LLCs

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dissolution

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

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The subject of this week’s post has it all: cinematic threats, emergency court orders, changed locks, an intentional foreclosure, a tactical bankruptcy filing, and a trip to the Second Circuit Court of Appeals.  The resulting opinion is equally satisfying.
Continue Reading LLC Member States Direct Claims Arising from Machiavellian Manager’s Tactical Bankruptcy Petition

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This week’s New York Business Divorce presents the 2025 Winter Case Notes, where we highlight a few recent decisions of interest featuring strict adherence to statutory language and the parties’ governing agreements.
Continue Reading Winter Case Notes: Nice Try, But the Agreements Say What They Say

This week’s New York Business Divorce features the highly anticipated ruling by the New York Court of Appeals, in a 4-3 decision in Behler v Tao, affirming dismissal of a complaint seeking to enforce an oral “exit opportunity agreement” involving a Delaware LLC. …
Continue Reading New York Top Court’s Advice to Prospective Investors in Delaware LLCs: Pay Close Attention to Controller’s Power to Amend LLC Agreement

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 irony of litigation over buy-sell agreements is that such agreements are specifically intended to avoid litigation when owners die or become disabled or otherwise seek to exit the firm. Take, for example, last week’s Appellate Division ruling, reversing the lower court’s decision dismissing a claim to enforce an operating agreement’s buy-sell provision. Better yet, read about it in this week’s New York Business Divorce.
Continue Reading The Little Buy-Sell That Could

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This week’s New York Business Divorce post examines a recent appellate court decision in which the Third Department searches the record to find deadlocked 50/50 members unable to carry on a realty LLC’s business, warranting dissolution.
Continue Reading Help Comes From an Unexpected Place in LLC Deadlock Dissolution: The Third Department

Fall NYC Roundup

November was a whirlwind month for New York LLC litigation.  It featured disputes over how to wind up a judicially dissolved LLC, a bitter intra-family emergency indemnification/advancement injunction, and the finale of a decade-long battle over the enforceability of a partially baked operating agreement.  Some of these recent cases add clarity to the growing body of New York LLC caselaw. Others add confusion.  But all add precedential footholds for future arguments in disputes between members of New York LLCs. Members and their counsel take note.Continue Reading A Leaf Through a Busy November in New York LLC Litigation