The decision highlighted in this week’s New York Business Divorce may not be new, but it is one that deserves serious attention as a possible remedial template in deadlock dissolution cases, where one 50% owner with operational control uses it as a sword to force the other 50% owner to accept an under-valued buyout.
Continue Reading How Should Courts Maximize Shareholder Value When Dissolving Deadlocked Companies?

Classifying a shareholder claim as direct or derivative has important consequences at the pleading stage and beyond. This week’s New York Business Divorce looks at a recent decision by Justice Melvin Schweitzer in which he concluded that the defendant majority shareholder’s alleged breaches of fiduciary duty, constituting a “de facto liquidation” of the company, could support dual direct and derivative claims.
Continue Reading Minority Shareholder’s De Facto Liquidation Claim: Direct, Derivative, or Both?

A decision last month by Justice Carolyn Demarest in Mizrahi v. Cohen adds to the short but growing list of LLC dissolution cases in which courts have ordered equitable buy-outs notwithstanding the absence of enabling provision in the LLC agreement. This week’s New York Business Divorce has this important story.
Continue Reading Court Decision Boosts Equitable Buy-Out Remedy in LLC Dissolution Case

Someday, if and when the facts come out in discovery, we’ll learn what really happened in the curious case of Matter of Hu (Lowbet Realty Corp.), 2012 NY Slip Op 22314 (Sup Ct Kings County Nov. 2, 2012), in which a slippery minority shareholder somehow managed to sell the corporation’s sole realty asset and abscond with $1.6 million sale proceeds in violation of court order in a pending liquidation proceeding brought by the majority shareholder. In the meantime, the buyer and the property manager now find themselves ensnared in the majority shareholder’s effort to rescind the sale and to recover damages.

The court’s decision in Lowbet, issued earlier this month by Brooklyn Commercial Division Justice Carolyn E. Demarest, tells a remarkable story of brazen disobedience of court order by one Margaret Liu, a 25% shareholder of Lowbet Realty Corp. The decision also sheds light on an interesting, rarely seen procedural question in corporate dissolution proceedings, namely, whether the court may adjudicate within such summary proceedings a shareholder’s claim for relief against a third party who is neither a shareholder nor officer/director of the corporation, rather than being forced to commence a separate, plenary action by ordinary summons and complaint.

Background

The petitioner, Shau Chung Hu, was the 100% owner of Lowbet when, in 1980, it purchased a 19-unit apartment building in Brooklyn. In 1985, Hu married Margaret Liu and gave her a 25% stock interest in Lowbet. Mr. Hu and Ms. Liu separated in 1995, at which time Mr. Hu went to China where he has resided ever since, leaving Ms. Liu in full control over Lowbet.
Continue Reading Dissolution Case Ensnares Buyer of Corporation’s Realty in Unauthorized Sale

This week’s New York Business Divorce offers some “summer shorts” consisting of summaries of three recent decisions of interest including two by Justice Timothy Driscoll and another by Justice David Schmidt, featuring disputes over a liquidating receiver’s sale of the dissolved corporation’s real property and the requirements for pleading derivative claims.

Continue Reading Summer Shorts: Liquidating Receiver’s Authority to Compel Share Redemption and Other Recent Decisions of Interest

Those interested in the evolving law of LLC dissolution won’t want to miss this week’s New York Business Divorce featuring a case called Mizrahi v. Cohen decided last week by Justice Carolyn Demarest in which she ordered dissolution of a financially failing real estate holding company.

Continue Reading Court Orders Dissolution of Unprofitable Real Estate LLC

Better late than never, at least sometimes, is the common theme of the cases highlighted in this week’s New York Business Divorce. The cases examined include one shareholder’s effort to challenge the disposition of company assets 13 years after its dissolution and, in another case, an attempt to annul a default judgment of dissolution almost three years later.

Continue Reading It Aint Over ’til It’s Over: Courts Decide Post-Dissolution Controversies

Under the Business Corporation Law, must a court-appointed receiver sell at public auction realty owned by a dissolved corporation, or may the receiver offer the property in a privately negotiated sale? That’s the question presented in Matter of Darvish decided this month by Manhattan Commercial Division Justice Melvin Schweitzer. It’s in this week’s New York Business Divorce.

Continue Reading Liquidation of Real Estate Holding Company: Public Auction or Private Sale?

A post-trial decision last month by Justice Emily Pines in Matter of Wenger, a corporate dissolution case pitting father against son, addresses novel issues concerning shareholder standing and oppression remedies. It’s in this week’s New York Business Divorce.

Continue Reading Splitting the Baby: Court in Oppressed Shareholder Dissolution Case Divides the Company Assets

In a first impression decision handed down last month in Matter of Deblinger, Justice Stephen A. Bucaria upheld the court’s power to compel a respondent shareholder in a dissolution case to present a derivative claim against the petitioner-director. Catch it in this week’s New York Business Divorce.

Continue Reading Can Court Compel Shareholder to Present Claim in Dissolution Proceeding?