Nothing on earth is more effective at dividing family than money. At New York Business Divorce, we’ve encountered almost every manner of money-driven intrafamily business litigation. Husband versus wife. Father versus son. Brother versus brother. Brother versus sister. Sister versus sister. Brother, Sister, and sister versus brother. Uncle versus nephew. Cousin versus cousin.

But it seems we’ve never written about father-and-son versus mother-and-son. We encounter precisely that pairing of antagonists in a recent decision from New York County Commercial Division Justice Nancy M. Bannon, Aronshtein v Aronshtein (Decision and Order [Sup Ct, NY County May 28, 2026]). In Aronshtein, a father and his eldest son sued his wife and youngest son alleging equity ownership of a New York limited liability company that owned and operated a home care services agency.

For the Aronshtein family, not one, not two, but three intrafamily litigations raged simultaneously.

The first lawsuit was a matrimonial divorce proceeding Olga Aronshtein (“Olga”), wife and mother, commenced against Dimitry Aronshtein (“Dimitry”), husband and father, in early January 2025, in Nassau County Supreme Court.

The second lawsuit Olga commenced in the name of her home care services agency, At Home Solutions, LLC (“AHS”), against her eldest son, Simon Aronshtein (“Simon”), and his separate company, in early April 2025, in Queens County Supreme Court.

The third lawsuit Dimitry and his eldest son, Simon, commenced against Olga and the younger son, Aaron Aronshtein (“Aaron”), in late April 2025, in New York County Supreme Court.

Four family members. Three lawsuits. Three courts. Two generations. One can only imagine the financial, psychological, and emotional cost.

The last of the three lawsuits to begin – Dimitry and Simon’s against Olga and Aaron – turned out to be the first to end. Why so? As do so many other lawsuits here on the blog – for lack of standing.

Dimitry and Simon’s Alleged Sources of Standing

According to the Complaint, the alleged ownership structure of AHS’s membership interests was Olga as a 40% member, Dimitry as a 40% member, and Simon as a 20% member.

Originally, Olga was the sole member of AHS.

Dimitry purported to sue both “derivatively on behalf of” AHS and individually “on behalf of himself.” Dimitry apparently attributed his alleged membership in AHS to a matrimonial divorce statute, Section 236B of the New York Domestic Relations Law, claiming that he was entitled to equitable distribution of 50% of the remaining equity of the business (half of the remaining 80% after an alleged prior transfer by Olga to Simon of 20%).

Simon attributed his alleged membership in AHS to an email chain from 2020, in which Olga contemplated a possible gift of 20% of the membership interests of AHS to Simon. The email chain said nothing, however, about the transaction closing, only a possible future transfer. In the Complaint, Simon sued individually, not derivatively.

The Dismissal Motion

Olga moved to dismiss on two grounds.

First, Olga argued that Dimitry lacked standing to sue derivatively because she owned 100% of the membership interests of AHS, providing documentary evidence to support her position consisting of the Articles of Organization, an Operating Agreement, and several years of Schedules K-1 (which unfortunately are sealed on NYSCEF). It’s unclear whether Dimitry and Olga filed joint personal income tax returns, or if so, whether the K-1s found their way into the returns. If so, under Mahoney-Buntzman and its progeny, Olga would have had a very promising tax estoppel argument. But the papers said nothing about it.

Second, Olga argued that Dimitry and Simon’s purported direct claims were all derivative in nature, impermissibly confusing direct with derivative claims, requiring dismissal.

In opposition, in a pair of affidavits linked here and here, Dimitry and Simon argued some odd things.

First, Dimitry and Simon argued that the Operating Agreement upon which Olga relied to prove her 100% membership interest was “fabricated.” Dimitry wrote that “Olga has fabricated an Operating Agreement of At Home Solutions in an attempt to grab ownership of the entity.” Simon wrote that the Operating Agreement was “fabricated specifically for this litigation.”

The only evidence of “fabrication” either of them could point to, though, was the anomalous fact that the Operating Agreement bore a “commencement date” for AHS’s “term” of “March 24, 2006,” defined as the “date on which the company was licensed by the New York State Department of Health to operate as a home care agency.” According to Dimitry and Simon, the New York Department of Health did not license AHS as a home care services agency until five months later, on August 30, 2006. Of course, there are other explanations than “fabrication” – it would not be the first time in the world an operating agreement contained an incorrect date or typo.

Second, somewhat inconsistently with their first argument, Dimitry argued that he intentionally “registered the LLC in Olga’s name for liability purposes,” “solely to protect me from personal liability,” and to “protect Simon from liability,” and “for no other reason.” Simon wrote that “to protect me from liability, Olga was registered as sole member.”

This argument is suspicious to say the least. LLCs inherently provide their owners protection from personal liability. “Generally, a member of a limited liability company cannot personally be held liable for any debts, obligations or liabilities of the limited liability company, ‘whether arising in tort, contract or otherwise’” (DePetris v Traina, 211 AD3d 939 [2d Dept 2022], quoting Limited Liability Company Law § 609 [a]). Courts do not consider holding LLC members personally liable unless an exception to the general rule applies, like where an LLC principal personally commits a tortious act (see Blumenfeld v Smith, 249 AD3d 570 [1st Dept 2026]), or where there is “abuse of the corporate form to perpetuate a wrong or injustice” (Crawford v Integrated Asset Mgt. Servs., LLC, 236 AD3d 750 [2d Dept 2025]).

