This article was co-authored by Franklin C. McRoberts, counsel in the Uniondale office of Farrell Fritz and a member of the firm’s Business Divorce Group.
The rules of “standing” in business divorce litigation generally require that the plaintiff have an ownership interest in the business entity at the time of the alleged wrongful conduct and, for derivative claims brought on the entity’s behalf, throughout the litigation.
In Lewis v Alcobi, 2017 NY Slip Op 30664(U) [Sup Ct NY County Apr. 6, 2017], Manhattan Commercial Division Justice Anil C. Singh considered whether a parent’s assignment of her young daughter’s membership interest in a limited liability company as security for the other parent’s unpaid debt deprived the daughter of standing to sue, despite the daughter’s claim to have received no consideration for the assignment.
The case provides useful lessons for litigating disputes of this sort and, perhaps more importantly, for transactional attorneys considering the use of LLC membership interests to secure payment obligations. Continue Reading Assignment of LLC Interest Defeats Standing Despite Alleged Lack of Consideration