516-227-0700

Business Divorce

Representing owners of privately held businesses in disputes with business partners and corporate dissolutions.

All too often, relations among co-owners of privately held businesses deteriorate to the point where they can no longer work together: They need a “business divorce.” Our business divorce group brings together the diverse practice skills and experience required for the myriad challenges presented by private company disputes and to devise solutions that allow clients to achieve their business and personal goals free of the uncertainty and rancor that can accompany a failed business relationship.

We Understand the Intricacies of Business Divorce Law

Our business divorce team includes highly experienced litigators who understand the intricacies of the laws governing the internal affairs of closely held corporations, partnerships, and limited liability companies. Their extensive representation of clients in private company disputes includes:

  • Judicial dissolution proceedings on behalf of both majority and minority owners.
  • Dissenting shareholder proceedings, derivative suits, books and records proceedings.
  • Other litigation among co-owners of companies in a wide variety of industries including real estate, construction, manufacturing, finance, a variety of wholesale and retail operations, auto dealerships, service companies, and more.

A Multidisciplinary Practice

The business divorce group also includes highly experienced corporate and tax attorneys who advise clients and assist in structuring and documenting buy-outs, liquidations, and other forms of business reorganization resulting either from judicial proceedings or negotiated settlements.

Pre-Litigation Resolution

Often the litigation of private company disputes can be avoided by early intervention leading to a favorable out-of-court settlement. Our business divorce team works closely with clients to explore and execute strategies and solutions that can eliminate the distraction, expense, and escalation of hostilities that inevitably accompany litigation. Key to the business divorce group’s record of success in resolving such disputes through early intervention is their reputation and prowess as attorneys well-equipped and unhesitant to seek relief in court when negotiations fail to achieve their clients’ objectives.

Accurate Business Appraisal

The resolution of a business divorce often centers on the valuation of the subject company. Effective legal counseling, therefore, requires a thorough understanding of the principles and legal framework for valuing a business. The business divorce group has extensive experience working in tandem with qualified business and real estate appraisers in connection with buy-out negotiations and appraisal litigation.

Thought Leaders

Members of the business divorce group are acknowledged leaders in their field. Our attorneys frequently lecture on business divorce topics before professional organizations, can be heard interviewing leading academics and experts on the Business Divorce Roundtable podcast, and publish numerous articles on the subject including the widely followed New York Business Divorce blog, which has also been cited in a number of judicial opinions.

Professionals

Matthew D. Donovan

Partner
New York City

Lyle C. Mahler

Partner
Uniondale

Peter A. Mahler

Partner
New York City

Franklin C. McRoberts

Partner
Uniondale

Stephen F. Melore

Partner
Uniondale

Peter J. Sluka

Partner
New York City

Viktoriya Liberchuk

Associate
Uniondale

Recent Blog Posts

New York Appellate Court’s Split Decision Involving Delaware LLC Pits “Harsh” Contractarianism Against “Fundamental Fairness”

Last week, the Manhattan-based Appellate Division, First Department, handed down one of the more intriguing decisions by a New York…

March 18, 2024

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March 18, 2024

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Rare as a Dodo: Bifurcation in Business Divorce Trials

Jury trials in business divorce litigation are uncommon. Bifurcated business divorce jury trials are all but nonexistent. But in Aronov…

March 11, 2024

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March 11, 2024

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And the Award for Most Creative Attempt to Evade a Book Value Buy-Sell Provision Goes To . . .

“Under any standard of value, the true economic value of a business enterprise will equal the company’s accounting book value…

March 04, 2024

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March 04, 2024

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Enforcing the Guardrails on Transactions Involving Interested Directors of Close Corporations

In my business divorce practice I deal with many closely held corporations that have only a few or perhaps just…

February 26, 2024

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February 26, 2024

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The Flexible “For Cause” Standard for Director and Officer Removal

Sections 706 (d) and 716 (c) of the Business Corporation Law (the “BCL”) both contain a “for cause” standard for…

February 19, 2024

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February 19, 2024

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The First State Defines the Scope of Majority Shareholder Fiduciary Duties

More often than not, the centerpiece of an intra-owner business dispute is a claim that those in control of the…

February 12, 2024

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February 12, 2024

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The Perils of Indeterminate LLC Membership Interests, Redux

Capital contributions by business owners are the lifeblood of any newly formed business entity. Typically the lifeblood consists of cash,…

February 04, 2024

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February 04, 2024

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Direct to Beneficial: Change of Corporate Ownership Structure Yields No Right to Dissent and Seek Appraisal

There are many paths to a fair value appraisal proceeding. A road less traveled begins at Section 910 of the…

January 29, 2024

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January 29, 2024

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Let’s Talk About Dilution

When a closely-held business is profitable, self-interested owners naturally want a bigger slice of the pie, especially where the personal…

January 22, 2024

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January 22, 2024

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Winter Case Notes: Murder, Forgery, Accidental Death, Oppression, Oh My!

Welcome to this year’s Winter Case Notes where, amidst the arctic blast currently sweeping most of the nation, I offer…

January 16, 2024

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January 16, 2024

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Parallel Business and Matrimonial Divorce Proceedings

Parallel business divorce proceedings in the same or different courts alleging overlapping or duplicative claims are common. When it occurs,…

January 08, 2024

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January 08, 2024

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Ambiguous Agreement, Clear Consequences

This first post of 2024 brings the New York Business Divorce Blog into its eighteenth calendar year of weekly commentary…

January 02, 2024

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January 02, 2024

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Top 10 Business Divorce Cases of 2023

Some years are easier than others to select the most significant business divorce cases. In this, the 16th year I’ve…

December 26, 2023

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December 26, 2023

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A Lifeline for the Stale “Schedule A”

One need not peruse the pages of this blog for long to learn that its authors strongly advise against entering…

December 18, 2023

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December 18, 2023

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“Irreparable Harm” and Injunctions in Close Business Owner Disputes

Injunctions are an indispensable weapon in the business divorce lawyer’s arsenal. Primarily defensive in nature, temporary restraining orders and preliminary…

December 11, 2023

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December 11, 2023

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Judicially Expelled Member Pays Heavy Price For Abandoning LLC

Last month, in Flor v Greenberg Farrow Architectural Inc., a three-judge panel of the New Jersey Appellate Division handed down…

December 04, 2023

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December 04, 2023

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A Potent Combo: Misappropriation of Corporate Opportunity Meets Faithless Servant

Misappropriation of corporate opportunity is one of our favorite, most frequently blogged topics on New York Business Divorce. A special…

November 27, 2023

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November 27, 2023

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Proceed with Caution: Strategy Considerations Before Making a Books and Records Demand

The books and records demand often is the opening act in business divorce litigation.  The relatively low burden that an…

November 20, 2023

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November 20, 2023

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New York LLC Caselaw’s Greatest Hits

I recently had the privilege of speaking to an audience of judges of the New York Supreme Court Commercial Division…

November 13, 2023

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November 13, 2023

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How to Stop a Cash-Out Merger from Cancelling Your Shares

The corporation of which you are a shareholder just sent you notice that it plans to merge with another corporation. …

November 06, 2023

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November 06, 2023

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Bad Things Can Happen When You Steal a Business from a Minority Co-Owner

Occasionally, we come across court cases in which the majority owners so egregiously mistreated their minority co-owners that it’s difficult…

October 30, 2023

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October 30, 2023

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The Magnolia State Wins the Prize for Novel Alternative Remedies in LLC Dissolution Cases

New York courts are not in the vanguard when it comes to devising less drastic, alternative remedies in LLC judicial…

October 23, 2023

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October 23, 2023

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Dissolution Defined: The First Department’s Recent Guidance on Interpreting Operating Agreements

The owners’ agreement is the backbone of the closely-held business.  In intracompany LLC disputes, few things are more important than…

October 16, 2023

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October 16, 2023

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Damages or Rescission? When Electing Fraud Remedies Choose Wisely

Imagine devoting years of costly litigation to rescinding a $1 million equity investment in an LLC for fraudulent inducement, prevailing…

October 09, 2023

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October 09, 2023

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Use Caution When Amending Your Operating Agreement Without Unanimous Consent

In my experience, most operating agreements of New York LLCs include a provision barring amendments unless made in writing and…

October 02, 2023

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October 02, 2023

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Derivative into Direct and Waived into Preserved: The Transformative Power of the Implied Covenant of Good Faith and Fair Dealing

The distinction between direct and derivative claims pervades business divorce litigation.  Whether a dissident owner’s claim against his or her…

September 25, 2023

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September 25, 2023

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A General Partnership in Perpetual Enmity

With the growing prevalence of limited liability companies, notable general partnership decisions become fewer and further between with each passing…

September 18, 2023

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September 18, 2023

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Eastland Redux: Do Close Corporation Shareholders Have a Direct Claim Against Directors For Taking Disguised Distributions?

Earlier this year, using as a springboard the Maryland intermediate appellate court’s decision in Eastland Food Corp. v Mekhaya, I…

September 11, 2023

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September 11, 2023

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Strength in Numbers: The Resurgence of the Accounting Claim in Business Divorce Litigation

At the beginning of last year, I wrote a eulogy for the equitable accounting cause of action in business disputes:…

September 05, 2023

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September 05, 2023

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Surrogate’s Court Jurisdiction to Resolve Close Business Owner Disputes

Do New York’s Surrogate’s Courts have jurisdiction to compel an accounting related to a non-party limited liability company in which…

August 28, 2023

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August 28, 2023

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When Is It Too Late to Sue for Shareholder Oppression?

Potential client sits down with business divorce lawyer and says, “I’m a minority shareholder in XYZ Corp. I’ve been completely…

August 21, 2023

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August 21, 2023

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Clash of Valuation Visions: Appraisal Proceeding Over Manhattan Eyeglass Shop Goes the Distance

The authors of this blog have a special affinity for fair value appraisal proceedings.  The narrow hearings—where the sole issue…

August 14, 2023

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August 14, 2023

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Can a Shareholder Suing Derivatively Face Countersuit Individually?

That was the interesting, infrequently-litigated question addressed in a recent decision by Manhattan Commercial Division Justice Melissa A. Crane. Simon…

August 07, 2023

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August 07, 2023

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Summer Shorts: Equitable Contribution, Stock Redemption, and Other Recent Decisions of Interest

Welcome to the 13th annual edition of Summer Shorts. This year’s edition features brief commentary on five recent decisions by…

July 31, 2023

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July 31, 2023

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At-Will Employment Agreement Plus Mandatory Redemption Clause Leaves Minority Shareholder-Employees Out in the Cold

MiniCorp has five shareholders, all of whom are employees.  Each shareholder’s employment agreement states that they are an at-will employee…

July 24, 2023

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July 24, 2023

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Legal Déjà Vu: The Law of Preclusion and Re-Litigation of Standing-Based Dismissals

Dismissals for lack of standing are routine in business divorce cases. Examples abound on this blog. Litigation over standing to…

July 17, 2023

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July 17, 2023

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Can One 50% Shareholder Sue the Other in the Company Name on the Company Dollar? Answer: It Depends

In the menagerie of closely held companies, those owned and controlled by 50/50 business partners pose unique benefits and challenges.…

July 10, 2023

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July 10, 2023

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Must a Professional Corporation Redeem the Shares of its Retired Shareholders?

I previously wrote that one of the most difficult periods in the lifecycle of a closely held business is the…

July 03, 2023

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July 03, 2023

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Take the Business Divorce Pop Quiz!

