 

 

I’m pleased to present my fourth annual list of picks for the past year’s ten most significant business divorce cases. This year’s crop includes rulings on substantive and procedural issues involving dissolution, buy-out, appraisal and fiduciary breach involving closely held corporations, limited liability companies, and professional corporations. All ten were featured in this blog previously; click on the case name to read the full treatment. And the winners are: 

 

  1. Matter of Supplier Distribution Concepts, Inc., 80 AD3d 869, 2011 NY Slip Op 00084 (3d Dept Jan. 6, 2011), presenting a fight over the proper venue for a corporate dissolution proceeding, in which the appellate court reversed an order departing from the statutory mandate requiring commencement of the proceeding in the judicial district correlating to the county in which the business is located as stated in its certificate of incorporation.
  2. Matter of Darvish (Haslacha, Inc.), 2011 NY Slip Op 30134(U) (Sup Ct NY County Jan. 19, 2011), involving the liquidation and winding up of a real estate holding company by a receiver, in which the court rejected a shareholder’s contention that the property must be sold at public auction rather than by private sale.
  3. Matter of Giaimo (EGA Associates, Inc.), 31 Misc 3d 1217(A), 2011 NY Slip Op 50714(U) (Sup Ct NY County Apr. 25, 2011), a valuation proceeding involving a large portfolio of Manhattan apartment buildings, where the court applied a discount for built-in capital gains but refused to apply a marketability discount.
  4. Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 17 NY3d 269, 2011 NY Slip Op 04720 (Ct App June 7, 2011) and Arfa v. Zamir, 17 NY3d 737, 2011 NY Slip Op 04719 (Ct App June 7, 2011), a pair of highly important decisions by the Court of Appeals dismissing fiduciary breach claims between shareholders based on written releases given as part of the challenged transactions.

Continue Reading Top 10 Business Divorce Cases of 2011

I’m pleased to present my third annual list of the year’s top ten business divorce cases.  This year’s crop includes some very important decisions concerning the standard for LLC dissolution, expulsion of LLC members, buyouts triggered by dissolution petitions, stock valuation, and much, much more.  All ten were featured in this blog previously; click on the case name to read the full treatment.  And the winners are: 

1.  Matter of 1545 Ocean Avenue, LLC, 72 AD3d 121, 2010 NY Slip Op 00688 (2d Dept Jan. 26, 2010), in which the Second Department differentiated dissolution of LLCs from business corporations and pronounced a contract-based standard for judicial dissolution of LLCs giving primary weight to the terms of the operating agreement.

2.  Jain v. Rasteh,  Decision and Order, Index No. 109920-09 (Sup Ct NY County Feb. 1, 2010), where the court upheld the right of the LLC’s majority member to expel a minority member for breach of the operating agreement.

 

3.  Chiu v. Chiu, 71 AD3d 646, 2010 NY Slip Op 01768 (2d Dept Mar. 2, 2010), holding that courts have no statutory authority to order expulsion of an LLC member for alleged misconduct, absent language in the operating agreement expressly providing for an expulsion remedy. 

 

4.  Matter of Superior Vending, LLC, 71 AD3d 1153, 2010 NY Slip Op 02801 (2d Dept Mar. 30, 2010), in which the court upheld as an "equitable method of liquidation" the return of the petitioner’s capital contribution in exchange for his membership interest in the LLC.

  

5.  Matter of Eklund Farm Machinery, Inc., 73 AD3d 1319, 2010 NY Slip Op 04097 (3d Dept May 13, 2010), in which the court construed BCL Section 1217 to limit the commission payable to receivers in corporate dissolution cases.

 

Continue Reading Top 10 Business Divorce Cases of 2010

I’m pleased to present the second annual list of my selections for the year completed’s top-10 business divorce cases — a dubious honor at best for the litigants involved, but no less titillating for the rest of us voyeurs (although one of the cases, Ravitz, I handled).  Half of this year’s crop concerns issues arising out of LLC disputes, which is consistent with the growing importance of the LLC as the business form of choice for closely held firms.  All of these cases were featured in this blog previously; click on the case name to read the full treatment.  And the winners are:

