Two decisions—just over 10 weeks apart—show business divorce litigants the power and limitations of the implied covenant of good faith and fair dealing.
Two recent Brooklyn decisions test the procedural boundaries of shareholder oppression—one rejecting a standalone damages claim outside dissolution, the other sending a properly commenced dissolution proceeding down a plenary path.
Continue Reading Brooklyn Cases Test the Procedural Boundaries of Shareholder Oppression
Can an operating agreement require majority approval before a minority member may sue derivatively? A recent Delaware decision warns against letting authority provisions swallow the derivative claim whole.
Continue Reading The Derivative Claim and the Majority Approval Trap
A recent Second Department decision reminds business divorce litigants that while K-1s may be powerful evidence of an economic interest, they cannot substitute for compliance with a partnership agreement’s formal admission requirements.
Continue Reading Tax Partner, Not True Partner: The Limits of K-1s in Business Divorce Litigation
When shareholder oppression is real but dissolution is too much, should courts give majority owners a chance to straighten out before imposing the corporate death penalty?
Litigation over who is—and who is not—a member of a limited liability company has become a defining feature of LLCs. A recent First Department decision suggests a shift away from informality and back toward strict compliance with the contractual mechanics of admission.
Continue Reading Promise of Equity Falls to Operating Agreement’s Rigid Admission Requirements
When an LLC operating agreement permits action upon majority consent, can a minority member nonetheless challenge that action as a breach of the majority’s fiduciary duties? The Fourth Department weighs in.
Continue Reading Can Majority-Authorized Action Still Breach Fiduciary Duty?
A recent Brooklyn Supreme Court case bring useful insight on three post-dissolution fundamentals: when (and how) a dissolution can be annulled, the court’s supervisory power under BCL 1008, and why, when shareholders are deadlocked as to dissolution procedure, a public sale—not a private deal—is the default endgame.
Continue Reading Corporate Afterlife: Deadlock and Accounting in the Winding-Up Phase
While the distinction between a partner and an economic interest holder is conceptually sound, a recent decision from the Second Department shows how an assignee of an economic interest can be left not only out of the boardroom, but also out in the cold financially.
When cash never hits the books, can an accounting still deliver meaningful relief? A recent decision offers answers—and warnings.
Continue Reading Can an Equitable Accounting Find the Missing Cash?