It’s been many years since our last pop quiz for all you business divorce aficionados. Time for another. See how…

June 26, 2023

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June 26, 2023

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Business Divorce and Restrictive Covenants

Closely-held business owner breakups often defy easy categorization. What seem at first blush to be traditional business divorce cases sometimes…

June 19, 2023

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June 19, 2023

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Greetings from the American Bar Association’s 2023 LLC Institute

Over its three-decade rise to the closely-held business entity of choice, the Limited Liability Company has won a special place…

June 12, 2023

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June 12, 2023

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Derivative Standing and the Internal Affairs Doctrine

Choice-of-law questions in shareholder derivative lawsuits venued in New York courts involving out-of-state or international entities can be confoundingly difficult,…

June 05, 2023

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June 05, 2023

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Recent Decisions Enforce LLC Member’s Right of First Refusal, Restrict Partnership Accounting, and Allow Damages Claim for Breach of Oral Shareholders Agreement

Someday, perhaps, I’ll find the comedic inspiration to come up with a joke that begins, “An LLC, a partnership, and…

May 30, 2023

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May 30, 2023

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Recent Decisions Enforce LLC Member’s Right of First Refusal, Restrict Partnership Accounting, Invalidate Shareholder’s Post-Mortem Buyout

Someday, perhaps, I’ll find the comedic inspiration to come up with a joke that begins, “An LLC, a partnership, and…

May 29, 2023

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May 29, 2023

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Second Department Rejects Private Auction for Deadlocked Corporation

Resolving ownership disputes with a buyout at auction has a tempting simplicity.  The buyout gives the owners the divorce they…

May 22, 2023

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May 22, 2023

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Misappropriated Watering Hole Becomes Money Judgment Sinkhole

Occasionally, we come across post-trial decisions with such scathing rebuke of one side that it’s difficult to imagine why the…

May 15, 2023

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May 15, 2023

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Fair Value Awards: A Matter of Interest

Statutory fair value appraisal proceedings in New York come in two flavors. First, there’s the buy-out appraisal under Business Corporation…

May 08, 2023

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May 08, 2023

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A Cross-Country Road Trip of Elections to Purchase in Dissolution Proceedings

When a minority shareholder petitions for dissolution of a corporation on the grounds of oppressive or illegal conduct (see BCL…

May 01, 2023

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May 01, 2023

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Pitfalls for Corporate Counsel in Business Divorce Disputes

No corporate lawyer wants to get drawn into a nasty litigation between an entity’s owners. But the reality is that…

April 24, 2023

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April 24, 2023

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Operating Agreement Trumps Postnup in High Stakes Battle Over Transfer of LLC Interest

Husband owns 99% membership of manager-managed LLC. Children own remaining 1%. Postnuptial agreement says husband’s “interest” in LLC goes to…

April 17, 2023

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April 17, 2023

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First Department Recognizes Cause of Action for Specific Performance of LLC Member Voting Agreement

In 1941, two of the three shareholders of Ringling Bros.-Barnum & Bailey Combined Shows, Inc. entered into an agreement stating…

April 10, 2023

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April 10, 2023

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Faithless Servant in Business Divorce Cases

Litigants assert with growing frequency “faithless servant” claims in business divorce cases. New York’s faithless servant doctrine, and the legal…

April 03, 2023

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April 03, 2023

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The Pathology of Deadlock Dissolution

It seems a bit exaggerated to liken the deterioration of a relationship between 50/50 business partners to a fatal disease,…

March 27, 2023

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March 27, 2023

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A Litigation Odyssey

Litigated business breakups are often highly intense and emotional for the participants. The intensity and emotion multiply when the litigants…

March 20, 2023

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March 20, 2023

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The Corporation is Becoming More Contract Focused, But Don’t Call it an LLC Just Yet

Having spent the better part of my career litigating disputes between minority and majority owners of closely-held businesses, I can…

March 13, 2023

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March 13, 2023

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When Do Disguised Dividends Add Up to Minority Shareholder Oppression?

De facto dividend. Disguised dividend. Constructive dividend. They all refer to the same thing: monies in excess of reasonable compensation…

March 06, 2023

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March 06, 2023

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Who Died and Made You a Member?  Second Department Resurrects LLC Dissolution Petition Brought by Deceased Member’s Estate.

One of the most difficult periods in the lifecycle of a closely-held company is the period following the death of…

February 27, 2023

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February 27, 2023

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Winter Case Notes: Punitive Damages Awarded for Breach of Fiduciary Duty and Other Recent Decisions of Interest

Notwithstanding that the pictured snow globe is the only snow I’ve seen in my neck of the woods this balmy…

February 20, 2023

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February 20, 2023

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The Worst of Both Worlds: Untimely Buyout Election Yields Full Merits Hearing and Huge Bond

Nine months ago, we wrote about a 20% shareholder, Alvin Clayton Fernandes, whose bare bones petition Manhattan Supreme Court Justice…

February 13, 2023

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February 13, 2023

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Dueling Dissolution Petitions Beget Dissolution Without Consideration of Alternate Remedies

This blog frequently covers cases considering a shareholder’s request to dissolve a corporation under New York’s oppression-based corporate dissolution statute,…

February 06, 2023

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February 06, 2023

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Do Non-Manager, Minority LLC Owners Owe Fiduciary Duties?

This important question of whether non-manager, minority limited liability company owners owe fiduciary duties continues to bedevil New York litigants…

January 30, 2023

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January 30, 2023

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Has the Time Come for New York to Follow Delaware and Officially Pronounce Deadlock as Ground for LLC Dissolution?

Since its legislative birthing in New York in 1994, the limited liability company has become the preferred choice of entity…

January 23, 2023

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January 23, 2023

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Potential Creditor Drags Corporation in Stalled Dissolution Proceeding into Receivership

The dissolution of a company—and the winddown and liquidation that usually follow—often impacts a broad range of stakeholders beyond just…

January 16, 2023

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January 16, 2023

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Business Divorce in the Divorce Courts

Folks hearing the phrase “business divorce” for the first time tend to focus unconsciously on the word “divorce,” tuning out…

January 09, 2023

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January 09, 2023

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Top 10 Business Divorce Cases of 2022

I’m delighted to present our 15th annual list of the past year’s ten most significant business divorce cases. This year’s…

January 03, 2023

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January 03, 2023

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Scrivener’s Error Keeps Sailboat-Owning LLC Afloat

Pictured right is the Nite Cap, a 42’ sailboat known to cruise the New York area waters.  As we return…

December 27, 2022

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December 27, 2022

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The Art of Manager Removal

If there’s anything more contentious than a business divorce between co-owners of closely held firms, it’s a business divorce between…

December 19, 2022

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December 19, 2022

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Stock Transfer Restrictions and “Annihilation of Property”

One of the pleasures of being a litigator is that we constantly learn. The pleasure multiplies as a law blogger,…

December 12, 2022

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December 12, 2022

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LLC Forced Buy-Out Pits Fair Value Against Fair Market Value Against Power to Amend Operating Agreement

Let’s see how good you are at predicting the outcome and its rationale in a recently decided case involving the…

December 05, 2022

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December 05, 2022

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Challenges to Expert Appraisers in Valuation Proceedings

Ask a trial lawyer what he or she would give to have an expert witness as effective as Mona Lisa…

November 28, 2022

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November 28, 2022

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And a Time to Every Purpose Under . . . the Operating Agreement?

King Solomon, to whom authorship of Ecclesiastes 3 traditionally is attributed, unlikely had in mind the life cycle of limited…

November 21, 2022

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November 21, 2022

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The “Illegality” Defense to Partnership Formation

Food trucks have become as ubiquitous on the streets of Manhattan as pigeons in Central Park. Unsurprisingly, the New York…

November 14, 2022

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November 14, 2022

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Federal Courts Wade Into Business Divorce: Recent Decisions of Interest

Our federal courts by and large are not hospitable to business divorce litigation. The two mainstays of the federal courts’…

November 07, 2022

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November 07, 2022

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The Contract is King: Advancement and Indemnification Under Delaware Law

In last week’s New York Business Divorce, we wrote about an important decision from New York’s highest court, Sage Sys.,…

October 31, 2022

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October 31, 2022

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Warning: If You Want Legal Fee Advancement or Indemnification, You May Need to Amend Your Partnership, Shareholder, or Operating Agreement

The universe works in mysterious ways. Four days ago, when I sat down to write this article, my plan was…

October 24, 2022

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October 24, 2022

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Wrongful Dissociation Under RUPA: Toto, We’re Not in New York Anymore

Unlike the vast majority of states, New York hasn’t adopted the Revised Uniform Partnership Act (1997) (“RUPA”). A recent appellate…

October 17, 2022

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October 17, 2022

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Summary Judgment in Lieu of Complaint Meets Business Divorce

For most business divorce litigants, a dispositive win on the merits, even in a summary proceeding, can take years. Appraisal…

October 10, 2022

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October 10, 2022

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A Recurring Business Divorce Feature: Usurpation of Corporate Opportunity

One of the earliest signs that a closely-held business is headed for divorce lies in how its owners treat new…

October 03, 2022

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October 03, 2022

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Contrived LLC Deadlock Doesn’t Cut the Delaware Dissolution Mustard

The statutes authorizing judicial dissolution of Delaware LLCs (LLC Act § 18-802) and New York LLCs (LLC Law § 702)…

September 26, 2022

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September 26, 2022

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Magic Words Still Matter, and Equitable Defenses Can’t Save a “Void” Transfer

New York’s default rules regarding LLC members’ rights to transfer their interests appear in sections 603 and 604 of the…

September 19, 2022

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September 19, 2022

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Conflicts of Laws and the Internal Affairs Doctrine

The legal concept of “conflicts of laws” is difficult, to say the least, confounding even seasoned litigators and judges, with…

September 12, 2022

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September 12, 2022

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Is Loss Sharing an “Indispensable Essential” of Partnership?

What makes a partnership a partnership? What makes a partner a partner? To be clear, I’m referring to partners in…

September 06, 2022

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September 06, 2022

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The “Conflict of Interest” Defense to Shareholder Derivative Standing

In shareholder derivative litigation, defendants occasionally argue that the plaintiff – who ostensibly sues on behalf of the company and…

August 29, 2022

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August 29, 2022

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Never the Twain Shall Meet: Damages Claims Do Not Offset the Purchase Price in Buy-Sell Agreements

Nestled between Broadway and Church Street in New York City’s hottest neighborhood is the landmarked, stone-façade building at 66-68 Reade…

August 22, 2022

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August 22, 2022

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Summer Shorts: LLC Dissolution and Other Recent Decisions of Interest

Welcome to the 12th annual edition of Summer Shorts. This year’s edition features brief commentary on a handful of recent decisions…

August 15, 2022

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August 15, 2022

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A Fresh Take on Partnership to LLC Conversions

A rarely litigated provision of the New York Limited Liability Company Law (the “LLC Law”), Section 1006, authorizes the conversion…

August 08, 2022

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August 08, 2022

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Minority Shareholder’s Petition to Dissolve Seltzer Business Loses Its Fizz

In 1950, Sam Hoffman and his two sons, Hyman and Melvin, founded Brooklyn-based Cornell Beverages, Inc. to manufacture and distribute…

August 01, 2022

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August 01, 2022

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Questions Abound in Parallel Cash-Out Merger Rescission / Fair Value Appraisal Lawsuits

The topic of mergers between two business entities designed to involuntarily extinguish the equity interest of a minority owner in…

July 25, 2022

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July 25, 2022

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A Lesson In Drafting Capital Call Provisions

Those of us who follow the Delaware Chancery Court’s output are regularly treated to lengthy, detailed, finely crafted opinions sometimes…

