statute of limitations

Over the last several years, the books-and-records proceeding and its corresponding shareholder rights of inspection seem to have entered a bit of renaissance period in the courts. We here at New York Business Divorce have reported on at least nine decisions primarily addressing the topic since September 2014, going on record to proclaim the phenomenon as a “boost” for the summary proceeding, by which minority owners in closely-held businesses can get a window into the management and operation of the companies from which they’ve been shut out. We’ve even gone so far as to suggest that books-and-records proceedings may be “on a roll” of late, both in terms of an expansion what constitutes a “proper purpose” for bringing the proceeding, as well as in terms of the scope of information attainable.

That trend, at least with respect to the frequency with which issues related to inspection rights are being litigated, appears to be continuing into 2018. What follows are summaries of three of this year’s more notable decisions addressing inspection rights – all from Manhattan Supreme Court, as it happens.

But first, a quick refresher on the subject matter at hand… Continue Reading Inspection Rights, Oral Operating Agreements, and Other Pop-Diva Delights

LLCA couple of interesting things caught my eye about an otherwise garden-variety lawsuit brought by a dissident LLC member in which Nassau County Commercial Division Justice Stephen A. Bucaria issued a decision earlier this month granting a motion to reargue and reinstating the previously dismissed complaint asserting that the controlling members withheld the plaintiff’s pro rata share of distributions.

First, the prior order of dismissal last July in Webster v Forest Hills Care Center LLC (read here) was another in a series of rulings by Justice Bucaria, which I highlighted on this blog a year ago, in which he dismissed lawsuits asserting various and sundry claims among co-owners of close corporations and LLCs while granting leave to file either a new action or an amended pleading seeking judicial dissolution. Justice Bucaria based these rulings on the ancient principle of partnership law barring “piecemeal” adjudications among “squabbling” partners and requiring them, as stated by the Court of Appeals in Gramercy Equities Corp. v Dumont, 72 NY2d 560 [1988], either to “settle their own differences amicably or dissolve and finally conclude their affairs by a full accounting.”

The plaintiff in Webster, a 15% member of two affiliated LLCs that own and operate a nursing home, declined the invitation to sue for dissolution. Instead, she filed a motion asking Justice Bucaria to reconsider and to vacate his dismissal order on the ground that he had “misunderstood” her claims seeking an accounting and damages for withheld distributions (read complaint here) and that, contrary to the court’s characterization of her position, she had not argued that the LLCs were unable to carry on their business in accordance with the operating agreements. The plaintiff disavowed any intention, desire, or grounds to dissolve the LLCs and argued that the partnership rule reflected in Gramercy Equities does not apply to LLCs. Continue Reading LLC “Squabble” Gets Back Its Day in Court

They say this summer has been unusually cool in the Northeast, but it’s been a hot one for business divorce litigation, judging from the number of recent court decisions involving various and sundry disputes among co-owners of closely held businesses. So, once again, it’s time for my annual summertime post featuring a few, short summaries of recent decisions of interest in business divorce cases.

First, we’ll look at a decision by Justice Melvin Schweitzer in a battle between 50/50 ownership factions over control of an international translation services company with over 3,000 employees. Next up is Justice Carolyn Demarest’s ruling denying a change of venue in a corporate dissolution case. Last is a decision by Justice Marcy Friedman in which she addressed an interesting statute of limitations defense in a drawn-out dissolution case.

Shareholder of Parent Corporation Has Standing to Sue Derivatively to Remove Subsidiary’s Director But Not for Dissolution

Elting v Shawe, 2014 NY Slip Op 32126(U) [Sup Ct, NY County July 24, 2014]. It’s not everyday you encounter business divorce litigation on the scale of this case, involving a firm with over 3,000 employees and revenues over $350 million. The subject company is a closely held Delaware holding corporation owned 50/50 by two individuals who also comprise its two-director board, and its wholly owned New York subsidiary providing international translation services. One owner-director sued the other for alleged financial and management abuses, asserting direct and derivative claims seeking the defendant’s removal as an officer and director of the subsidiary under BCL §§ 706 (d) and 716 (c), and also seeking deadlock dissolution of the subsidiary under BCL § 1104 (a). Continue Reading Summer Shorts: Director Removal and Other Recent Decisions of Interest