One of the more interesting defenses in judicial dissolution cases alleging deadlock is that the petitioner itself contrived or manufactured the deadlock for the purpose of achieving dissolution. It’s a defense long ago recognized in cases involving close corporations, and only more recently in cases involving LLCs, including a decision this month by the Delaware Chancery Court. Learn more in this week’s New York Business Divorce.
Continue Reading Contrived LLC Deadlock Doesn’t Cut the Delaware Dissolution Mustard

This week’s post covers a case likely to make waves inside and outside of Delaware, where Vice Chancellor Laster explores the interplay between acts that are void ab initio and equitable defenses, and he encourages an appeal so that Delaware may reconsider its laws on the issue.
Continue Reading Magic Words Still Matter, and Equitable Defenses Can’t Save a “Void” Transfer

This week’s post considers a recent decision from New York County Commercial Division Justice Borrok, who offers well-reasoned guidance on the separateness between claims to specifically enforce a buy-sell agreement, on the one hand, and damages claims, on the other.
Continue Reading Never the Twain Shall Meet: Damages Claims Do Not Offset the Purchase Price in Buy-Sell Agreements

This week’s New York Business Divorce offers readers a preview of two thought provoking articles by Professors Donald Weidner and Daniel Kleinberger published as point/counter-point in the current issue of The Business Lawyer on the subject of LLCs, the direct-derivative distinction, and Special Litigation Committees.
Continue Reading LLCs, Direct vs. Derivative Claims, and Special Litigation Committees: A Lively Debate

LLC members often enter into an operating agreement containing certain formality requirements, then exercise substantially less formality in their dealings. In those cases, the argument that a member waived his or her right to insist upon the formality requirements of the operating agreement is a familiar one. In a recent case, New York County Justice Borrok considers a party’s claim that text messages establish his 9.9% membership interest in an immensely valuable cryptocurrency business, despite admitted non-compliance with the member-admission requirements of the operating agreement. 
Continue Reading Text Messages Trump Formalities in Ownership Dispute Over Cryptocurrency Business

This week’s post considers a duo of recent decisions concerning disputes between LLC members over the terms of their operating agreement.  In the first case, the court considered whether to enforce an operating agreement as written despite evidence that the parties actually intended a different deal.  In the second, the court considered whether to enforce an operating agreement where its buyout terms were grossly unfair.  The cases’ different outcomes highlight the outer limits of the parties’ freedom of contract in LLC operating agreements. 
Continue Reading The Operating Agreement Controls, Unless Public Policy Says Otherwise

The interplay between the default rules of the LLC law and the members’ agreement sometimes gets complicated. In a duo of recent decisions from Justice Cohen, that interplay took center-stage when a majority of members invoked the default rules in an attempt to oust the managing member from authority.
Continue Reading A Two-Act Play of LLC Default Rules and Manager Removal