July 18, 2022

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July 18, 2022

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Disputes Abound When Law Firms Dissolve

Some of the most complex and hotly-contested business divorce litigation arises from the dissolution of law firms. Perhaps law firm…

July 11, 2022

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July 11, 2022

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Business Divorce, Brooklyn Style

The pictured architectural rendering of the sunlit Kings County Supreme Courthouse at 360 Adams Street, completed in 1957, doesn’t quite…

July 05, 2022

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July 05, 2022

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Three Strikes You’re Out: Sebrow Revisited

A year and a half ago, we blogged about a decision in which Bronx County Supreme Court Justice Llinet M.…

June 27, 2022

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June 27, 2022

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LLCs, Direct vs. Derivative Claims, and Special Litigation Committees: A Lively Debate

The current issue of The Business Lawyer, a quarterly publication of the ABA’s Business Law Section that rightly bills itself…

June 20, 2022

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June 20, 2022

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Text Messages Trump Formalities in Ownership Dispute Over Cryptocurrency Business

The emergence of the Limited Liability Company as the preferred form of closely-held business association in New York has spawned…

June 13, 2022

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June 13, 2022

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A Loan Is a Loan Is a Loan, Except When It’s Equity

Disputes over capital accounts and equity percentages are frequent fodder for business divorce litigation — especially in LLCs without operating…

June 06, 2022

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June 06, 2022

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Gordon Ramsay’s The Fat Cow: Dishing Up Damages and Dissolution

You know you’re in big trouble if the post-trial decision in a lawsuit you filed begins like this: “The court…

May 31, 2022

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May 31, 2022

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Principles of Fiduciary Deference: The Business Judgment Rule and Exculpatory Clauses

A number of lawsuits have percolated through New York’s courts over the past five years between Adam Max, son of…

May 23, 2022

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May 23, 2022

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Equitable Standing in Shareholder Derivative Suit Bows to the Contemporaneous Ownership Rule

In 2008, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery — one of the many intellectual giants…

May 16, 2022

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May 16, 2022

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The Evidenceless Petition to Dissolve

It’s hard not to feel sorry for the petitioner in Fernandes v Matrix Model Staffing, Inc., Decision and Order, Index…

May 09, 2022

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May 09, 2022

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Binding Nonsignatories to Arbitration Agreements

Closely-held business owners often hope to avoid the costs and delays of litigation by including arbitration provisions in their partnership,…

April 25, 2022

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April 25, 2022

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It’s Time to Address Sex Discrimination Against Women Owners of Closely Held Companies, Say These Two Law Professors

Longtime readers of this blog may recall a post I wrote three years ago titled Minority Shareholder Oppression in the…

April 18, 2022

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April 18, 2022

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A New Stile: First Department Shakes Up the Shareholder Oppression Claim

A watershed moment or a forgettable outlier?  It is often difficult to predict how much a novel decision will impact…

April 11, 2022

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April 11, 2022

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Recent Stock Valuation Decisions Reign “Supreme”

The fair value and fair market value appraisal standards applicable in contested buyout and dissenting shareholder valuations cut across state…

April 04, 2022

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April 04, 2022

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Appellate Rulings Endorse Courts’ Broad Remedial Powers Over Condo and Co-op Board Elections

Serving dual roles as urban homestead and non-profit business operation, residential condominiums and co-ops occupy a special niche in the…

March 28, 2022

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March 28, 2022

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But What of the Equitable Accounting?

I can’t say what the number is, but my own experience tells me that a significant percentage of lawsuits by…

March 21, 2022

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March 21, 2022

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Anti-Dissolution Provisions and Public Policy

In Congel v Malfitano, New York’s highest court wrote that business partners are free to include in partnership contracts practically…

March 14, 2022

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March 14, 2022

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New York Judge Spares NRA “Corporate Death Penalty”

The National Rifle Association has long been a politically charged topic for its fans and critics. For those of you…

March 07, 2022

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March 07, 2022

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The Operating Agreement Controls, Unless Public Policy Says Otherwise

Two principles often guide courts’ interpretation and enforcement of contracts.  First, courts respect parties’ freedom of contract, mostly.  So long…

February 28, 2022

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February 28, 2022

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General Partner’s Resignation Triggers Nonjudicial Dissolution of Limited Partnership

A limited partnership without a general partner cannot lawfully continue. That’s why it’s critical that the limited partnership agreement thoughtfully…

February 21, 2022

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February 21, 2022

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Valuation Decision Finds LLC “Worthless, Worthless, Worthless”

The chorus to one of Neil Young’s most sublime songs is “Helpless, helpless, helpless.” If composed in song, the chorus…

February 14, 2022

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February 14, 2022

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Winter Case Notes: Tax Estoppel (Not) to the Rescue and Other Decisions of Interest

The New York Times yesterday published an article entitled Climate Change Enters the Therapy Room discussing persons suffering from “climate…

February 07, 2022

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February 07, 2022

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Defendant Dissolves Mid-Lawsuit: What’s the Creditor’s Remedy?

Generally speaking, New York courts respect the corporate form, regarding the liabilities of the entity as separate from and inapplicable…

January 31, 2022

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January 31, 2022

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A Two-Act Play of LLC Default Rules and Manager Removal

“Except as provided in the operating agreement. . . ” By my count, this phrase and its close relative, “unless…

January 24, 2022

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January 24, 2022

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The Skinny on Arbitrability of Judicial Dissolution Claims

Are claims for judicial dissolution of business entities arbitrable? It’s a question I’m occasionally asked by business owners and, surprisingly,…

January 17, 2022

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January 17, 2022

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Justice Platkin’s Primer on Shareholders’ Inspection Rights

The books and records proceeding often is the first time that a dispute between a minority shareholder and the majority…

January 10, 2022

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January 10, 2022

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Singin’ the Derivative Plaintiff Blues

If you ask me to name the most common skirmishes over the adequacy of pleadings at the outset of business…

January 03, 2022

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January 03, 2022

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Top 10 Business Divorce Cases of 2021

It’s been another year of important case law developments in business divorce controversies. I’m pleased to present my 14th annual…

December 27, 2021

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December 27, 2021

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Look Before You Leap: Buy-Sell Agreements Triggered by a Petition for Dissolution

For owners of closely-held businesses, there are few provisions meriting more attention in an owners’ agreement than the buy-sell agreement. …

December 20, 2021

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December 20, 2021

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LLCs as They Approach the 50-Year Milestone: A Conversation with Professor Susan Pace Hamill

Wyoming enacted the first LLC Act in 1977, creating a hybrid business entity combining partnership features including pass-through taxation with…

December 13, 2021

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December 13, 2021

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The Outer Limits of LLC Indemnification: Michael Cohen v Trump Organization

Michael D. Cohen, former personal attorney and self-described “fixer” for Donald J. Trump, was ubiquitous in the national news throughout…

December 06, 2021

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December 06, 2021

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#MeToo and Business Divorce: The Flip Side

Two years ago, Peter Mahler wrote about a dissolution lawsuit by a female minority shareholder alleging that her male co-shareholders condoned…

November 29, 2021

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November 29, 2021

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The Nutmeg State Out Front on Member Inspection Rights Under RULLCA

For the second time in two years, the Connecticut Supreme Court has ventured into uncharted waters of LLC governance under…

November 22, 2021

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November 22, 2021

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Disguised Agreements and Dissolution

Appearances can be deceiving. That, essentially, was the argument made in two recently decided cases involving claims for judicial dissolution.…

November 15, 2021

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November 15, 2021

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Cooked or Raw? Enforceability of Partly Signed Operating Agreements

The harried realities of modern life are such that business entity organizational documents, like LLC operating agreements, sometimes do not…

November 08, 2021

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November 08, 2021

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Statutory Buyouts and Discounts Under the Fair Market Value Standard: An Awkward Pair?

Valuation discounts can and often do play an outsized role in contested appraisal proceedings involving the valuation of equity interests…

November 01, 2021

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November 01, 2021

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This Is Not Your Father’s Brady Bunch

If ever there was a ticking time bomb of a family-owned, closely held business more likely to result in business…

October 25, 2021

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October 25, 2021

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Too Little, Too Late: Court Sides with Ousted Member, but Denies Preliminary Injunction Undoing Termination

We often cover preliminary injunctions on the pages of this blog because they are a powerful tool in the business…

October 18, 2021

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October 18, 2021

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The Doctrine of Tax Estoppel in Ownership Status Disputes

Ownership status in a closely-held business is the first and most vital box almost every business divorce petitioner must check.…

October 11, 2021

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October 11, 2021

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Everything You Ever Wanted to Know About Buy-Sell Agreements: A Conversation With Paul Hood

Any shareholder, partnership, or LLC agreement that doesn’t include a well-crafted buy-sell provision triggered by an owner’s death, withdrawal, expulsion,…

October 04, 2021

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October 04, 2021

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Stay Away Settlement Between Closely-Held Corporation and Dissident Shareholder Goes Away Upon Shareholder’s Death

Business divorce has a way of drawing quick and often lopsided battle lines. Many disputes in closely-held companies feature one…

September 27, 2021

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September 27, 2021

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Court Cancels Capital Call For Want of a Postage Stamp

Who says email is more efficient and cheaper than regular mail? Not the manager of the McGuire family real estate…

September 20, 2021

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September 20, 2021

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Court Enjoins Dilution of Brewing Company LLC Membership Interest

Most folks associate beer with pleasure. Beer brings the happy, and many craft brewers will tell you they went into…

September 11, 2021

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September 11, 2021

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Delaware Declines Subject Matter Jurisdiction Over Judicial Dissolution of Foreign Entities

It’s not surprising that Vice Chancellor Zurn’s recent, first-impression decision in In re Coinmint, LLC, aligning itself with rulings in…

September 07, 2021

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September 07, 2021

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Summer Shorts: Business Divorce Cases From Across the Country

Welcome to this 11th annual edition of Summer Shorts! This year’s edition features brief commentary on half a dozen business…

August 30, 2021

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August 30, 2021

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Swing and a Miss: Unopposed LLC Dissolution Claim Denied

In an article from a little over a month ago, we summarized New York’s LLC judicial dissolution statute with the…

August 23, 2021

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August 23, 2021

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Fueling the DLOM Debate: Control Transfer Restrictions and the Discount for Lack of Marketability

Of all the factors considered by business divorce lawyers and appraisers when valuing an owner’s interest in a closely-held company,…

August 16, 2021

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August 16, 2021

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When It Comes to Transfers of Ownership Interests, Where There’s a Will There’s Not Always a Way

My partner Frank McRoberts recently posted about two New York cases, one involving an LLC and the other a close…

August 09, 2021

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August 09, 2021

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Business Divorce Alert: Forum Selection Clauses Do Not Confer Subject Matter Jurisdiction in Foreign Entity Dissolution Cases

As I wrote here, in 2016 the Manhattan-based Appellate Division, First Department decided Raharney Capital LLC v Capital Stack LLC,…

August 02, 2021

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August 02, 2021

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Stop the Vote: Injunction Halts Shareholders Meeting Pursuant to Courts’ Broad Power to Review Corporate Elections

The right of shareholders to elect a corporation’s directors is one of the most valuable rights attendant to share ownership. …

July 26, 2021

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July 26, 2021

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Common-Law and Equitable LLC Dissolution: Going, Going, . . .

