You may be surprised to learn that, according to a ruling last month in Shapiro v Ettenson, a minority member of a New York LLC that initially had no written operating agreement is bound by a written operating agreement subsequently adopted by the majority members, notwithstanding the minority member’s refusal to sign the agreement. Get the detailed story in this week’s New York Business Divorce.
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Summer Shorts: Member Expulsion and Other Recent Decisions of Interest
Traditions are good. This blog has two annual traditions. First, at the end of each year I write a post listing the year’s top ten business divorce decisions. Second, each August I offer readers who are (or ought to be) on summer vacation some light reading in the form of three, relatively short case summaries.
So here we are in what’s been a particularly felicitous August weather-wise (at least here in the Northeast U.S.), with another edition of Summer Shorts. This edition’s summaries feature two out-of-state cases — one from Florida involving expulsion of an LLC member and one from Delaware involving the valuation upon redemption of an LLC member’s interest — and a New York appellate court decision involving the removal of a limited partnership’s general partner.
The Anti-Chiu: Florida Court Upholds LLC Member’s Expulsion
Froonjian v Ultimate Combatant, LLC, No. 4D14-662 [Fla. Dist. Ct. App. May 27, 2015]. The Florida intermediate appellate court’s ruling in Froonjian makes for a fascinating contrast with New York case law represented most prominently by the Second Department’s 2010 decision in Chiu v Chiu holding that, absent express authorization in the LLC’s operating agreement, a member’s involuntary expulsion is not permitted. Going 180° in the other direction, the Froonjian court upheld the majority members’ expulsion of a minority member from a Florida LLC that had no operating agreement, reasoning that the Florida default statute vesting all decision-making authority in the members acting by majority vote encompasses the authority to expel a member.
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Delaware LLC Agreement Says Members Waive Right to Sue Outside New York, But New York Judge Says Otherwise in Dissolution Case
A recent decision by Manhattan Commercial Division Justice Jeffrey Oing dismissed for lack of subject matter jurisdiction a petition to dissolve a Delaware LLC whose operating agreement included a venue provision waiving the members’ right to sue anywhere but New York. Get the full story in this week’s New York Business Divorce.
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“Locked in Corporate Hell”: Bitter Feud Between Deadlocked 50/50 Owners Leads Court to Order Sale of Lucrative Company
Hard to believe the two, 50/50 owners of a company with half a billion annual sales and $80 million profit can’t overcome their mutual antipathy, but that’s exactly what happened in Shawe v. Elting, a decision last week by the Delaware Chancery Court ordering the appointment of a custodian to sell the company. It’s in this week’s New York Business Divorce.
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Deadlock Hits Dead End in LLC Dissolution Case
In Goldstein v Pikus, decided last month by Justice Charles Ramos, the court dismissed a dissolution petition alleging deadlock, brought by one of two co-managing members of an LLC that owns a residential apartment building. Find out why in this week’s New York Business Divorce.
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No Slam Dunk for This Oppressed Minority Shareholder Petition
The basketball court meets the law court in this week’s New York Business Divorce, featuring an unusual lawsuit brought by a minority member of the LLC that owns the WNBA’s Tulsa Shock, seeking to stop its recently announced move to Dallas.
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Fifty Years a Stockholder, Six Years to Prove it in Court
An appellate ruling last week in Zwarycz v, Marnia Construction, Inc. illustrates the heavy price of neglect to issue stock certificates or follow other formalities in closely held corporations — a price paid in years of litigation over stock ownership. Learn more in this week’s New York Business Divorce.
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The Hidden Cost of a Devalued Buyback Upon Termination for Cause
Agreements providing for compulsory buyouts upon termination of a minority shareholder’s employment can be a good thing. Complications or sometimes litigation sets in, however, when termination for cause is linked to a devalued buyout formula, as illustrated in the case highlighted in this week’s New York Business Divorce.
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Business Partners Fighting Over the Company’s Corpse
Once in a while, a case comes along to remind us to think twice before getting involved in expensive litigation between business partners over a defunct, insolvent company. Mazel Capital v. Laifer, recently decided by Justice Shirley Werner Kornreich is such a case. It’s in this week’s New York Business Divorce.
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Wash Hands Before Suing
A recent First Department ruling in Sansum v. Fioratti is one of the few reported instances in which the defense of unclean hands was successfully asserted to defeat on the merits a minority shareholder’s claim for corporate dissolution. Read this week’s New York Business Divorce to find out more.
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