Operating Agreement

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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

In this week’s New York Business Divorce, we tackle one of the most spectacular and well-publicized business falling-outs of modern times: Michael D. Cohen’s departure from the Trump Organization LLC, his resulting criminal conviction, and his cooperation with the Federal Government’s various investigations into activities surrounding former President Trump J. Trump. As an alleged former officer of the Trump Organization, Cohen sued the company for indemnification under its operating agreement for millions of dollars in legal fees resulting from the sprawling array of civil, administrative, and criminal proceedings against him. Learn how Cohen’s claims were resolved in this week’s New York Business Divorce.
Continue Reading The Outer Limits of LLC Indemnification: Michael Cohen v Trump Organization

In this week’s New York Business Divorce, we consider a recurring problem with LLC operating agreements: enforceability of the writing when it is unexecuted or partially executed. A growing body of case law finds such agreements at least potentially enforceable absent an expression of intent to the contrary. Read about that issue, and related issues of due execution of operating agreements, in this week’s New York Business Divorce.
Continue Reading Cooked or Raw? Enforceability of Partly Signed Operating Agreements

Preliminary injunctions are a powerful tool in the business divorce litigator’s toolbox, and they often involve a race to the courthouse. This week’s post offers a reminder that sometimes, that race is critical; courts will be more inclined to preserve the status quo with a preliminary injunction than to undo action with one.  …
Continue Reading Too Little, Too Late: Court Sides with Ousted Member, but Denies Preliminary Injunction Undoing Termination

Hard to believe in the year 2021 we’re seeing litigation over the validity of capital calls because notice was given by email rather than snail mail, but that’s what happened in a case recently decided by the Appellate Division, Fourth Department and reported in this week’s New York Business Divorce. …
Continue Reading Court Cancels Capital Call For Want of a Postage Stamp

In this week’s New York Business Divorce, read about the plight of a Brooklyn beer brewing company founder whose co-members allegedly attempted to “freeze out” his interest by way of a forced dilution and ouster from management, and his efforts to fight back with a start-of-the-case preliminary injunction motion.
Continue Reading Court Enjoins Dilution of Brewing Company LLC Membership Interest

In this week’s New York Business Divorce, a would-be LLC dissolution plaintiff goes down swinging on an unanswered complaint within an unopposed motion for a default judgment, just the latest example of New York courts closely scrutinizing the merits of LLC dissolution claims at the pleadings stage.
Continue Reading Swing and a Miss: Unopposed LLC Dissolution Claim Denied

This week’s New York Business Divorce features a pair of noteworthy appellate decisions by the Second Circuit U.S. Court of Appeals and the Appellate Division, First Department, involving unsuccessful suits by non-managing members against managing members of realty holding LLCs.
Continue Reading Managing Members of Realty Holding LLCs Vanquish Self-Dealing Claims

Special Purpose Acquisition Companies or “SPACs” have become all the rage over the last two years, so it was inevitable that we’d see litigation between members of the LLCs that serve as SPAC sponsors. This week’s New York Business Divorce looks at a case stemming from a dispute over whether the sponsor’s operating agreement gave members an ongoing right to participate in future SPACs.
Continue Reading It Was Only a Matter of Time: SPAC Meets Business Divorce