Recently, we’ve written two articles focusing on the brewing dispute over whether New York law recognizes a viable cause of…

July 19, 2021

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July 19, 2021

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Betting the Farm On An Oral Partnership Agreement

The Cummins Nursery in upstate New York grows, harvests, plants, and grafts fruit trees — mainly apple trees — which…

July 12, 2021

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July 12, 2021

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A Bumper Crop: Cannabis Meets Business Divorce

Unless you’ve been living under a rock, you’ve probably heard that a little over two months ago, New York State…

July 06, 2021

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July 06, 2021

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Managing Members of Realty Holding LLCs Vanquish Self-Dealing Claims

Managing members of manager-managed New York LLCs owe default fiduciary duties of loyalty and care to non-managing members. Those duties…

June 28, 2021

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June 28, 2021

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To Dissolve to Not to Dissolve, that is the Question. The Answer is Both.

Like the Energizer bunny, some business divorce lawsuits keep going and going and going. Years of protracted litigation, brutal though…

June 21, 2021

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June 21, 2021

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Judicial Dissolution of LLCs Under RULLCA: Iowa Supreme Court Takes the Stage

Iowa was one of the first states to adopt the 2006 Revised Uniform Limited Liability Company Act.  As of this…

June 14, 2021

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June 14, 2021

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“Intentional” Breach of Fiduciary Duty Defeats Operating Agreement’s Exculpatory Clause

Last week, Peter Mahler blogged about a recent decision holding that a minority shareholder’s claim against its majority co-owners for…

June 07, 2021

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June 07, 2021

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Appellate Ruling Puts Pappas v. Tzolis to the Test

The New York Court of Appeals’ 2012 opinion in Pappas v Tzolis, decided in the wake and spirit of that…

June 01, 2021

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June 01, 2021

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Common-Law Dissolution Hits Speed Bumps in Recent Decisions

The heyday of common-law dissolution — if it ever had one — is long past, largely displaced by a statutory…

May 24, 2021

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May 24, 2021

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Battle of the Estoppels

In an earlier post, we wrote about a fascinating law firm limited liability partnership dispute culminating in a thoughtful post-trial…

May 17, 2021

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May 17, 2021

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It Was Only a Matter of Time: SPAC Meets Business Divorce

Anyone who keeps up with the public equity markets knows that the volume of IPOs generated by Special Purpose Acquisition…

May 10, 2021

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May 10, 2021

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Holes in Shotgun Buy-Sell Agreement Keep Deadlock Dissolution Petition Alive

Under both New York and Delaware law, members of an LLC may petition for judicial dissolution on the grounds that…

May 03, 2021

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May 03, 2021

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Be Careful What You Say. It May Get You Expelled From Your LLC.

Now that I’ve got your attention, relax. At least for New York LLCs, a member can be expelled from an…

April 26, 2021

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April 26, 2021

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The Money’s There But Out of Reach for the Minority LLC Member

Of late I’ve been ruminating on New York’s membership in the shrinking pool of states that don’t recognize oppression of…

April 19, 2021

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April 19, 2021

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Unsigned, Non-Final Operating Agreement Trumps Conflicting Testamentary Bequest of LLC Interest

Ten months ago, we wrote about an unusual case involving an LLC member who documented two irreconcilable membership interest transfers…

April 12, 2021

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April 12, 2021

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On the Menu: Steak and Equitable Dissolution

Fine dining and business divorce crossed paths in a recently decided case featuring a lengthy battle between co-equal ownership factions…

April 05, 2021

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April 05, 2021

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U.S. Circuit Courts Split on Abstention Doctrine in Dissolution Cases

In 1994, in Friedman v Revenue Management, Inc., the U.S. Court of Appeals for the Second Circuit, covering New York,…

March 29, 2021

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March 29, 2021

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Civil RICO: A Blunt But Elusive Tool in Business Divorce Cases

What do business divorce litigants have in common with the frill-necked lizard? At the outset of confrontation, they both use…

March 22, 2021

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March 22, 2021

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The Oral Partnership Operating as a Corporation: Is it a Partnership? A Corporation? Can it be Both?

Oral agreements to form and operate business enterprises are a recurring subject of this blog. We’ve written many times, for…

March 15, 2021

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March 15, 2021

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“Informal Dissolution” and Individual Liability

Section 1007 of the Business Corporation Law (the “BCL”) has a procedure for dissolved corporations to publish “notice requiring all…

March 08, 2021

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March 08, 2021

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General Partner Breached Implied Covenants in Partnership Agreement, but Plaintiff’s “Apples-to-Oranges” Calculation Dooms Bid for Damages

In most of the business valuation cases that I’ve litigated, it’s not long before one side accuses the other’s valuation…

March 01, 2021

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March 01, 2021

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Winter Case Notes: Dissolution of Not-For-Profit Corporation and Other Decisions of Interest

Here in the New York metro area, for the first time in years winter is living up to its name.…

February 22, 2021

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February 22, 2021

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Who Decides Disputed Valuation Under LLC Agreement’s Buy-Out Provision: Arbitrator or Appraiser?

It’s not unusual to find buy-out provisions in shareholder and operating agreements that commit the pricing of the buy-out to…

February 15, 2021

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February 15, 2021

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A Shotgun Buy-Sell Agreement and an Email Deal Walk into a Beachside Bar . . .

One of the more attractive features of LLCs as a business organization is that they are, in large part, creatures…

February 08, 2021

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February 08, 2021

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Re-Revisiting The Duty to Disclose Third-Party Offers Amidst Buy-Out Negotiations

Three weeks ago, I wrote about the Bak v Rostek case in Brooklyn Supreme Court addressing the duty to disclose…

February 01, 2021

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February 01, 2021

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The Farro Litigation: The Rest of the Story

In last week’s New York Business Divorce, Peter Mahler wrote about an important new decision with far-reaching implications for New…

January 25, 2021

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January 25, 2021

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Groundbreaking Appellate Ruling Boosts LLC Cash-Out Mergers

For law bloggers, if there’s one thing more satisfying than writing about an important new court decision, it’s writing about…

January 18, 2021

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January 18, 2021

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The Duty to Disclose Third-Party Offers Amidst Buy-Out Negotiations, Revisited

In 2011 and 2012, the New York Court of Appeals decided a series of difficult cases addressing the circumstances under…

January 11, 2021

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January 11, 2021

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The Injunction Remedy in Business Divorce Cases

Business divorce clients often arrive in the throes of a crisis, complaining of co-owners siphoning, diverting, depleting, or denying access…

January 04, 2021

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January 04, 2021

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Top 10 Business Divorce Cases of 2020

I’m very pleased to present my 13th annual list of the past year’s ten most significant business divorce cases. This year’s…

December 28, 2020

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December 28, 2020

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It Takes Two to Remove a Tiebreaker

“I don’t get no respect” was a famous Rodney Dangerfield comedy routine. It also could be ascribed albeit less comedically…

December 21, 2020

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December 21, 2020

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An Extreme Case of Petitioner’s Remorse

Many business divorce practitioners are familiar with a phenomenon one might call “petitioner’s remorse” – an often abrupt abandonment of…

December 14, 2020

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December 14, 2020

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Fee Sharing in LLC Derivative Suits: A Common Law Right and a One Way Street 

BCL 626 governs shareholder derivative actions, or suits brought by individual shareholders on behalf of, and for injury to, the…

December 07, 2020

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December 07, 2020

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Dissenting Shareholders’ Challenge to Appraisal of Famed East End Resort Hits Dead End

Gurney’s Inn is an iconic oceanside resort located in Montauk, New York, on the eastern tip of Long Island’s South…

November 30, 2020

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November 30, 2020

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Business Divorce on the Menu

The restaurant business is on the skids amid the COVID-19 pandemic. Yelp reports that 60% of closed restaurants won’t re-open.…

November 23, 2020

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November 23, 2020

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When Estate Plans and Stock Transfer Restrictions Collide

A recent decision from Bronx County Supreme Court Justice Llinet M. Rosado, Sebrow v Sebrow, 2020 NY Slip Op 20269…

November 16, 2020

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November 16, 2020

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Court Enforces LLC Agreement’s “Naked” Expulsion Clause

Don’t Miss the 2020 LLC Institute Virtual Meeting! It’s that time of year again, when leading experts and practitioners in…

October 26, 2020

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October 26, 2020

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First-Impression Decision Recognizes a Cause of Action for Common-Law LLC Dissolution

Five years ago, we wrote about an important decision from the Delaware Chancery Court, In re Carlisle Etcetera, LLC, 114…

October 19, 2020

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October 19, 2020

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Court Bounces Books-and-Records Petition in Feud Over Park Avenue Co-op Board’s Rejection of Prospective Purchasers

Interview with Bob Ambrogi on This Week In Legal Blogging Last week I had the pleasure of being interviewed for…

October 12, 2020

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October 12, 2020

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Court Rejects Oppressed Shareholder’s Bid for Dissolution or Buy-Out, Finds Money Damages Sufficient

A minority shareholder petitioning for dissolution under BCL § 1104-a must establish, by a preponderance of the evidence, that the…

October 05, 2020

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October 05, 2020

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The Purposeless Purpose Clause Rides Again

“The Company is formed for any valid business purpose” Nine seemingly benign words in the garden-variety operating agreement of a…

September 28, 2020

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September 28, 2020

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Two Entities, Two Outcomes: Withdrawal and the Right to an Accounting

In Jacobs v Cartalemi, now the leading case on the subject of LLC member withdrawal (which our firm had the…

September 21, 2020

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September 21, 2020

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Business Divorce Nation: A Cross-Country Tour of Recent Decisions of Interest

There’s tremendous diversity from state-to-state when it comes to statutory and judge-made law in business divorce cases. The basic fact…

September 14, 2020

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September 14, 2020

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A Partnership Dissolution in Three Acts Over Fifteen Years and Counting

With apologies to the King James Bible, what the Manhattan real estate market giveth, a poorly conceived partnership agreement taketh…

September 07, 2020

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September 07, 2020

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Departing LLC Members: Exercise Your Put Option Before Insolvency Approaches

Several weeks ago, I had the pleasure of first appearing on this blog, with a piece about a Delaware Chancery…

August 31, 2020

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August 31, 2020

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Enforceability of Oral Operating, Shareholder, and Partnership Agreements

Oral agreements – and oral modifications of written agreements – are a constant source of litigation in business divorce cases.…

August 24, 2020

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August 24, 2020

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Summer Shorts: For-Cause Termination of LLC Member and Other Decisions of Interest

Usually I open my annual Summer Shorts post with some breezy comment about summer vacations, travel, or poolside reading. But…

August 17, 2020

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August 17, 2020

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Dissolve for Failure to Elect a Board? Better Demand an Election First

New York’s Business Corporation Law (BCL) provides three pathways for non-controlling shareholders to achieve involuntary (judicial) dissolution. The first two…

August 10, 2020

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August 10, 2020

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A Business Divorce Rarity: The Jury Trial

The mystique of the jury trial is deeply embedded in the social consciousness of our country. Non-lawyers who think of…

August 03, 2020

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August 03, 2020

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Does an LLC Member Have Absolute Power to Withdraw from the LLC?