  1. Gottlieb v. Northriver Trading Co., LLC, 58 AD3d 550 (1st Dept 2009), in which the court recognized a common law right of LLC members to seek an equitable accounting remedy. 
  2. Matter of Verdeschi, 63 AD3d 1084 (2d Dept 2009), in which the court ruled that the majority shareholders of an accounting firm were liable for the value of the deceased minority shareholder’s interest after they formed a new firm using the old firm’s assets and good will.
  3. Yemini v. Goldberg, 60 AD3d 935 (2d Dept 2009), in which the court enforced stock ownership rights as reflected in a nominee agreement notwithstanding allegations of unclean hands relating to the concealment of the stock interest.
  4. Matter of Ravitz, 65 AD3d 1049 (2d Dept 2009), holding that the court lacks authority to conduct an appraisal of good will value in post-dissolution proceedings arising from a deadlock petition under BCL Section 1104. 
  5. Caplash v. Rochester Oral & Maxillofacial Surgery Associates, LLC, 63 AD3d 1683 (4th Dept 2009), in which the court held that a 50% LLC member lacked authority to hire company counsel to accept the other member’s resignation.

Continue Reading Top 10 Business Divorce Cases of 2009

The nominations are in, the votes are counted, envelope please!  Following are my picks for last year’s top 10 business divorce cases, all of which were featured in prior posts:

  1. Tzolis v. Wolff, 10 NY3d 100 (2008), in which the Court of Appeals resolved conflicting First and Second Department decisions on the question whether LLC members can bring derivative actions on the LLC’s behalf.  They can. 
  2. Matter of Beverwyck Abstract, LLC, 53 AD3d 503 (3d Dept 2008), in which an appellate court upheld a lower court’s ruling that the de facto dissolution of an LLC did not terminate the members’ fiduciary duty to account for ongoing profits up until formal dissolution.
  3. Tal v. Superior Vending, LLC, 20 Misc 3d 1103(A) (Sup Ct Westchester County 2008), in which the court crafted an equitable remedy in an LLC dissolution by ordering a return of the petitioner’s investment.
  4. Dingle v. Xtenit, Inc., 20 Misc 3d 1123(A) (Sup Ct NY County 2008), in which the court required a bona fide purpose for a controlling shareholder’s dilution of the minority shareholder’s interest.
  5. Caplash v. Rochester Oral & Maxillofacial Surgery Associates, LLC, 19 Misc 3d 1138(A) (Sup Ct Monroe County May 12, 2008), subsequent decision, 20 Misc 3d 1104(A), in which the court upheld the petitioner’s standing to seek LLC dissolution after finding that the other member lacked authority to engage the LLC’s attorney who had accepted the petitioner’s resignation.
  6. Hellman v. Hellman, 19 Misc 3d 695 (Sup Ct Monroe County 2008), modified, 2009 NY Slip Op 02418 (4th Dept Mar. 27, 2009). involving a corporation owned 50-50 by brothers, in which the court upheld a new company lease executed by the brother who served as president over the other’s objection that the lease required board approval. 
  7. Murphy v. U.S. Dredging Corp., 2008 NY Slip Op 31535 (Sup Ct Nassau County May 19, 2008), a valuation proceeding involving shares in a subchapter C real estate holding corporation in which the court applied a discount for built-in capital gains. 
  8. Matter of Youngwall, 2008 NY Slip Op 30811(U) (Sup Ct Nassau County Mar. 14, 2008), adhered to upon reargument in unreported decision dated July 28, 2008, in which the court granted dissolution of an unprofitable LLC and also ruled that a provision in the operating agreement waiving the right to seek judicial dissolution is void as against public policy. 
  9. Ross v. Nelson, 54 AD3d 258 (1st Dept 2008), in which the court enforced the LLC’s default statute in upholding a majority vote of the members to remove one of the managers. 
  10. Manitaras v. Beusman, 56 AD3d 735 (2d Dept 2008), in which the court found that an LLC operating agreement’s silence on the sale of the LLC’s sole asset permitted majority approval under the default statute even though the sale automatically triggered dissolution. 

What will 2009 bring?  It’s not illogical to think that the stress of the economic meltdown will lead to an increase in business divorce.  But in my years watching the scene I’ve never detected any correlation between business cycles and the rate of litigious business break-ups involving closely held companies.  If anything, I would lean in favor of the theory that financial success and opportunity in a business create even more incentive for dissension among co-owners.   A recent NY Times article pointed out how falling real estate values are impeding marital divorces by eliminating the primary resource for financial settlement.  I think a similar phenomenon could be at play with businesses in the current climate, by reducing the upside for a disgruntled owner contemplating a tactical lawsuit designed to induce a buyout.