Business Divorce 101: To be entitled to an accounting of a closely-held business, the plaintiff or petitioner must demonstrate the existence of a fiduciary relationship giving rise to a duty to account. Almost always, that requires establishing ownership status in the business — the existence of a general partnership, ownership of shares of stock in a corporation, possession of a membership interest in an LLC, etc.
Can one obtain a judicially-imposed accounting of a closely-held business in which one is not an owner? That was the question decided two weeks ago by a Brooklyn appeals court in Bonanni v Horizons Invs. Corp., 2020 NY Slip Op 00563 [2d Dept Jan. 29, 2020]. The answer may surprise you.
The MRI Business
In 2001, four investors formed MRI Enterprises, LLC (the “Company”) with the following stakes to provide magnetic resonance imaging services to local hospitals:
- 20% – Plaintiff Bonanni, through his wholly-owned corporation, Plaintiff MRI Enterprises, Inc. (“MRI Inc.”)
- 40% – Defendant Fernandez through his wholly-owned corporation, Defendant Horizons Investors Corp. (“Horizons”)
- 20% – Defendant Kalish through his wholly-owned corporation, Defendant Adex Management Corp. (“Adex”)
- 20% – Defendant Hausknecht
To comply with New York law, which prohibits the practice of medicine without a medical license, Hausknecht, a physician, formed Comprehensive Imaging of New York, PLLC (“CINY”), an entity in which Bonanni and MRI Inc. had no membership interest, to provide medical services associated with the Company’s machines. Continue Reading Bending the Rules of Standing: The De Facto Merger Doctrine