Some years ago I had the good fortune to join the ABA Business Law Section’s Committee on LLCs, Partnerships and…

July 27, 2020

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July 27, 2020

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“Rank Pretext Will Not Do”: Court Enjoins Freeze-Out Merger With No Corporate Benefit

I’ve represented clients on both sides of freeze-out mergers of privately owned business entities, so I’m very familiar with their…

July 20, 2020

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July 20, 2020

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Disputes Over Member Status Continue to Roil the LLC Waters

I don’t know if empirical studies have been done comparing the relative frequency or ratio of disputes and litigation over…

July 13, 2020

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July 13, 2020

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The Common-Law Tort of Breach of Fiduciary Duty: The Total Package

In the famous case of Meinhard v Salmon, Justice Benjamin Cardozo wrote in lofty language that lawyers of maltreated business…

July 06, 2020

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July 06, 2020

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Business Judgment Rule Prevails in Fight Over Liquidation Plan for Dissolved Madoff Feeder Fund

FGLS Equity LLC was one of many feeder funds caught up in the maelstrom that followed the exposure and meltdown…

June 29, 2020

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June 29, 2020

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Consider Whether Your Buy-Sell Provision is a Call Option Before Pulling the Trigger

This post is authored by Peter J. Sluka, a senior associate in the Manhattan office of Farrell Fritz and a…

June 22, 2020

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June 22, 2020

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A Trio of Recent Business Divorce Decisions by Manhattan Commercial Division Judges

The COVID-19 pandemic kept New York’s courthouses dark the last few months, but it didn’t slow down the output of…

June 15, 2020

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June 15, 2020

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How to Resolve Competing Estate Plans of an LLC Owner with a Double Life

Corporate shareholder and LLC operating agreements routinely contain provisions addressing the transfer of equity interests upon the death of an…

June 08, 2020

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June 08, 2020

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This Single-Appraiser Buy-Sell Agreement Was Asking for Trouble

Was it “an unfortunate attempt to second-guess or even force a ‘do over’ of the appraisal,” as the one side…

June 01, 2020

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June 01, 2020

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$30 Million Appraisal of Plumbing Fixtures “Marketeer” Goes Down the Drain at Fair Value Hearing

Three shareholders co-own an 8-year old internet-based “marketeer” business that imports Chinese-manufactured sinks, faucets, and related plumbing fixtures that it sells…

May 26, 2020

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May 26, 2020

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Member Liquidity, Default Rules, and the Corporate-ization of LLCs: A Conversation with Dean Donald J. Weidner

I’m very excited to announce my latest podcast interview featuring Donald J. Weidner, Dean Emeritus of the Florida State University College…

May 18, 2020

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May 18, 2020

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Will the Pandemic Be a Boon for Future LLC Dissolution Claimants?

The ongoing coronavirus / COVID-19 pandemic has quite literally impacted everyone and everything in New York, including the courts, which…

May 11, 2020

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May 11, 2020

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When an LLC Manager’s “Sole and Absolute Discretion” is Neither Sole Nor Absolute

If you read most any operating agreement for a manager-managed LLC, chances are you’ll find somewhere in it a grant…

May 04, 2020

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May 04, 2020

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Buy-Sell Agreements Are Supposed to Deter Litigation, Not Foment It

Two of my pet topics — dysfunctional buy-sell agreements and application of federal court abstention doctrine in private company disputes…

April 27, 2020

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April 27, 2020

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Turmoil Follows Involuntary Transfers of LLC Membership Interests

LLC enabling legislation swept the country in the late 1980s through the mid 1990s. By the turn of the century…

April 20, 2020

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April 20, 2020

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Unauthorized Certificate of Revival Dooms Delaware LLC’s Claims Against Former Managing Members

April 06, 2020

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No Laughing Matter: Deadlock Dissolution Petition Targets Legendary NYC Comedy Club

The Comic Strip is the oldest stand-up comedy showcase club in New York City. Its co-founders Robert Wachs and Richard Tienken…

March 30, 2020

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March 30, 2020

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No Double Dipping! Court Denies Post-Valuation Date Distributions in Equitable Buyout of LLC Member

I’m always disappointed by appellate opinions that decide novel or unsettled issues in business divorce cases with little or no…

March 23, 2020

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March 23, 2020

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Who Is a “Control” Person for Purposes of the Dissolution Statute’s Surcharge Provision?

Section 1104-a of the Business Corporation Law (the BCL) empowers courts to dissolve a corporation if the petitioning shareholder can…

March 16, 2020

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March 16, 2020

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Forced to Buy Out Law Partner’s Interest In Defunct Firm, Years After Withdrawing? It Can Happen

Article 12 of New York’s Limited Liability Company Law authorizes the formation of professional service limited liability companies (PLLC). Eligible…

March 09, 2020

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March 09, 2020

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Always Check Provenance Before Taking an Assignment of LLC Interest

Buyers of fine art must investigate the work’s provenance before closing the deal. The same holds true for anyone contemplating…

March 02, 2020

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March 02, 2020

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Winter Case Notes: Time-Barred Dissolution Petition and Other Decisions of Interest

Welcome to this year’s edition of Winter Case Notes in which I highlight a collection of recent court decisions of interest to business…

February 24, 2020

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February 24, 2020

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Bending the Rules of Standing: The De Facto Merger Doctrine

Business Divorce 101: To be entitled to an accounting of a closely-held business, the plaintiff or petitioner must demonstrate the…

February 17, 2020

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February 17, 2020

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Death of Limited Partner Disarms Derivative Action

I’ve yet to see him make a court appearance, and hope I never do, but the Grim Reaper sure has a knack for…

February 10, 2020

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February 10, 2020

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The Curious Case of the Expelled LLC Member Bound by Operating Agreement He Never Signed

The case of Shapiro v Ettenson ranks as one of the more consequential ones in the realm of New York’s LLC…

February 03, 2020

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February 03, 2020

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A Case of LLC Withdrawal Symptoms

I was especially drawn to the case I’m about to introduce involving LLC member withdrawal, owing to the Jacobs v…

January 27, 2020

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January 27, 2020

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Resignation: Antidote for Internal Dissention and Deadlock?

There are countless New York corporations in which the owners are equal 50 / 50 shareholders and co-members of a…

January 20, 2020

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January 20, 2020

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The Two Worlds of LLCs: A Conversation With Professor Peter Molk (Part Two)

As is my custom, I devote a post on this blog to each new episode of my Business Divorce Roundtable…

January 06, 2020

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January 06, 2020

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Top Ten Business Divorce Cases of 2019

Imagine staging an Oscars-like award ceremony for business divorce cases: Emcee: And the award for Best Oppressive Conduct Toward a…

December 30, 2019

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December 30, 2019

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Gull Wing Takes Flight, Pleading Gets Stricken

In litigation, the term “spoliation” generally refers to loss or destruction of evidence. Spoliation can involve physical evidence, paper documents,…

December 22, 2019

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December 22, 2019

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The Two Worlds of LLCs: A Conversation With Professor Peter Molk (Part One)

After three decades during which it rose from obscurity to become the entity of choice, the limited liability company remains…

December 16, 2019

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December 16, 2019

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LLC Member’s Petition to Dissolve Boxing Club Dealt First Round KO

In the end, it wasn’t much of a fight. The case of Huggins v Scott, decided last month by Justice W.…

December 09, 2019

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December 09, 2019

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Can the Company Pay My Legal Fees? – Part Two

My last post on the subject of advancement and indemnification summarized the basic rules by which closely-held business owners, officers,…

November 25, 2019

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November 25, 2019

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Operating Agreement Spawns Multiple Disputes Between 50/50 Members of Realty Holding LLC

330 West 85th Street is a prime location on Manhattan’s Upper West Side. At that address sits an elegant, pre-war,…

November 11, 2019

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November 11, 2019

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Advance! Amend! Retreat!

The title of this post describes not an army maneuver, but the outcome of a recent lawsuit in Delaware Chancery…

November 04, 2019

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November 04, 2019

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LLCs as Nominal Parties in Dissolution Cases: An Uncertain Portal to Federal Court Jurisdiction

It’s Not Too Late to Register for the LLC Institute! The annual LLC Institute is a unique gathering of professionals and academics…

October 21, 2019

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October 21, 2019

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The Perils of Indeterminate LLC Membership Interests

Here we go again — and again and again. On numerous prior occasions I’ve written about judicial dissolution cases and other infighting among…

October 14, 2019

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October 14, 2019

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Post-Valuation Date Distributions: Should They Be Credited Against Fair Value Awards?

In my business divorce travels occasionally I encounter instances in which shareholder distributions are made in the period between the valuation date for…

October 07, 2019

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October 07, 2019

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Lawyer Says, “I’m Not a Partner, No Wait, I am a Partner!” Which is It?

Earlier this year, we wrote about a partnership dispute involving a prominent insurance litigation firm, D’Amato & Lynch, LLP. In…

September 30, 2019

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September 30, 2019

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Chicken Sh*t Bingo Fans Rejoice: The Dragpipe Saloon Survives a Dissolution Scare

In a moment I’ll explain why you’re looking at a picture of “chicken shit bingo,” but first . . .…

September 23, 2019

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September 23, 2019

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A Transactional Lawyer’s Approach to Resolving Business Divorce: Podcast Interview with Steve Robinson

Meet Steve Robinson. He’s a 1982 Harvard Law grad who spent the formative years of his legal career practicing corporate securities law at…

September 16, 2019

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September 16, 2019

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Pave Paradise, Put Up a Purposeful Parking Lot

Parking lots breed partnership disputes. I’ve litigated them and I’ve written about them, most notably the Kassab saga. I suppose it’s…

September 09, 2019

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September 09, 2019

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Business Divorce in the Surrogate’s Court

Like business divorce, New York trusts and estates litigation (“T&E”) is a highly specialized niche of the law. T&E litigators have their own universe of…

September 03, 2019

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September 03, 2019

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Court Looks to Partnership Law in Ruling Against Petitioner’s Status as LLC Member

What makes someone a member of an LLC? It’s a question that frequently arises in business divorce cases involving LLCs that…

August 26, 2019

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August 26, 2019

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Statute Trumps LLC Agreement’s Voting Rights Provision in Dispute Over Manager’s Removal

LLC enabling statutes authorize two types of management structures. The default structure is member-managed in which all members participate in the management of the company’s business affairs.…

August 19, 2019

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August 19, 2019

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Summer Shorts: LLC Minority Member Oppression and Other Decisions of Interest

It’s that time of year again, when I offer some lighter fare for poolside consumption consisting of summaries of a few recent decisions…

August 12, 2019

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August 12, 2019

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Court Blocks “End Run” Around Bar to Subject Matter Jurisdiction in Suit to Dissolve Foreign LLC

Many thousands of closely held corporations, limited liability companies, and limited partnerships formed under Delaware law (and, to a much lesser extent,…

July 29, 2019

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July 29, 2019

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LLC’s Post-Dissolution Receivership is On, is Off, is On

Last week’s post examined an unusual case in which the court appointed a temporary receiver of an LLC pending the…

July 22, 2019

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July 22, 2019

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Court Appoints Interim Receiver for LLC, But at What Price?

The limited liability company did not exist as a legally recognized business entity in New York when I first began handling business…

July 15, 2019

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July 15, 2019

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The Demanding Demand Requirement in Shareholder Derivative Actions

Business divorce cases more often than not include claims against the controlling owners for diversion or waste of company assets,  usurpation of corporate…

July 01, 2019

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July 01, 2019

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Siblings Battle Over Spoils from Sale of Family-Owned Business

Normally you don’t associate the lucrative sale of a closely held business with bitter disputes among the co-owners leading to judicial…

June 24, 2019

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June 24, 2019

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Trouble Down on the Farm: The Importance of Using Experienced Counsel When Forming an LLC

It’s commonly said there are three things that matter with real estate: location, location, location. Likewise, three things matter when choosing a lawyer…

June 17, 2019

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June 17, 2019

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Can an Arbitrator Order Extra-Judicial Dissolution?

Often business owners enter into arbitration agreements because they hope it will result in a speedier, less expensive resolution than…

June 10, 2019

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June 10, 2019

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Who Gets to Play the Bankruptcy Card Under Your LLC Agreement?

