A dissolution petitioner received the judicial equivalent of the old quip “Where’s the beef?” in a Brooklyn appeals court decision last week reversing an order dissolving a limited liability company under Section 702 of the Limited Liability Company Law. In Matter of FR Holdings, FLP v Homapour, 2017 NY Slip Op 07439 (2d Dept Oct. 25, 2017), the Appellate Division, Second Department, sent the case back to the drawing board, despite the LLC having been in receivership for more than two years, because the petitioner “offered no competent evidentiary proof” in support of his petition for dissolution.
A Common Fact Pattern
FR Holdings involved a common fact pattern. 3 Covert LLC (“Covert”) was formed to own and operate a mixed-use apartment and commercial building in Brooklyn. Under the operating agreement, the purpose of the member-managed LLC was “to purchase and sell residential and commercial real estate and to engage in all transactions reasonably necessary or incidental to the foregoing.” Section 6.01 (a) of the operating agreement permitted most actions by “the vote or consents of holders of a majority of the Membership Interests.” As alleged in the petition, the LLC had five members, four of whom each held 12.5% interests. The fifth member, FR Holdings, owned a 50% interest. Continue Reading “Where’s the Beef?” Says Appeals Court, Reversing LLC Dissolution
As many judges and lawyers know, Superstorm Sandy has been used in litigation over the years as an excuse for things ranging from the seriously bad, like destroyed evidence, to the more mundane, like blown court deadlines. In 
Board members’ decisions to award compensation packages for themselves can present some thorny issues. In a close corporation, shareholders typically serve as officers and directors, and have a reasonable expectation of compensation in lieu of dividends or distributions. But dissenting shareholders or directors, armed with the benefit of hindsight, can, and often do, criticize a board’s compensation decisions as excessive, claiming self-dealing, looting, and waste. What statutory protections do board members have when making compensation decisions? To what extent can board members truly rely on those protections?
A business’s failure to pay state taxes can be a problem if the entity later wants to bring a lawsuit, or its non-controlling owners want to sue on the entity’s behalf.
Civil litigation in federal court can be a luxury experience. The quality of the judiciary is superb. Federal judges often give their cases substantial individualized attention. Lawsuits progress relatively quickly. The procedural rules in federal court have been litigated nationwide, so lawyers can easily find case law on almost every procedural nuance. Yet, business divorce cases are almost never litigated in federal court. Why?
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.
When a romantic affair evolves into a business relationship, the eventual falling out can be especially messy. Even more so if the former lovers try to keep the business going after the romance ends. That is a theme from a recent post-trial decision by Queens County 