Operating Agreement

Subscribe to Operating Agreement via RSS

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

The interaction between an LLC’s operating agreement and a subsequent, informal deal between the members raises difficult questions surrounding the enforceability of either agreement. In a recently-filed Manhattan Commercial Division case, the Court granted the plaintiff a preliminary injunction, signaling to the parties that the plaintiff was likely to succeed on his claim to enforce the informal deal notwithstanding arguably contrary provisions in the operating agreement. The case reminds us that the formality requirements of an LLC operating agreement may give way to an informal agreement when both LLC members manifest their intent to be bound by the informal agreement.
Continue Reading A Shotgun Buy-Sell Agreement and an Email Deal Walk into a Beachside Bar . . .

Can an LLC member with a put option–the right to sell his interest back to the LLC–exercise that option when doing so will render the LLC insolvent? This week’s New York Business Divorce post highlights a recent decision by Justice Masley of the New York County Commercial Division considering this issue. …
Continue Reading Departing LLC Members: Exercise Your Put Option Before Insolvency Approaches

In this week’s New York Business Divorce, we tackle the rules governing enforceability of oral partnership, shareholder, and operating agreements, including a first-impression appeals court decision addressing the validity of an alleged oral modification of written limited partnership agreement under New York’s Revised Limited Partnership Act.
Continue Reading Enforceability of Oral Operating, Shareholder, and Partnership Agreements