If you’re a member of a multi-member LLC, and especially if it’s manager-managed, here’s a reason you might want to…

June 03, 2019

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June 03, 2019

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Ambiguous Advancement Provision Favors Former Officer and Director

I’ve long been intrigued with the frequency of litigation — especially in Delaware Chancery Court — over advancement of legal fees of a corporate…

May 28, 2019

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May 28, 2019

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Can a Deadlock Resolution Provision Cause Deadlock? This One Did

This is the story of a deadlock resolution provision that backfired. It is a long story — 94 pages long…

May 20, 2019

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May 20, 2019

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How to Initiate a Fair Value Appraisal Proceeding – a Dissenter’s Checklist

Over the years, we’ve written a lot about limited partnership, corporation, and LLC “fair value” appraisal proceedings. An appraisal proceeding…

May 13, 2019

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May 13, 2019

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Half-Baked LLC Agreement Yields Improvised Valuation Decision

A Plug for Cunningham on IRC 199A Tax issues always have been an integral factor in valuing closely held business…

May 06, 2019

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May 06, 2019

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For Want of a Penny: Business Divorce Case Almost Makes it Into Federal Court

“I will not seek or accept an award in excess of $74,999.99, inclusive of punitive damages, attorney’s fees and the…

April 29, 2019

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April 29, 2019

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Third Time’s Not a Charm in LLC Dissolution Case

As it approaches its sixth anniversary with little sign of letting up, the highly contentious litigation between brothers and business…

April 22, 2019

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April 22, 2019

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The Law Firm “Partner”- A Rose by Any Other Name . . .

One of the great ironies of New York business divorce litigation is that so much of it involves the breakup of…

April 15, 2019

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April 15, 2019

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Disclosure of Estate Tax Stock Appraisals in Shareholder Disputes

The discoverability of materials in civil litigation in general resists any hard and fast rules, other than that the scope of discovery…

April 01, 2019

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April 01, 2019

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Arbitrating Deadlock: A Conversation with Arbitrator Erica Garay

When 50/50 co-owners of a business are deadlocked on a major business decision, unless they have a written agreement in…

March 25, 2019

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March 25, 2019

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A Pig in a Poke: The Rollercoaster Kadosh Settlement Litigation

Years ago, we wrote about the perils of “impromptu” settlements in business divorce cases – settlements eked out at the…

March 15, 2019

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March 15, 2019

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A Cross-Country Tour of Five Recent Stock Appraisal Cases

When it comes to business valuation principles in contested appraisal proceedings, I’d say the 50 states have far more in common than…

March 10, 2019

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March 10, 2019

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Throwing Grenades and Casting Plagues Upon Your Fellow Directors: A Lesson in Fiduciary (Ir)responsibility

This week’s post is by Matthew D. Donovan, a commercial litigation partner and member of Farrell Fritz’s business divorce practice group.  There is…

March 04, 2019

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March 04, 2019

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Judicial Dissolution as the Nuclear Option When Other Means Falter

nu•cle•ar op•tion (noun): the most drastic or extreme response possible to a particular situation The litigation arsenal of business divorce lawyers contains…

February 25, 2019

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February 25, 2019

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Sue for Dissolution – Get Sued for Defamation?

It’s simply in the nature of things that business divorce litigants tend to accuse one another of all manner of heinous,…

February 19, 2019

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February 19, 2019

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Winter Case Notes: Oppression of the “Gifted” Minority Shareholder and Other Recent Decisions of Interest

Notwithstanding we’ve had no more than a dusting of snow thus far in my downstate New York neck of the woods, welcome to another…

February 11, 2019

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February 11, 2019

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The Bad-Faith Petitioner Defense Makes Successful Debut in LLC Dissolution Case

What’s become known as the bad-faith petitioner defense in judicial dissolution proceedings first emerged in Matter of Kemp & Beatley, 64 NY2d…

February 04, 2019

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February 04, 2019

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Minority Shareholder Oppression in the #MeToo Era

In the last two years, fueled by a series of high profile cases involving media executives, entertainers, and other public…

January 28, 2019

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January 28, 2019

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A Fresh Take on an Old Doctrine – The “Adequate, Alternative Remedy” to Dissolution

After 35 years, Matter of Kemp & Beatley, Inc. (64 NY2d 63 [1984]), remains the leading authority in New York on oppression-based corporate…

January 22, 2019

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January 22, 2019

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Another Reason Not to Use Fixed Price Buy-Sell Agreements

As if we need another case illustrating why fixed price buy-sell agreements should be avoided like the plague. Before we get to…

January 14, 2019

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January 14, 2019

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Business Divorce Epilogues

Over the years I’ve blogged about hundreds of court decisions in business divorce cases. Believe it or not, one of the…

January 07, 2019

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January 07, 2019

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Top Ten Business Divorce Cases of 2018

I’m very pleased to present my 11th annual list of this past year’s ten most significant business divorce cases. This year’s list…

December 31, 2018

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December 31, 2018

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Equitable Accounting vs. Access to Books and Records: Don’t Confuse Them

Raise your hand if you think that a lawsuit for an accounting by the managers of an LLC simply means they…

December 17, 2018

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December 17, 2018

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Outlawing of LLC’s Short-Term Rental Business Brings Long-Term Litigation

After two years, 300+ docket entries, and 12 motions, a lawsuit among members of a Delaware LLC that owned a…

December 10, 2018

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December 10, 2018

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IP Disputes Among Private Business Co-Owners Dominate Three Recent Cases

Last month gave us three noteworthy post-trial decisions in three different cases from three different states, all centering on disputes…

December 03, 2018

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December 03, 2018

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When Dealing in Partnership Owned Real Property, Caveat Emptor

A basic and well-known principle of partnership law is that, absent an agreement to the contrary, general partners have authority to unilaterally bind…

November 26, 2018

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November 26, 2018

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Is a Schedule K-1 By Itself Enough to Prove LLC Membership?

Let me say up front, I don’t claim to know the answer to the question posed in this post’s title, or pretend…

November 19, 2018

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November 19, 2018

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Think Twice Before Putting 100% Quorum Requirement in By-Laws or LLC Agreement

It’s no surprise that the quorum requirements found in close corporation by-laws and LLC operating agreements rarely step into the limelight…

November 12, 2018

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November 12, 2018

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A Deep Dive Into the Election to Purchase in Dissolution Proceedings

When a minority shareholder petitions for judicial dissolution under § 1104-a of the Business Corporation Law based on the majority’s alleged…

November 05, 2018

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November 05, 2018

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Accounting Unchained: Is the Closely Held Business Owner’s Right to an Accounting Absolute?

Let’s face it. In business divorce, the accounting cause of action doesn’t get a lot of love. It’s not as sexy as the…

October 29, 2018

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October 29, 2018

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Does an Inactive Member of a Member-Managed LLC Owe Fiduciary Duties?

Consider the following hypothetical: The operating agreement of an LLC vests management authority in its two members. In practice, and…

October 22, 2018

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October 22, 2018

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Inspection Rights, Oral Operating Agreements, and Other Pop-Diva Delights

Over the last several years, the books-and-records proceeding and its corresponding shareholder rights of inspection seem to have entered a…

October 15, 2018

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October 15, 2018

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Does This Decision Put the Brakes on Non-Unanimous Amendments to Operating Agreements?

Much digital ink has been spilled on this blog (here, here, here, and here) and elsewhere (Tom Rutledge’s terrific article…

October 08, 2018

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October 08, 2018

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Stock Pledge Agreement Defeats Minority Shareholder’s Standing to Sue for Statutory But Not Common-Law Dissolution

Last week, this blog wrote about a decision by Manhattan Commercial Division Justice Saliann Scarpulla in the burgeoning Yu family melee, in…

October 01, 2018

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October 01, 2018

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Judicial Dissolution and the Weaponized LLC

What’s a weaponized LLC? It’s one whose operating agreement gives the controlling majority members the authority to dilute, remove from management, or expel a non-controlling…

September 24, 2018

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September 24, 2018

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Repeat After Me: You May Not Expel a Member of a New York LLC Unless the Operating Agreement Says So

C’mon, New York lawyers, do you really want to spend your time, your client’s money, and bother the court litigating…

September 17, 2018

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September 17, 2018

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Past is Prologue: Refusal to Adopt Dividend Policy After Petitioner Resigns Not Ground for Dissolution

In the judicial dissolution case that John (“Jake”) Feldmeier brought after resigning as the highly paid president of the family-owned business, the central…

September 10, 2018

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September 10, 2018

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Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 3

This is the final installment of a three-part series about the basics of contested New York business appraisal proceedings. The first…

September 04, 2018

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September 04, 2018

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Gymnastics Business Falls Off the Beam in LLC Dissolution Case

Very few and very far between are cases in which the holder of a minority membership interest in a New York LLC — with or without…

August 27, 2018

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August 27, 2018

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LLC Dissolution Statutes Under the Microscope: Podcast Interview with Professor Douglas Moll

Douglas K. Moll, Professor of Law at the University of Houston Law Center, is well known to business divorce aficionados for…

August 20, 2018

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August 20, 2018

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Summer Shorts: Partnership Appraisal and Other Recent Decisions of Interest

The dog days of August are upon us, a perfect time as I do each year to offer vacationing readers some lighter…

August 13, 2018

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August 13, 2018

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Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 2

A few weeks ago, this blog – in the first of a three-part series about business valuation proceedings – addressed the various statutory triggers by which…

August 06, 2018

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August 06, 2018

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49% Shareholder Can’t Seek Deadlock Dissolution Despite Shareholders’ Agreement Granting Co-Equal Control

Shareholders A and B are the sole shareholders of a real estate holding corporation. Their shareholders’ agreement includes provisions that: guarantee each…

July 30, 2018

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July 30, 2018

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Dissension Follows When Business Owners Don’t Put Their IP House in Order

When you think about protecting a business firm’s intellectual property (IP), usually you think about protecting it from infringement by external actors. But there also…

July 23, 2018

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July 23, 2018

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Dead Men Tell No Tales of Shareholder Buy-Outs Gone Sour

When three gentlemen in their mid-eighties, one of whom is in a nursing home with failing health and onset dementia, are the key…

July 16, 2018

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July 16, 2018

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Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 1

Last month, seasoned business appraiser Andy Ross of Getty Marcus CPA, P.C., and I made a presentation at the Nassau…

July 09, 2018

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July 09, 2018

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Lessons From a Trio of Dysfunctional Buy-Sell Agreements

Three recent court decisions from three different states — New York, Pennsylvania, and Alabama — add to the rogue’s gallery…

July 02, 2018

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July 02, 2018

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Court Denies Second Bite at Dissolution Cherry in Kassab Brothers Business Divorce

The hard-fought business divorce litigation between Nissim Kassab and his brother Avraham has provided plenty of fodder for this blog over the last…

June 25, 2018

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June 25, 2018

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You Sued for Dissolution, They Elected to Buy You Out, What Else Do You Want?

Article 11 of the Business Corporation Law features multiple provisions giving judges broad authority and discretion to impose interim remedies designed to preserve corporate…

June 18, 2018

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June 18, 2018

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A Trip Down Business Divorce Lane with Recently Retired Justice Shirley Werner Kornreich

With a genuine sense of loss, we bid adieu to Manhattan Commercial Division Justice Shirley Werner Kornreich, who retired at the…

June 11, 2018

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June 11, 2018

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Bona Fide Purchaser Avoids Rescission of Minority Shareholder’s Unauthorized Sale of Corporation’s Realty

The Lowbet Realty saga, featuring the dissolution court’s rarely used authority to rescind an unauthorized sale of the corporation’s realty under Business Corporation Law…

June 04, 2018

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June 04, 2018

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Anyone Think Binding Mediation to Break Deadlock Is a Good Idea?

