This week on New York Business Divorce, read about the interplay between statutory and contract rules for LLC manager removal or expulsion, set within an appeal from a trio of decisions we wrote about what feels like a lifetime ago.
The Bad Faith Defense to Opportunistic Expulsion
Think bad faith can save you from expulsion? A new ruling shows just how slim that lifeline really is.
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Does This California Case Bolster the Argument Against Waiver of the Right to Seek Judicial Dissolution of New York LLCs?
A recent California case may shed light on how New York courts should handle ant-dissolution provisions in LLC agreements.
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For Embattled Bich Family, “Full Membership” Requires Admittance Without Precondition
This week’s New York Business Divorce features an intra-family battle concerning the precise contours of admittance as a “full” member of the family business.
Summer Shorts: A Trio of Recent Decisions of Interest in LLC Member Disputes
It’s that time of year for our Summer Shorts edition, this year highlighting a trio of decisions involving LLC member disputes.
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Hoping to Take Assignment of an LP or LLC Interest? Best Read the Contract
A recent decision from one of our favorites, Albany County Commercial Division Justice Richard M. Platkin, is a reminder to would-be assignees of limited partnership interests that without total compliance with the terms and conditions of the partnership agreement, an attempted assignment conveys only economic rights (i.e., the right to distributions, profits, and losses), but not voting or management rights, even if both sides to the assignment genuinely intended transfer of all ownership rights.
Although not an LLC case, the concept of Marini v Marini Realty LP (2025 NY Slip Op 51138[U] [Sup Ct, Albany County July 2, 2025]), applies equally to LLC members: to become a full-blown equity holder with all attendant rights and privileges, compliance with the governing contract (or if none, the default rules under the Partnership Law and Limited Liability Company Law) is essential. Standard language in such contracts requires unanimity for admission of new equity owners. After all, who wants to take on a new partner without one’s consent? Less than total compliance conveys only economic benefits, not voting or management rights.
Continue Reading Hoping to Take Assignment of an LP or LLC Interest? Best Read the ContractCapital Call Cancelled: A Fairness Defense to the Majority’s Mandatory Capital Call
This week’s post unpacks a novel estoppel defense that put the brakes on the manager’s right to make a mandatory capital call.
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The Humble LLC Exculpation Clause Wins Big: Member/CEO Escapes $8M Fiduciary Claims
Section 417 of New York’s LLC Law permits the members to eliminate their fiduciary duties, but only in very narrow circumstances. This week’s post shows how the seemingly toothless provision can carry the day.
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A Message of Acceptance from the Garden State
This week’s New York Business Divorce takes us to the Garden State for a delightfully-written, post-trial decision by retired, recalled Appellate Division Judge Clarkson S. Fisher, Jr.
Cheshun v Sikand, Opinion [NJ Super Ct, Monmouth County May 7, 2025]), was a dissolution proceeding under New Jersey’s version of the Revised Uniform Limited Liability Company Law (“RULLCA”) between two 50/50 LLC member-managers who founded and operated an entity they hoped would perform clinical drug trials, but which never really got off the ground.
A couple of lessons emerge from Cheshun.
First, it seems obligatory for close entity owners and their litigation counsel to throw stones, cast aspersions, and lay blame for the business’s demise. But like marriages, sometimes business relationships fail because of good faith disagreements and reasonable, dashed expectations. Sometimes nobody is to blame. And that is ok.
Second, business owners may agree to part ways, but the decision to do so does not sever the existence of one’s ongoing fiduciary duties. Fiduciary duties continue through the conclusion of the wind up process. In the words of Judge Fisher, where a business entity is in a “state of un-woundedness,” failure to heed one’s fiduciary duties – even after an agreement to separate – can prove costly.
Continue Reading A Message of Acceptance from the Garden StateDemand Futility, Dissolution, and Transfer Restrictions: Spring Blooms Fresh Developments in LLC Litigation
Spring in New York has ushered in a fresh crop of noteworthy decisions on intra-LLC disputes. Headliners include a boost to members’ rights to compel an accounting courtesy of the First Department, a procedural refresher on LLC dissolution and the applicable standard, and a winding dispute over membership bequests in the Surrogate’s Court.