merger clause

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In a split 3-2 decision last week, the Appellate Division, First Department, affirmed an order dismissing a claim to enforce an oral buy-out agreement involving a Delaware LLC as barred by the merger clause in a subsequently amended operating agreement that the plaintiff never signed. Read about it in this week’s New York Business Divorce.
Continue Reading New York Appellate Court’s Split Decision Involving Delaware LLC Pits “Harsh” Contractarianism Against “Fundamental Fairness”

This week’s post considers a duo of recent decisions concerning disputes between LLC members over the terms of their operating agreement.  In the first case, the court considered whether to enforce an operating agreement as written despite evidence that the parties actually intended a different deal.  In the second, the court considered whether to enforce an operating agreement where its buyout terms were grossly unfair.  The cases’ different outcomes highlight the outer limits of the parties’ freedom of contract in LLC operating agreements. …
Continue Reading The Operating Agreement Controls, Unless Public Policy Says Otherwise

Pass-through tax entities including S corporations and LLCs can create personal tax liability on so-called phantom income, that is, undistributed net income allocated on Form K-1. A case recently decided by a Manhattan appeals court tells the tale of a selling shareholder’s costly failure to deal with the issue of phantom income in a stock buy-out agreement. This week’s New York Business Divorce has the story.
Continue Reading Stock Redemption Agreement Forecloses Seller’s Suit for Tax Liability on Phantom Income