Can a court order the expulsion of an LLC member for misconduct absent language in the operating agreement so providing? Get the answer in this week’s New York Business Divorce highlighting a recent decision by the Appellate Division, Second Department, posing the issue in the context of a bitter dispute between two brothers.
Continue Reading Tzolis No Solace for Proponent of LLC Member Expulsion
Following Delaware Precedent, New York Appeals Court Rules that Indemnification of LLC Managers for Successful Defense in First Action Need Not Await Resolution of Second, Related Litigation
By Peter A. Mahler on
The Appellate Division, First Department, has ruled consistent with Delaware law that an LLC manager’s right to indemnification of legal expenses in winning dismissal of one action need not await resolution of a second action raising the same claims. This week’s New York Business Divorce explains.
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Continue Reading Following Delaware Precedent, New York Appeals Court Rules that Indemnification of LLC Managers for Successful Defense in First Action Need Not Await Resolution of Second, Related Litigation
“Unusual Actions Breed Unusual Outcomes”: Delaware Court Dismisses Non-Voting Trust’s Action to Dissolve LLC Born of Estate Plan
By Peter A. Mahler on
Estate planners frequently utilize limited liability companies to separate management and economic interests. This week’s New York Business Divorce examines a fascinating decision last month by the Delaware Chancery Court dismissing a dissolution petition brought by the trustees of an inter vivos trust that held almost all of the LLC’s economic interest but none of the voting rights or management control.
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Continue Reading “Unusual Actions Breed Unusual Outcomes”: Delaware Court Dismisses Non-Voting Trust’s Action to Dissolve LLC Born of Estate Plan
The Perils of For-Cause Expulsion Provisions in LLC Agreements
By Peter A. Mahler on
The expulsion of an LLC member for breach of the LLC agreement, when combined with buyout provisions that leave the expelled member with little or no return on investment, is a sure-fire recipe for litigation, as evidenced in a recent decision by Manhattan Commercial Division Justice Melvin Schweitzer in Jain v. Rasteh. Read about it in this week’s New York Business Divorce.
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Continue Reading The Perils of For-Cause Expulsion Provisions in LLC Agreements
It Only Took 16 Years: New York Appellate Court Defines Standard for Judicial Dissolution of Limited Liability Companies
By Peter A. Mahler on
On January 26th, in a case called Matter of 1545 Ocean Avenue, LLC, the Appellate Division, Second Department, became the first New York appellate court since the LLC Law’s enactment in 1994 to articulate a standard for judicial dissolution of limited liability companies. Read about Justice Leonard Austin’s scholarly opinion for the court, from which two justices dissented in part, in this week’s New York Business Divorce.
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Continue Reading It Only Took 16 Years: New York Appellate Court Defines Standard for Judicial Dissolution of Limited Liability Companies
Interview with Delaware LLC Experts and Practice Manual Co-Authors John Cunningham and Vernon Proctor: Part II
By Peter A. Mahler on
This week’s New York Business Divorce presents Part II of my interview with the co-authors of “Drafting Delaware LLC Agreements”, in which prominent Delaware lawyer and LLC expert Vernon Proctor answers questions about Delaware LLCs from the litigator’s perspective. Don’t miss it!
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Continue Reading Interview with Delaware LLC Experts and Practice Manual Co-Authors John Cunningham and Vernon Proctor: Part II
Interview with Delaware LLC Experts and Practice Manual Co-Authors John Cunningham and Vernon Proctor: Part I
By Peter A. Mahler on
The importance of a well-drafted operating agreement cannot be underestimated when it comes to keeping the peace among members of a limited liability company. This week’s New York Business Divorce presents the first of a two-part interview of LLC experts John Cunningham and Vernon Proctor who have co-authored a highly recommended new formbook and practice manual called “Drafting Delaware LLC Agreements”.
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Continue Reading Interview with Delaware LLC Experts and Practice Manual Co-Authors John Cunningham and Vernon Proctor: Part I
Two-Member LLC Operating Agreement Contains Recipe for Dissension and Litigation
By Peter A. Mahler on
Case law involving judicial dissolution of LLCs is still in its infancy. A recent Delaware Chancery Court decision takes another small developmental step, while also highlighting the need for operating agreement buy-sell provisions that stand a reasonable chance of avoiding business divorce litigation. It’s in this week’s New York Business Divorce.
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Continue Reading Two-Member LLC Operating Agreement Contains Recipe for Dissension and Litigation
Delaware Supreme Court Upholds Application of Statute of Frauds to Oral LLC Operating Agreements
By Peter A. Mahler on
In an important ruling yesterday, the Delaware Supreme Court upheld application of the statute of frauds to oral LLC operating agreements. Today’s posting links to Professor Larry Ribstein’s analysis.
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Continue Reading Delaware Supreme Court Upholds Application of Statute of Frauds to Oral LLC Operating Agreements
Beware Unreasonable Restraints on Alienation When Drafting Shareholder and Operating Agreements
By Peter A. Mahler on
Shareholder and operating agreements typically contain provisions restricting the right to transfer stock or membership interests. A recent decision by Justice Ira Warshawsky in Verderber v. Commander Enterprises Centereach, LLC, in which he refused to grant a preliminary injunction enforcing a transfer restriction, prompts this week’s New York Business Divorce to examine the ancient rule against unreasonable restraints on alienation.
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Continue Reading Beware Unreasonable Restraints on Alienation When Drafting Shareholder and Operating Agreements