Spring in New York has ushered in a fresh crop of noteworthy decisions on intra-LLC disputes. Headliners include a boost to members’ rights to compel an accounting courtesy of the First Department, a procedural refresher on LLC dissolution and the applicable standard, and a winding dispute over membership bequests in the Surrogate’s Court.
This week’s New York Business Divorce discusses a case involving an LLC member dispute in which the plaintiff was hoisted on his own petard or, to paraphrase an email that came to light in discovery, stepped into his own “wolverine trap.”
Continue Reading LLC Minority Member Gets Caught in His Own “Wolverine Trap”
This week’s New York Business Divorce features a failed attempt at removing restaurant manager on a preliminary injunction motion.
Business appraiser liability? A minority owner of an LLC recently took a run at it, alleging that a valuation firm conspired with the majority owners to undervalue his interest for a compelled buyout under the operating agreement. Learn how the court handled this novel issue in this week’s New York Business Divorce.
Continue Reading Business Appraiser Liability? That’s a New One.
It’s been 15 years since the Second Department’s decision in Matter of 1545 Ocean Avenue, LLC, 72 AD3d 121, 2010 NY Slip Op 00688 (2d Dept Jan. 26, 2010), which established the standard for judicial dissolution of limited liability companies. Under that standard, a New York LLC should be judicially dissolved when the management of the company is unable or unwilling to permit or promote the stated purpose of the entity, or continuing the entity is financially unfeasible.
That standard has proved both enduring and highly fact-specific, producing over the last decade and a half a landscape of judicial decisions finding that specific conduct and circumstances do—or do not—warrant dissolution.
I’ve also seen at least some disconnect between that standard and the real interests of many LLC members. On the one hand, the standard focuses on two things: (i) the stated purpose of the LLC as set forth in the operating agreement, and (ii) the financial feasibility of the LLC. On the other hand, in many cases, the “stated purpose” as set forth in the operating agreement is boilerplate that the owners never considered. And the financial feasibility of the LLC usually is a given; people tend not to litigate over failing businesses. Most owners who resort to judicial dissolution do so for other reasons.
Many LLC members seek judicial dissolution as a means to resolve distrust of or perceived misconduct by their co-owners. And while there is room for consideration of those things in the “unable or unwilling” language of the dissolution standard, a court faithfully applying the 1545 Ocean Avenue standard and a party seeking his day in court about allegations of member misconduct might feel like they’re speaking different languages.
A recent decision from New York County, Otsuka v Shimura, No. 159202/2020 (Sup Ct, New York County 2025), serves as a fine springboard to highlight that disconnect, discuss the timing of an LLC dissolution claim, and take stock of the current LLC dissolution landscape.Continue Reading Stated Purpose vs. Stated Problem: Court Sticks to the Script for LLC Dissolution
The qualifying phrase, “Notwithstanding anything to the contrary in this Agreement,” can be a highly useful and efficient means to clarify the hierarchy of otherwise potentially competing contract provisions. It can also trigger thorny litigation when two “notwithstanding” clauses arguably conflict with one another, as in the case featured in this week’s New York Business Divorce.
Continue Reading Court’s Decision in High Stakes Case Cuts Through the “Fog of Dueling ‘Notwithstanding’ Clauses”
Can a partnership dispute be premature and untimely simultaneously? That was the unfortunate outcome for a hapless general partner in this week’s New York Business Divorce.
Continue Reading Premature or Untimely? Both at the Same Time? When to Sue as a General Partner
The subject of this week’s post has it all: cinematic threats, emergency court orders, changed locks, an intentional foreclosure, a tactical bankruptcy filing, and a trip to the Second Circuit Court of Appeals. The resulting opinion is equally satisfying.
Continue Reading LLC Member States Direct Claims Arising from Machiavellian Manager’s Tactical Bankruptcy Petition
On the menu in this week’s New York Business Divorce is a case about a restaurant menu, literally, and the disputed changes to it made by a 50% member of the operating LLC.
Continue Reading I’ll Have a Bacon Cheeseburger, Hold the Pickle and LLC Dissolution
This week’s New York Business Divorce presents the 2025 Winter Case Notes, where we highlight a few recent decisions of interest featuring strict adherence to statutory language and the parties’ governing agreements.
Continue Reading Winter Case Notes: Nice Try, But the Agreements Say What They Say