articlesThis week I’m departing from my usual, case-focused, long-form post due to time constraints of an impending trial. Instead, I’m putting a well-deserved spotlight on two recently published articles of special interest to business divorce practitioners.

The first concerns one of my favorite topics, on which I’ve written several posts (here, herehere, and here), about whether the courts of one state have subject matter jurisdiction over involuntary dissolution petitions for a business entity formed in another state. The article, entitled Judicial Dissolution: Are the Courts of the State that Brought You In the Only Courts that Can Take You Out?, is co-authored by Peter B. Ladig and Kyle Evans Gay and is published in the Fall 2015 issue of The Business Lawyer (available here).

Ladig and his firm, Morris James LLP, represented one of the members of a Philadelphia-based newspaper publishing company organized as a Delaware LLC in a recent, high-profile dissolution case that initially played out as a game of jurisdictional ping-pong between the Pennsylvania and Delaware courts. Ultimately the Pennsylvania court sided with Ladig’s client and ruled against its own jurisdiction, allowing the case to proceed unobstructed in the Delaware Court of Chancery. It therefore comes as no surprise that Ladig’s thoroughly researched, scholarly article strongly supports the argument against subject matter jurisdiction to dissolve foreign business entities. Continue Reading Recent Articles Highlight Dissolution of Foreign Entities and Delaware LLC Litigation

Del Ct Chancery 2Viewing the arc of Delaware Chancery Court jurisprudence over the last two decades implementing that state’s Limited Liability Company Act, and witnessing the Delaware legislature’s frequent amendments to the statute in reaction to judicial developments, you can’t help but detect a pattern of maintaining the unique attributes of the Delaware LLC, as compared to other forms of business entity, by:

  • rigorously promoting freedom of contract (in the form of the LLC agreement) and its corollary, “you made your bed now lie in it”;
  • deciding internal governance disputes within the bounds of the interplay of the Delaware LLC Act’s default rules and the LLC agreement; and
  • strongly disfavoring judicial intervention based on open-ended notions of fairness (the main exception being when managers take on fiduciary duties by agreement or by default under the statute).

Stated simply, in Delaware certainty trumps indeterminacy.

Well, not always, as seen in a first-impression ruling last week by Vice Chancellor J. Travis Laster in In re Carlisle Etcetera LLC, C.A. No. 10280-VCL (read here), in which the court held that the assignee of an LLC membership interest, who as a non-member and non-manager lacked standing to seek involuntary dissolution under Section 18-802 of the Delaware LLC Act, nonetheless had standing to seek equitable dissolution under the Chancery Court’s common-law authority as a court of equity.  Continue Reading Delaware Chancery Court Endorses Equitable Dissolution of LLC

The limited partnership is the dinosaur of business forms in New York, on its way to virtual extinction (outside of estate planning*) due to the availability since 1994 of the vastly superior LLC form and the inherent shortcomings of New York’s limited partnership statutes.

When New York finally enacted a Revised Uniform Limited Partnership Law in 1991 (NYRULPA), it exempted from its application all pre-existing limited partnerships which, unless the partnership later files an amended certificate, continue to be governed by the Uniform Limited Partnership Act of 1916 adopted by New York in 1922 (NYULPA). Meanwhile, there appears to be no interest or effort underway to modernize New York’s limited partnership laws, as almost 20 other states have done, by adopting the re-Revised Uniform Limited Partnership Law of 2001.

In its pre-LLC heyday, the limited partnership was a popular form of business association for real estate investments, and there remain some number of legacy limited partnerships that never filed a certificate of amendment and therefore remain subject to NYULPA’s antiquated provisions. One of the ways we know these dinosaurs are still roaming about is the occasional court decision, which invariably involves some of the messiest and most prolonged litigation you’re ever likely to come across.

Take, for example, Alizio v. Perpignano, pending in Nassau County Supreme Court for over ten years, involving multiple litigations over multiple real estate limited partnerships, in the course of which two of the five general partners died. By my count the case has generated at least 50 motions and 27 written decisions by the lower court, and another 17 appellate decisions on motions and appeals, which by any standard represents an extraordinary expenditure of judicial resources on one case. Continue Reading Equitable Dissolution of Limited Partnerships