A recent California case may shed light on how New York courts should handle ant-dissolution provisions in LLC agreements.
Continue Reading Does This California Case Bolster the Argument Against Waiver of the Right to Seek Judicial Dissolution of New York LLCs?
It’s been 15 years since the Second Department’s decision in Matter of 1545 Ocean Avenue, LLC, 72 AD3d 121, 2010 NY Slip Op 00688 (2d Dept Jan. 26, 2010), which established the standard for judicial dissolution of limited liability companies. Under that standard, a New York LLC should be judicially dissolved when the management of the company is unable or unwilling to permit or promote the stated purpose of the entity, or continuing the entity is financially unfeasible.
That standard has proved both enduring and highly fact-specific, producing over the last decade and a half a landscape of judicial decisions finding that specific conduct and circumstances do—or do not—warrant dissolution.
I’ve also seen at least some disconnect between that standard and the real interests of many LLC members. On the one hand, the standard focuses on two things: (i) the stated purpose of the LLC as set forth in the operating agreement, and (ii) the financial feasibility of the LLC. On the other hand, in many cases, the “stated purpose” as set forth in the operating agreement is boilerplate that the owners never considered. And the financial feasibility of the LLC usually is a given; people tend not to litigate over failing businesses. Most owners who resort to judicial dissolution do so for other reasons.
Many LLC members seek judicial dissolution as a means to resolve distrust of or perceived misconduct by their co-owners. And while there is room for consideration of those things in the “unable or unwilling” language of the dissolution standard, a court faithfully applying the 1545 Ocean Avenue standard and a party seeking his day in court about allegations of member misconduct might feel like they’re speaking different languages.
A recent decision from New York County, Otsuka v Shimura, No. 159202/2020 (Sup Ct, New York County 2025), serves as a fine springboard to highlight that disconnect, discuss the timing of an LLC dissolution claim, and take stock of the current LLC dissolution landscape.Continue Reading Stated Purpose vs. Stated Problem: Court Sticks to the Script for LLC Dissolution
This week in New York Business Divorce, read about what appears to be the first New York appeals court decision to enforce a waiver-of-dissolution provision in an LLC operating agreement, a departure from prevailing appellate case law holding broad anti-dissolution provisions void as against public policy.
Continue Reading New Year, New Law – New Opacity – for LLC Owner Disputes
The key question in shareholder oppression claims is often whether the complaining shareholder’s expectations were reasonable under the circumstances. A recent decision from Albany County and a recently published article highlight two sides of a debate about how “contractual” the reasonable expectations inquiry should be.
Continue Reading Can a Shareholder Be Oppressed After Ceding Control? Oppression, Reasonable Expectations, and Contractual Formalism
There are plenty of advantages to practicing business divorce litigation in New York. The diversity of businesses and clients, complexity of agreements and transactions, and excellence of judges and attorneys make New York, in my view, the place to be for commercial litigators of all stripes.
One downside is the reality that crowded dockets and busy judges sometimes results in too terse decisions from the trial and appellate courts. At the appellate level, hundreds of pages of evidence, and nuanced, extensively briefed legal theories are sometimes reduced to a one-line decision. Not only do those one-liners inevitably leave the parties dissatisfied, but they also miss an opportunity to lend reasoned, precedential analysis to complex and unsettled questions of law.
But in some sense, that’s where the lawyers come in. New cases can be won or lost in the grey areas created by brief appellate authority, and the sharpest lawyers will find the precedential value in even the shortest appellate decisions.
These few paragraphs are already much longer than the Fourth Department’s recent decision affirming dismissal of a shareholder’s claim for dissolution pursuant to BCL 1104-a in Kavanaugh v Consumers Beverages, Inc., 205 NYS3d 637 (4th Dept 2024). But in a few words, the Fourth Department packs a punch in corporate dissolution jurisprudence.Continue Reading Termination, Adequate Alternative Remedies Sends Dissolution Proceeding Packing
A New York LLC with a broad, “purposeless” purpose clause and demonstrated financial sustainability is dissolved over . . . the minority owner’s disagreement with the menu?
Continue Reading The Legal Ramen-ifications of Dissolving a New York LLC Over Noodle Choices
In this week’s New York Business Divorce, we consider the problem of concurrent, overlapping business and marital dissolution proceedings, including a small but growing body of case law addressing how to prioritize one over the other. For judges and lawyers accustomed to commercial courts exercising their jurisdictional powers broadly, the result may be surprising.
Continue Reading Parallel Business and Matrimonial Divorce Proceedings
How does the First Department tackle competing interpretations of an LLC operating agreement? This week’s post explains.
Continue Reading Dissolution Defined: The First Department’s Recent Guidance on Interpreting Operating Agreements
If an oppressed, frozen-out minority shareholder is going to sue for judicial dissolution, chances are they’re going to do it within the applicable six-year statute of limitations. This week’s New York Business Divorce examines a recent decision where the shareholder claiming oppression waited at least 10 years to sue.
Continue Reading When Is It Too Late to Sue for Shareholder Oppression?
When a shareholder petitions for dissolution, many states have statutes allowing the corporation to respond by buying out the complaining shareholder. This week’s post takes a look at several recent decisions concerning buyout elections across the country.
Continue Reading A Cross-Country Road Trip of Elections to Purchase in Dissolution Proceedings