dissolution

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dissolution

It’s been 15 years since the Second Department’s decision in Matter of 1545 Ocean Avenue, LLC, 72 AD3d 121, 2010 NY Slip Op 00688 (2d Dept Jan. 26, 2010), which established the standard for judicial dissolution of limited liability companies.  Under that standard, a New York LLC should be judicially dissolved when the management of the company is unable or unwilling to permit or promote the stated purpose of the entity, or continuing the entity is financially unfeasible.

That standard has proved both enduring and highly fact-specific, producing over the last decade and a half a landscape of judicial decisions finding that specific conduct and circumstances do—or do not—warrant dissolution. 

I’ve also seen at least some disconnect between that standard and the real interests of many LLC members.  On the one hand, the standard focuses on two things: (i) the stated purpose of the LLC as set forth in the operating agreement, and (ii) the financial feasibility of the LLC.  On the other hand, in many cases, the “stated purpose” as set forth in the operating agreement is boilerplate that the owners never considered.  And the financial feasibility of the LLC usually is a given; people tend not to litigate over failing businesses. Most owners who resort to judicial dissolution do so for other reasons. 

Many LLC members seek judicial dissolution as a means to resolve distrust of or perceived misconduct by their co-owners.  And while there is room for consideration of those things in the “unable or unwilling” language of the dissolution standard, a court faithfully applying the 1545 Ocean Avenue standard and a party seeking his day in court about allegations of member misconduct might feel like they’re speaking different languages.

A recent decision from New York County, Otsuka v Shimura, No. 159202/2020 (Sup Ct, New York County 2025), serves as a fine springboard to highlight that disconnect, discuss the timing of an LLC dissolution claim, and take stock of the current LLC dissolution landscape.Continue Reading Stated Purpose vs. Stated Problem: Court Sticks to the Script for LLC Dissolution

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This week’s New York Business Divorce post examines a recent appellate court decision in which the Third Department searches the record to find deadlocked 50/50 members unable to carry on a realty LLC’s business, warranting dissolution.
Continue Reading Help Comes From an Unexpected Place in LLC Deadlock Dissolution: The Third Department

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The key question in shareholder oppression claims is often whether the complaining shareholder’s expectations were reasonable under the circumstances.  A recent decision from Albany County and a recently published article highlight two sides of a debate about how “contractual” the reasonable expectations inquiry should be. …
Continue Reading Can a Shareholder Be Oppressed After Ceding Control? Oppression, Reasonable Expectations, and Contractual Formalism

Fall NYC Roundup

November was a whirlwind month for New York LLC litigation.  It featured disputes over how to wind up a judicially dissolved LLC, a bitter intra-family emergency indemnification/advancement injunction, and the finale of a decade-long battle over the enforceability of a partially baked operating agreement.  Some of these recent cases add clarity to the growing body of New York LLC caselaw. Others add confusion.  But all add precedential footholds for future arguments in disputes between members of New York LLCs. Members and their counsel take note.Continue Reading A Leaf Through a Busy November in New York LLC Litigation

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Can two contested dissolution petitions—one by each 50% shareholder based on the other’s alleged misconduct—yield a shortcut to uncontested dissolution? See what the Second Department has to say in this week’s post.
Continue Reading Dueling Dissolution Petitions Beget Dissolution Without Consideration of Alternate Remedies

How does one value a law firm’s caseload at dissolution? The litigation over the dissolution of Brown Chiari LLP has already made its mark on business divorce jurisprudence. As it approaches its sixth birthday, the case continues to deliver, with Erie County Commercial Division Justice Timothy J. Walker recently authoring two notable decisions concerning a partner’s interest in the firm’s substantial caseload at the time of its dissolution.
Continue Reading Disputes Abound When Law Firms Dissolve