Was fear of a potential veil-pierce the impetus for reposing ownership with Olga? As Olga mentioned in her reply memorandum of law (all three briefs are here, here, and here), after AHS’s formation Dimitry was convicted in Federal Court of conspiracy to commit federal programs bribery, bribery, conspiracy to violate the Travel Act, and conspiracy to commit money laundering, sentenced to 20 years in prison, and issued a forfeiture order.

The Dismissal Decision

Justice Bannon strictly applied the burden-shifting standard for lack-of-standing dismissal motions. The functional equivalent of a motion for summary judgment, she wrote, the initial “burden lies with the defendant to establish prima facie that plaintiff has no standing to sue,” and if “this burden is met, the burden shifts to the plaintiff to raise a triable issue of fact as to its standing.”

Justice Bannon concluded that Olga and Aaron

satisfy their prima facie burden of demonstrating that plaintiffs have no standing to bring derivative claims under BCL § 626 by submitting an affirmation from Olga, wherein she states that she is AHS’s sole owner, and AHS’s original Articles of Organization submitted to the New York Secretary of State, indicating Olga as the sole ‘organizer’ of the company, as well as copies of four years’ worth of IRS Schedule K-1 Forms spanning 2019 to 2023, clearly indicating Olga’s 100% shareholder stock ownership in AHS for that time.

“In response,” the Court ruled, “plaintiffs do not raise any issue of fact”:

They fail to meaningfully contest the authenticity of those exhibits or offer any to the contrary. Rather, they argue Dimitry has the requisite ownership interest in AHS to confer standing due to his claim asserted in the divorce action seeking ‘an equitable distribution of the marital property’ between himself and Olga under New York Domestic Relations Law § 236B. Plaintiffs seem to anticipate or speculate that Dimitry stands to acquire some portion of Olga’s interest in AHS. Plaintiffs, however, fail to submit any authority supporting their novel theory that an unadjudicated equitable distribution claim in a divorce proceeding confers upon the claimant the kind of present corporate ownership required for standing to assert derivative shareholder claims pursuant to BCL § 626 in another action. Therefore, the complaint is dismissed pursuant to CPLR 3211 (a) (3) for lack of standing.

Unresolved Legal Points in Aronshtein

Aronshtein touched upon, but did not resolve, three important legal issues.

First, the LLC “organizer” point.

The fact that Olga was listed as sole “organizer” on the entity’s Articles of Organization is not necessarily probative of membership status. “An organizer may, but need not be, a member of the limited liability company that he or she forms” (LLC Law § 203 [b]). In the real world, LLCs often list their lawyer or accountant who helped form the entity as “organizer” on the articles of organization. The presence or absence of an individual’s name in the articles of organization is not dispositive of ownership status (see e.g. Out of the Box Promotions LLC v Koschitzki, 15 Misc 3d 1134(A) [Sup Ct, Kings County 2007], affd 55 AD3d 575 [2d Dept 2008] [“there is no requirement that all members of the LLC be set forth in the articles of organization” so “defendants’ contention that the absence of Hellman’s name on the Articles of Organization conclusively demonstrates that he is not a member, is not supported by . . . the LLC Law”]).

Second, the evidence “fabrication” point. One might argue that an allegation of falsification of an operating agreement could or should be enough to raise a triable issue of fact on membership status and standing to sue. But the converse argument is that to satisfy the heavy burden of demonstrating a fraud on the court from “fabrication of evidence,” “perjury,” or “falsification of documents,” one must present proof by “clear and convincing evidence” (Williams v Scafidi, 205 AD3d 1175 [3d Dept 2022]). Dimitry and Simon’s perfunctory affidavits far from sufficed under this stringent standard.

Third, the “equitable distribution” point. My understanding of Domestic Relations Law § 236B is that it does not automatically convert closely-held business equity owned solely by one spouse into equity owned by both spouses. Though an in-kind equitable distribution of a business interest is theoretically possible, courts almost always grant equitable distribution in the form of a cash payment following an appraisal process (see e.g. Muller v Muller, 116 Misc 2d 660 [Sup Ct, Nassau County 1982] [“Inasmuch as it would be improper to make the wife a ‘partner’ in the business, the court, therefore, awards the wife [in cash] a distributive award relative to the husband’s share of the business”]; G.B. v J.M.B., 88 Misc 3d 1254(A) [Sup Ct, Westchester County 2026] [awarding wife a cash award of $1.8 million, payable in 60 monthly installments, with prejudgment interest at 9%, for 30% of the value of the husband’s business interest]). New York’s matrimonial courts have developed a fairly comprehensive set of criteria in matrimonial divorce litigation – one might argue more comprehensive than in business divorce litigation – for valuing business interests and converting them to cash (see e.g. D.P. v S.P., 88 Misc 3d 1218(A) [Sup Ct, Westchester County 2026]).

Bottom line, it seems that where there are parallel pending matrimonial and business divorce proceedings, Domestic Relations Law § 236B cannot create standing to sue in the business divorce case where standing does not otherwise exist – the statute just makes one spouse a potential creditor of the other. So always check your footing before embarking on that expensive derivative litigation.