Is an LLC dissolution petition brought eight years after an alleged freeze-out barred by the statute of limitations? Is the limitations period relevant if the controlling member continued to carry on the business during the freeze-out period? Does the death of the controlling member trigger dissolution?

These and other questions are addressed in a recent decision of interest by the Brooklyn Surrogate’s Court in Sealy v. Clinton LLC, 2011 NY Slip Op 21375 (Sur Ct Kings County June 13, 2011). The court in Sealy followed the Appellate Division, Second Department’s landmark decision last year in the 1545 Ocean Avenue case in finding no ground for judicial dissolution under §702 of the LLC Law — and therefore no need to analyze the statute of limitations defense — where the controlling member continued to operate the subject real estate holding company during the alleged freeze-out period. The court nonetheless granted relief based on the controlling member’s death as one of the dissolution trigger events defined in the parties’ operating agreement.

In 1997, Charlie Alston and Daryl Sealy formed Clifton LLC to invest in real estate. Each held a 50% interest in the member-managed LLC. In 1999, the LLC bought two units in a Brooklyn commercial condominium. Alston rented one unit and used the other for his business office. Alston apparently attended to the LLC’s business affairs without Sealy’s involvement in the following years.

Continue Reading Statute of Limitations Issue Highlights Distinction Between Bases for Judicial Dissolution of LLCs Versus Other Business Forms

When you want to sue to dissolve a business in New York on behalf of the estate of a deceased shareholder, to which court should you go: Supreme or Surrogate’s Court?

For many practitioners, the Commercial Division of the Supreme Court, a specialized court in New York focusing on complex business-related disputes, is the venue of choice. Most types of disputes have a minimum monetary threshold for eligibility in the Commercial Division. Manhattan’s threshold is the highest – $500,000.  The rules of eligibility for cases to be heard in the Commercial Division, which you can read here, have three exceptions to the monetary threshold – one of which lists “[d]issolution of corporations, partnerships, limited liability companies, limited liability partnerships and joint ventures — without consideration of the monetary threshold.” In part because there is no monetary threshold for dissolution proceedings, practitioners in the several New York counties that have a Commercial Division usually litigate business dissolution disputes in the Commercial Division.

But once in a blue moon a dissolution case will wind up in the Surrogate’s Court. Continue Reading Surrogate’s Court Declines to Order Demise of Fashion Business