Mediation, as commonly understood in the context of alternative dispute resolution, employs a neutral third party to facilitate negotiation and voluntary agreement between the parties. Unlike arbitration, the…

May 29, 2018

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May 29, 2018

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No Prize for Nobel Laureate in Fight for Bigger Stake in Biotech Company

The Nobel Prize symbolizes the apex of human achievement in the arts and sciences. It is no guarantee, however, that…

May 21, 2018

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May 21, 2018

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Corporate Frankenstein “Partnership to Form a Corporation” Lives Another Day

Lawyers are famous for arguing seemingly inconsistent positions at the same time. We practitioners lovingly refer to the technique as “arguing in the alternative.” The…

May 14, 2018

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May 14, 2018

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If LLC Agreement Must Be in Writing, Must it Be Signed?

Transactional lawyers who assist clients in the formation and restructuring of business entities, and the litigators who clean up the transactional…

May 07, 2018

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May 07, 2018

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Court Grants 50% LLC Member Derivative Right to Defend Action Brought by Other 50% Member’s Solely Owned Company

You know there’s something unusual going on in a case involving a dispute between co-members of an LLC — a form of…

April 30, 2018

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April 30, 2018

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Can LLC Agreement Waive Right to Sue Derivatively? Not in These Two Cases

Recently, in two separate cases, two New York judges construing two LLC agreements of two LLCs formed under the laws of two…

April 23, 2018

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April 23, 2018

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Operating Agreement Dooms Derivative Claims by Deceased LLC Member’s Estate

In business divorce litigation, petitioners / plaintiffs often want to start the case with a bang. A common tactic is to file a petition…

April 16, 2018

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April 16, 2018

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Shareholder Oppression Requires More Than Denial of Access to Company Information

“We are poster-boys for why family members should not go into business together.” So says respondent Paul Vaccari in his…

April 09, 2018

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April 09, 2018

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New York’s High Court Takes Fresh Approach to Wrongful Dissolution, Sustains Valuation Discounts, Limits Damages in Partnership Case

There’s a lot to digest in last week’s decision by the Court of Appeals — New York’s highest court —…

April 02, 2018

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April 02, 2018

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You Dissented From a Merger. Are You Bound by Your Non-Compete?

New York’s business-entity statutes, like those across the nation, provide minority owners with the right to dissent from a merger…

March 26, 2018

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March 26, 2018

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The Cash-Out Merger Solution to the Problem Minority Owner

How can majority business owners legally rid themselves of a problematic minority owner? Not by transferring the business’s assets to another entity for no consideration. That…

March 19, 2018

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March 19, 2018

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Appeals Court Reinstates Derivative Claims Dismissed for Conflict of Interest Where Parties’ Relationship Not “Especially Acrimonious”

Almost always there are elements of acrimony and intense emotion in litigation between co-owners of closely held business entities. The degree…

March 12, 2018

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March 12, 2018

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One 50% Shareholder Wants to Sell or Liquidate the Business. The Other Wants to Keep It Going. Is That Deadlock?

We call it deadlock dissolution when a 50% shareholder of a close corporation, who claims to be at an impasse…

March 05, 2018

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March 05, 2018

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LLC Member Expulsion: What Hath Shapiro Wrought?

Unlike the LLC statutes in many other states, New York’s LLC Law does not authorize the LLC or any of its members…

February 26, 2018

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February 26, 2018

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The LLC Equitable Buyout: Past, Present, Future

Under the right set of facts, New York courts occasionally find remedies for LLC owners not explicitly authorized in the Limited Liability Company Law (“LLC…

February 19, 2018

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February 19, 2018

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Will Someone Please Re-Name the Implied Covenant of Good Faith and Fair Dealing?

In the annals of business divorce litigation and assorted other disputes between co-owners of closely held business entities, the cause of…

February 12, 2018

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February 12, 2018

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The Purposeless Purpose Clause Makes a Comeback — Or Does It?

The test for judicial dissolution of LLCs under LLC Law § 702, as laid down in 1545 Ocean Avenue, initially asks whether the…

February 05, 2018

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February 05, 2018

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Confessions of a Business Appraiser: A Conversation with Chris Mercer

Business valuation contests in court, including those arising out of shareholder and partnership disputes, inevitably boil down to a battle of the appraisal…

January 29, 2018

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January 29, 2018

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Rare Partnership Dissolution Decision Applies Deadlock Standard to Dissolution Under Partnership Law

As LLCs have become the dominant form of closely-held business in New York, cases involving dissolution of partnerships have become more and more rare. Section…

January 22, 2018

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January 22, 2018

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Delaware Chancery Court Rulings Address Valuation and Insolvency Disputes

The steady flow and scholarly character of Delaware Chancery Court opinions in company valuation contests provide an important resource and learning tool for…

January 15, 2018

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January 15, 2018

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Winter Case Notes: LLC Deadlock and Other Recent Decisions of Interest

This winter forever will be remembered in the Northeast as the winter of the “bomb cyclone,” which gets credit for the 6º temperature and…

January 08, 2018

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January 08, 2018

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Top 10 Business Divorce Cases of 2017

I’m delighted to present my 10th annual list of this past year’s ten most significant business divorce cases. This year’s list includes seven noteworthy…

January 02, 2018

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January 02, 2018

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Delaware Contractarian Principles Prevail in Appeal Over Deceased Ace Hotel Founder’s LLC Interest

The sudden death of Alexander Calderwood, the brilliant but troubled co-founder of the Ace brand of hotels, resulted in some fierce…

December 26, 2017

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December 26, 2017

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A River’s Divide: Time for the Manhattan and Brooklyn Appellate Courts to Agree on Marketability Discount in Fair Value Proceedings

The East River and roughly five miles as the pigeon flies separate the equally beautiful courthouses of the Appellate Division, Second…

December 18, 2017

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December 18, 2017

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Operating Agreement Defeats Statutory Buyout Rights Upon LLC Member’s Withdrawal

When the tsunami of LLC enabling statutes swept the U.S. in the late ’80s and early ’90s, including New York in 1994, many included a…

December 11, 2017

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December 11, 2017

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Reflections on Ten Years of Blogging

This week marks the tenth anniversary of the launch of this blog. Every Monday morning since, come hell, high water,…

December 04, 2017

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December 04, 2017

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Surrogate’s Court Declines to Order Demise of Fashion Business

When you want to sue to dissolve a business in New York on behalf of the estate of a deceased…

November 27, 2017

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November 27, 2017

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Can the Bare Naked Assignee Demand Access to LLC Records?

I wish I could take credit for it, but I can’t. The phrase “bare naked assignee” was coined by the preeminent…

November 20, 2017

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November 20, 2017

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The (Even More) Elusive Surcharge in Dissolution Proceedings

A year ago I wrote a piece called The Elusive Surcharge in Dissolution Proceedings highlighting the rare appearance in the…

November 13, 2017

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November 13, 2017

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Divorcing Husband Not Smiling Over Court’s Rejection of Ownership Interest in Wife’s Dental Practice

The self-proclaimed entrepreneur and guiding force behind his soon-to-be ex-wife’s highly successful, multi-office pediatric dental practice known as Kiddsmiles is not smiling after the court…

November 06, 2017

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November 06, 2017

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“Where’s the Beef?” Says Appeals Court, Reversing LLC Dissolution

A dissolution petitioner received the judicial equivalent of the old quip “Where’s the beef?” in a Brooklyn appeals court decision last…

October 30, 2017

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October 30, 2017

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Calling an Organization a Partnership Doesn’t Make it One, But Not Calling it a Partnership Doesn’t Make it Not One. Got It?

Did you know there’s such a thing as an “inadvertent partnership”? The basic definition of a partnership, under both the…

October 23, 2017

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October 23, 2017

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A Member By Any Other Name . . . May Have Access to LLC Books and Records

I’ve seen LLC operating agreements ranging from one page to over 100. Usually there’s a direct relationship between the length of the agreement and the…

October 16, 2017

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October 16, 2017

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Court Defines “True Deadlock”

Minority shareholder oppression and deadlock are the twin pillars of most business divorce litigation. Both are codified in the vast…

October 09, 2017

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October 09, 2017

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LLC’s Purpose Being Achieved? Business Doing Fine? Good Luck Getting Judicial Dissolution

New York’s LLC judicial dissolution statute, Section 702 of the Limited Liability Company Law, provides far more limited grounds to dissolve a business than the Business Corporation…

October 02, 2017

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October 02, 2017

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Read This Case. Slap Your Head. Not Too Hard.

Having read thousands of court opinions during my 30+ years as a litigator, I’ve learned to assume that there are things going…

September 25, 2017

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September 25, 2017

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Don’t Let the Deal Get Ahead of the Documents

The practical lesson for entrepreneurs of the case I’m about to describe is, never sign complex business agreements without your lawyer,…

September 18, 2017

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September 18, 2017

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Business Divorce Stories: Podcast Interviews with Business Appraiser Tony Cotrupe and Attorney Jeffrey Eilender

If you haven’t yet listened to prior episodes of the Business Divorce Roundtable (a) it’s time you did and (b)…

September 11, 2017

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September 11, 2017

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Superstorm Sandy Unable to Wash Away Sin of Contempt

As many judges and lawyers know, Superstorm Sandy has been used in litigation over the years as an excuse for…

September 05, 2017

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September 05, 2017

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Summer Shorts: Three Must-Read Decisions

Regular readers of this blog know it’s been anything but summer doldrums in the world of business divorce, what with case law developments such…

August 28, 2017

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August 28, 2017

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Does Your LLC Agreement Have a Purposeless Purpose Clause?

WARNING: Contractarians may find the following post disturbing. Reader discretion is advised. Now that I’ve got your attention, consider this:…

August 21, 2017

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August 21, 2017

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And the Award For Most Oppressive Conduct By a Majority Shareholder Goes to . . .

Over the years I’ve litigated and observed countless cases of alleged oppression of minority shareholders by the majority. Oppression can take endlessly different forms, some…

August 14, 2017

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August 14, 2017

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Navigating Rocky Shoals and Safe Harbors When Board Members Fix Their Own Compensation

Board members’ decisions to award compensation packages for themselves can present some thorny issues. In a close corporation, shareholders typically…

August 07, 2017

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August 07, 2017

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Books and Records Case Illustrates Crucial Importance of Pre-Suit Demand

The third time definitely wasn’t a charm for the plaintiff in Austin v Gould, 2017 NY Slip Op 31494(U) [Sup Ct…

July 31, 2017

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July 31, 2017

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It’s a Partnership! No, It’s an LLC! No, It’s Both!

In 1981, three partners formed a general partnership to own and operate a rental property. Their partnership agreement fixed a 30-year term, to…

July 24, 2017

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July 24, 2017

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Interview With Justice Carolyn Demarest (Ret.) on Litigating and Mediating Business Divorce Cases

During her many years as Presiding Justice of the Brooklyn Commercial Division, New York Supreme Court Justice Carolyn E. Demarest (Ret.)…

July 17, 2017

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July 17, 2017

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Minority Shareholders’ Derivative Suit Foiled by Voiding of Corporation’s Charter for Nonpayment of Taxes

A business’s failure to pay state taxes can be a problem if the entity later wants to bring a lawsuit, or…

July 10, 2017

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July 10, 2017

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In Dispute Over Partnership’s Conversion to LLC, Court Finds No Duty to “Spoon-Feed” Sophisticated Investor

Pay attention to your K-1s or they may come back to bite you, is the lesson of Bruder v Hillman, Docket No.…

July 03, 2017

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July 03, 2017

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Appraisers’ Valuations Are Light-Years Apart, But Does That Make Them Hired Guns?

