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Last week, in Pappas v. Tzolis, the Appellate Division, First Department, handed down a 3-2 decision reinstating claims for fiduciary breach and fraud brought by members of an LLC against another member who acquired their interests allegedly while keeping secret his negotiations to sell the LLC’s sole asset to an outside buyer at a drastically higher valuation. It’s an important decision likely headed to the New York Court of Appeals, and it’s in this week’s New York Business Divorce.
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Continue Reading The Rise and Fall and Rise of Blue Chip: Fiduciary Duty Trumps Waiver in Latest First Department Decision

A recent and controversial decision by the Delaware Chancery Court highlights the need for counsel drafting multiple-member LLC operating agreements to focus attention on whether, and if so the circumstances under which, a member may transfer its membership interest, including economic and voting rights, to another existing member with or without the other members’ consent. Learn more about this important case law development in this week’s New York Business Divorce.
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Continue Reading Avoiding the Pain of Achaian, or How Not to Draft LLC Membership Transfer Provisions

Two notable decisions handed down the same day last week by the Appellate Division, First Department, address claims against managers of Delaware LLCs for breach of fiduciary duty. The plaintiffs scored in one and struck out in the other. It’s in this week’s New York Business Divorce.
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Continue Reading One Hit, One Miss: NY Courts Decide Fiduciary Duties of Delaware LLC Managers

A decision last month by Nassau County Commercial Division Justice Ira Warshawsky, and two recent decisions by the Delaware Chancery and Supreme Courts, clarify issues of standing and scope in proceedings under the business corporation and LLC statutes for inspection of company books and records. Read more in this week’s New York Business Divorce.
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Continue Reading New York and Delaware Courts Clarify Petitioner Standing to Bring Books and Records Proceedings

It’s summertime, the livin’ is easy and the fare is lighter in this week’s New York Business Divorce featuring short summaries of a few decisions on diverse issues in shareholder disputes decided by Nassau County Justice Stephen Bucaria and Manhattan Justices Jane Solomon and Debra James.
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Continue Reading A Few Dissolution Case Tidbits

In two recent decisions, courts in Delaware and New York addressed obligations of non-managing members of LLCs to maintain the confidentiality of company trade secrets. These cases provide important lessons for attorneys who prepare LLC operating and employment agreements. It’s in this week’s New York Business Divorce.
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Continue Reading Keeping the Gag on Ex-Business Partners: LLCs and Confidentiality Agreements

It’s hard to imagine a more challenging fact pattern and set of legal issues for a law school exam than the one presented in real life in the recently decided case, Pappas v. Tzolis, involving a buyout among LLC members followed by the purchasing member’s sale of the LLC’s asset to an outside buyer for a price far in excess of the buyout, followed by a lawsuit by the former members claiming they were bamboozled by the buying member. Read all about it in this week’s New York Business Divorce.
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Continue Reading Does Operating Agreement’s Clause Permitting Competitive Activities Eliminate Member’s Fiduciary Duty to Disclose Negotiations to Sell LLC’s Assets Before Buying Out Co-Members?

The Appellate Division, First Department, has ruled consistent with Delaware law that an LLC manager’s right to indemnification of legal expenses in winning dismissal of one action need not await resolution of a second action raising the same claims. This week’s New York Business Divorce explains.
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Continue Reading Following Delaware Precedent, New York Appeals Court Rules that Indemnification of LLC Managers for Successful Defense in First Action Need Not Await Resolution of Second, Related Litigation

Estate planners frequently utilize limited liability companies to separate management and economic interests. This week’s New York Business Divorce examines a fascinating decision last month by the Delaware Chancery Court dismissing a dissolution petition brought by the trustees of an inter vivos trust that held almost all of the LLC’s economic interest but none of the voting rights or management control.
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Continue Reading “Unusual Actions Breed Unusual Outcomes”: Delaware Court Dismisses Non-Voting Trust’s Action to Dissolve LLC Born of Estate Plan

The expulsion of an LLC member for breach of the LLC agreement, when combined with buyout provisions that leave the expelled member with little or no return on investment, is a sure-fire recipe for litigation, as evidenced in a recent decision by Manhattan Commercial Division Justice Melvin Schweitzer in Jain v. Rasteh. Read about it in this week’s New York Business Divorce.
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Continue Reading The Perils of For-Cause Expulsion Provisions in LLC Agreements