Top 10 Business Divorce Cases of 2011

Posted on January 2, 2012 by Peter A. Mahler

 

 

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.
  1. Matter of Bernfeld (Michael Bernfeld, D.D.S. and Yakov Kurilenko, D.D.S., P.C.), 86 AD3d 244, 2011 NY Slip Op 05071 (2d Dept June 7, 2011), a case involving a professional corporation dental practice in which the widow of a deceased majority shareholder was denied standing to seek judicial dissolution.
  2. Gitlin v. Chirinkin, 32 Misc 3d 1226(A), 2011 NY Slip Op 51433(U) (Sup Ct Nassau County June 29, 2011), in which the court ruled that, in the absence of a formal withdrawal from membership, an inactive minority member of a limited liability company was entitled to his pro rata share of profits from the liquidation of realty assets.
  3. Matter of Harlem River Yard Ventures, Inc., Decision and Order, Index No. 602341/07 (Sup Ct NY County July 11, 2011), a dissenting shareholder case in which the court endorsed a discounted cash flow method and rejected post-merger tax benefits in valuing the company's real estate holdings.
  4. Barasch v. Williams Real Estate Co., 33 Misc 3d 1219(A), 2011 NY Slip Op 51979(U) (Sup Ct NY County Nov. 3, 2011), in which the court ruled in favor of a dissenting shareholder over the objection of the controlling shareholders who denied that a complex corporate reorganization triggered the right to dissent and seek appraisal.
  5. Matter of Carson (Carrabasset Management Corp.), 2011 NY Slip Op 09063 (3d Dept Dec. 15, 2011), a case involving dueling dissolution petitions in which the appellate court held that the petitioner had no statutory buy-out right.
  6. Roni LLC v. Arfa, 2011 NY Slip Op 09163 (Ct App Dec. 20, 2011), in which the New York Court of Appeals allowed plaintiffs to proceed on a complaint alleging breach of a fiduciary duty of pre-formation disclosure by the "promoter" of a limited liability company.
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Top 10 Business Divorce Cases of 2010

Posted on December 27, 2010 by Peter A. Mahler

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.

 

6.  Matter of Murphy (United States Dredging Corp.), 74 AD3d 815, 2010 NY Slip Op 04794 (2d Dept June 1, 2010),  a stock valuation case where the Second Department affirmed the trial court's application of the discount for lack of marketability to the corporation's entire enterprise value and not just its good will value.

 

7.   Roni LLC v. Arfa, 74 AD3d 442, 2010 NY Slip Op 04700 (1st Dept June 3, 2010), in which the appellate court ruled that the organizer of an LLC owes a fiduciary duty of disclosure to the investors it solicits to become members.

 

8.   Matter of Stevens (Allied Builders, Inc.), 74 AD3d 1757, 2010 NY Slip Op 05066 (4th Dept June 11, 2010), where the court construed a shareholder's agreement as not triggering a mandatory buyout upon the minority shareholder's filing of a dissolution petitioner.  

 

9.  Matter of Piekos (Home Studios Inc.), 28 Misc 3d 1220(A), 2010 NY Slip Op 51408(U) (Sup Ct Westchester County Aug. 3, 2010), in which the court allowed a petitioner to raise an unconscionability defense to the respondents' argument that the filing of the petition triggered petitioner's obligation to offer his shares at book value as specified in the shareholders' agreement. 

 

10.  Teutul v. Teutul, 2010 NY Slip Op 09248 (2d Dept Dec. 14, 2010), where the court held unenforceable an option agreement giving Paul (Senior) Teutul of American Chopper television fame the right to acquire his son Junior's 20% stock interest in Orange County Choppers.
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Top 10 Business Divorce Cases of 2009

Posted on December 28, 2009 by Peter A. Mahler

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.
  1. Cooperstown Capital, LLC v. Patton, 60 AD3d 1251 (3d Dept 2009), in which the court invalidated a selective capital call that violated the operating agreement's provision for pro rata contributions.
  2. Fuiaxis v. 111 Huron Street, LLC, 58 AD3d 798 (2d Dept 2009), in which the court enforced a capital call to pay legal defense costs in a judicial dissolution proceeding, as authorized by the parties' operating agreement and LLC Law Section 502.
  3. Matter of Jamaica Acquisition, Inc., 25 Misc 3d 1212(A) (Sup Ct Nassau County 2009), a dissenting shareholder appraisal case involving the valuation of former bus companies, in which the court rejected a discount for built-in capital gains.  
  4. Watkins v. J C Land Development, Ltd., Index No. 30679-08 (Sup Ct Suffolk County June 19, 2009), in which the court applied judicial estoppel to deny shareholder standing to an ex-convict who concealed his alleged shares from probation authorities at the time of his sentencing.
  5. Ficus Investments, Inc. v. Private Capital Management, LLC, Index No. 600926/07 (Sup Ct NY County Feb. 23, 2009), in which the court, addressing an issue of LLC dissolution procedure, ruled that the dissolution request must be made by complaint or petition, not by "mere" motion in an existing non-dissolution action.

Wishing all my readers a happy, healthy and prosperous New Year.
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