A claim for “usurpation of corporate opportunity” is simple to allege, but difficult to prove. Two recent cases out of the Manhattan Commercial Division and the U.S. District Court for the Southern District of New York explore the bounds of the corporate opportunity doctrine under New York and Delaware law.
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LLCs
Contrived LLC Deadlock Doesn’t Cut the Delaware Dissolution Mustard

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.
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Magic Words Still Matter, and Equitable Defenses Can’t Save a “Void” Transfer

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.
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Never the Twain Shall Meet: Damages Claims Do Not Offset the Purchase Price in Buy-Sell Agreements

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.
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Business Divorce, Brooklyn Style

If you think Brooklyn is still a backwater to Manhattan when it comes to important business litigation, think again. This week’s New York Business Divorce looks at a handful of recent decisions in shareholder disputes by prolific Justice Leon Ruchelsman of the Brooklyn Supreme Court’s Commercial Division.
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LLCs, Direct vs. Derivative Claims, and Special Litigation Committees: A Lively Debate

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. …
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Text Messages Trump Formalities in Ownership Dispute Over Cryptocurrency Business

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. …
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A Loan Is a Loan Is a Loan, Except When It’s Equity

Characterizing funds transfers to and from the company and its owners as either loan or capital transactions, and failing to adequately document such transactions, can have drastic financial, tax, and litigation consequences. Learn more in this week’s New York Business Divorce.
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But What of the Equitable Accounting?

In what he described as “the aftermath of what had been an amicable business divorce,” New York County Commercial Division Justice Joel Cohen discusses several interesting and novel limitations on New York’s cause of action for an equitable accounting.
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The Operating Agreement Controls, Unless Public Policy Says Otherwise

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. …
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