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.
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.
…
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!
…
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”.
…
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.
…
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.
…
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.
…
Continue Reading Beware Unreasonable Restraints on Alienation When Drafting Shareholder and Operating Agreements
Appellate Court Affirms Caplash Ruling Rejecting Authority of 50% LLC Member to Hire Company Counsel in Proceedings Against Other 50% Member
By Peter A. Mahler on
The hiring by one 50% business owner of legal counsel to take action in the company’s name against the other 50% owner is a frequent source of litigation. This week’s New York Business Divorce revisits the Caplash case, which involved this issue in the LLC context, on the occasion of a new decision by the Appellate Division, Fourth Department, affirming rulings by Justice Kenneth Fisher.
…
Continue Reading Appellate Court Affirms Caplash Ruling Rejecting Authority of 50% LLC Member to Hire Company Counsel in Proceedings Against Other 50% Member
Court Grants 50% LLC Member’s Petition for Judicial Dissolution of Passive Holding Company
By Peter A. Mahler on
This week’s New York Business Divorce features a recent decision by Justice Bernard Fried granting dissolution of an LLC owned 50-50 by two members locked in several highly contentious lawsuits. The decision addresses standing of a membership interest assignee to seek dissolution, and whether deadlock can establish ground for dissolution of a passive investment holding company.
…
Continue Reading Court Grants 50% LLC Member’s Petition for Judicial Dissolution of Passive Holding Company
Winning the Dissolution Battle, Losing the War
By Peter A. Mahler on
When a claim for judicial dissolution is denied or otherwise drops out of the case, that doesn’t necessarily mean the case is over. This week’s New York Business Divorce discusses two recent decisions by Justices Patricia Satterfield and Shirley Werner Kornreich in which the side opposing dissolution prevailed but left unresolved other claims addressing the parties’ underlying differences.
…
Continue Reading Winning the Dissolution Battle, Losing the War