The title of this post notwithstanding, the judge’s decision in the recent, high-stakes stock valuation case I’m about to describe, featuring a clash of…

June 26, 2017

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June 26, 2017

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Then There Were Two: Court Rejects Minority Shareholder’s Claim of Wrongful Termination Under Founders Agreement

Wanted: Business Divorce Stories Are you a business owner who’s been through a contentious break-up with your business partners and…

June 19, 2017

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June 19, 2017

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Federal Court No Mecca for Business Divorce Litigants

Civil litigation in federal court can be a luxury experience. The quality of the judiciary is superb. Federal judges often…

June 12, 2017

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June 12, 2017

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Finding No “Therapeutic” Benefit to Corporation, Court Denies Fee Award in Discontinued Shareholder Derivative Action

At first glance, you might think the plaintiff minority shareholder in Sardis v Sardis, 2017 NY Slip Op 27163 [Sup Ct…

June 05, 2017

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June 05, 2017

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“Food Fight” Sequel Ends Badly for Ousted Sibling

A little over three years ago I reported on the first round of a fascinating “food fight” among four siblings, each…

May 30, 2017

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May 30, 2017

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Delaware Ruling Highlights Difference With New York Over Amending LLC Agreements

The common perception among practitioners familiar with the business entity laws of New York and Delaware is that Delaware law…

May 22, 2017

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May 22, 2017

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Assignment of LLC Interest Defeats Standing Despite Alleged Lack of Consideration

The rules of “standing” in business divorce litigation generally require that the plaintiff have an ownership interest in the business entity at the time of the…

May 15, 2017

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May 15, 2017

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Aim Carefully Before Pulling Trigger on Shotgun Buy-Sell Agreement

At least on paper, shotgun provisions in shareholder and operating agreements provide an elegant and efficient buy-out solution when business owners…

May 08, 2017

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May 08, 2017

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Suing on Behalf of People You’re Suing Can Sink a Derivative Lawsuit — Especially If You Have a Litigious Nature

The U.S. reportedly has the world’s highest number of lawyers per capita (1 for every 300 people) and the 5th highest…

May 01, 2017

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May 01, 2017

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Forensic Analyses in Valuation: Interview With Jaime d’Almeida of Duff & Phelps

Forensics means different things to different people in different contexts. But what does it mean in the context of valuing…

April 24, 2017

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April 24, 2017

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Withdraw a Dissolution Claim? Not So Fast

Article 11 of the Business Corporation Law governs dissolution of closely held New York business corporations. Article 11 has existed, more…

April 17, 2017

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April 17, 2017

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Business Divorce Nation: Five States, Five Cases

It’s true that the statutory and common-law rules at play in business divorce cases can vary widely from state to…

April 10, 2017

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April 10, 2017

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Beware Diversity Trap in Federal Court Business Divorce Cases Involving LLCs

I can count on one hand the number of federal court cases I’ve featured on this blog since I started it almost 10 years…

April 03, 2017

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April 03, 2017

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A Pair of Unbrotherly Business Altercations Go to Trial

Like most civil cases, the vast majority of business divorce disputes get resolved before trial, which is disappointing for us voyeurs…

March 27, 2017

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March 27, 2017

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When Love and Business Fails

When a romantic affair evolves into a business relationship, the eventual falling out can be especially messy. Even more so…

March 20, 2017

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March 20, 2017

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Has New Jersey Gone Off Its DLOM Rocker?

Whenever I contemplate New York’s unusual case law on the discount for lack of marketability (DLOM) in statutory fair value buy-out proceedings, I cast my…

March 13, 2017

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March 13, 2017

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Mediating Business Valuation Disputes

Mediation continues to grow in popularity as a means of resolving legal disputes in lockstep with the rising costs and delays…

March 06, 2017

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March 06, 2017

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Business Appraisers Spar Over Tax Rates, Market Approach and Other Key Issues in Fair Value Buy-Out Case

As promised in the postscript to last week’s post about the appellate ruling in the Gould case, affirming Justice Platkin’s…

February 27, 2017

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February 27, 2017

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An Oppression How-To: Revoke Employment, Profit Sharing and Control

An earlier post on this blog, examining a post-trial decision in Matter of Digeser v Flach, 2015 NY Slip Op 51609(U) [Sup Ct…

February 20, 2017

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February 20, 2017

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Race to the Exit as Professional Practice Falters

Does a shareholder have a fiduciary duty not to exercise a contractual right under the shareholders’ agreement to resign and demand a…

February 13, 2017

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February 13, 2017

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Winter Case Notes: De Facto Partnership and Other Recent Decisions of Interest

Welcome to another edition of Winter Case Notes in which I clear out my backlog of recent court decisions of interest to…

February 06, 2017

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February 06, 2017

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Thinking About Becoming a Minority Member of a New York LLC Without an Operating Agreement? Think Again

An appellate decision last week sounds alarm bells for minority members of New York LLCs that have no operating agreement and for…

January 30, 2017

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January 30, 2017

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Operating Agreement Trumps Falsified Liquor License Application In Dispute Over LLC Membership

Oh, the things that can happen when the LLC members identified in the company’s operating agreement differ from those identified in…

January 23, 2017

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January 23, 2017

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Court of Appeals to Decide Controversial Partnership Dissolution Case

In a controversial ruling last year in Congel v Malfitano, the Appellate Division, Second Department, affirmed and modified in part…

January 16, 2017

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January 16, 2017

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Announcing Must-Have Treatise on Business Divorce Litigation

There’s little doubt in my mind that “business divorce” has achieved name recognition as a distinct subgenre of commercial litigation whose regular practitioners,…

January 09, 2017

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January 09, 2017

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Limited Partners Take a Licking in Two Delaware Supreme Court Decisions

Notwithstanding the ascendency of the limited liability company, the Delaware limited partnership continues to serve as an important, tax-advantaged vehicle for…

January 02, 2017

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January 02, 2017

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Top 10 Business Divorce Cases of 2016

I’m pleased to present my 9th annual list of this past year’s ten most significant business divorce cases. The list includes important appellate rulings…

December 26, 2016

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December 26, 2016

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Sole Owners of Close Corporation and LLC Discover They’re Not So Sole

What makes a shareholder a shareholder? What makes an LLC member a member? The simplicity of the questions belies the…

December 19, 2016

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December 19, 2016

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Marketability Discount Revisited: Interview With Greg Barber

Yet another voice, that of Greg Barber, CFA, of Barber Analytics in San Francisco, has joined the growing debate in business valuation and legal…

December 12, 2016

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December 12, 2016

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Another Frozen-Out Minority LLC Member’s Petition for Dissolution Bites the . . . Sushi?

The Japanese word “omakase” translates as “I’ll Ieave it up to you” and is used by patrons of sushi restaurants to leave the…

December 05, 2016

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December 05, 2016

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She’s a Tie-Breaker, She’s a Risk Taker

[N.B. Younger readers of this post may be forgiven for not catching the title’s play on the refrain of a certain…

November 28, 2016

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November 28, 2016

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Articles & Advisories

Business Divorce Cases of 2023

A trio of significant rulings by the Appellate Division dominated the business divorce caselaw arena in 2023. Peter A. Mahler…

February 27, 2024

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Can the Company Pay My Fees? Advancement and Indemnification in Business Divorce Litigation

Litigants must pay their own lawyer fees, even if they win, unless a contract, statute, or court rule provides otherwise.…

July 19, 2023

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Business Divorce and Judicial Dissolution Cases of 2022

Last year the Commercial Division rejected the New York Attorney General’s bid to dissolve the National Rifle Association based on…

March 07, 2023

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New Partner Spotlight: Peter J. Sluka

In celebration of our newly minted partners, Farrell Fritz is proud to present our “New Partner Spotlight,” a series of…

February 03, 2023

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Business Divorce Cases of 2021

Selecting the most noteworthy decisions from a year’s worth of business divorce cases normally is a daunting challenge given the…

February 25, 2022

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Business Divorce Cases of 2020

The pace of business divorce litigation has proven impervious to economic busts and booms, and now pandemics as well. The…

March 03, 2021

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Business Divorce Cases of 2019

Last year’s most noteworthy business divorce cases are marked by a diversity of subject matter, spanning a gamut of disputes…

March 09, 2020

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Business Divorce Cases of 2018

In recent years, most of the new and noteworthy case law developments in the business divorce field predictably have involved…

February 26, 2019

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Selling Your Business: Baskets, Deductibles and Caps, Oh My!

By Lyle C. Mahler You’re a business owner and have spent years nurturing and growing your business into a valuable asset,…

May 09, 2018

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THE NEW TAX LAW: What Businesses Can Expect

The question we hear most from domestic business owners about the TCJA is, “How much will IRC Section 199A 20…

May 09, 2018

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News

Farrell Fritz elevates five to partner

Farrell Fritz, the law firm headquartered in Uniondale, has elevated five attorneys to partner. Read the full coverage in Long…

January 16, 2023

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I set up a company with 3 friends. It has annual sales of $1 million. Two partners hijacked control of the bank accounts, and want to push others out. What can we do?

It’s time to stop trying to be fair, and start getting real. Before you do anything with friends — whether…

August 30, 2022

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Cellino & Barnes Battle Ends With Deal To Wind Down Firm

The warring partners who brought Buffalo, New York-based personal injury firm Cellino & Barnes PC national recognition — and massive profits —…

June 17, 2020

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In a Business Divorce, Knowing What to Do Is the First Step

Neil Sadaka said it best: “Breaking up is hard to do.” It’s as true in love as it is in…

February 19, 2020

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Millennial Lawyers Explain Why They Flock to New York’s Midsize Firms

January 18, 2018

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LexBlog Leaders: Peter Mahler Builds an Engine with Zeal

Peter Mahler discusses his impetus for launching the New York Business Divorce blog, how it has contributed to his business success…

September 12, 2016

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Understanding the Specifics of a Business Divorce

Breaking up is hard to do, so Uniondale-based law firm Farrell Fritz has set up a practice group to make…

June 30, 2016

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Farrell Fritz Counsels Disputing Partners with Business Divorce Practice Group

The attached advertorial, published in the May 27, 2016 issue of Long Island Business News, discusses the launch of Farrell Fritz’s…

June 02, 2016

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Press Releases

23 Farrell Fritz Attorneys Recognized as 2023 Leading Lawyers in Their Respective Areas of Practice

Farrell Fritz has a combined total of 23 attorneys selected to the 2023 New York Metro Super Lawyers and New…

September 26, 2023

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Farrell Fritz Elevates Five Attorneys to Partner

Farrell Fritz is pleased to announce the promotion of John C. Armentano, Azriel J. Baer, Peter J. Sluka, Lisa M.…

January 03, 2023

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Lyle C. Mahler of Farrell Fritz Elected to the Board of Long Island Cares, Inc.

Long Island Cares -The Harry Chapin Regional Food Bank is pleased to announce that Lyle C. Mahler, has been elected…

October 07, 2019

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29 Farrell Fritz Attorneys Recognized as 2019 Leading Lawyers in Their Respective Areas of Practice

Farrell Fritz has a combined total of 29 attorneys selected to the 2019 New York Metro Super Lawyers and New…

September 17, 2019

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Farrell Fritz Launches Business Divorce Practice Group

Farrell Fritz is pleased to announce the launch of the firm’s Business Divorce practice group. Led by Peter A. Mahler,…

June 06, 2016

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Farrell Fritz’s New York Business Divorce Blog Chosen as an ABA Journal Blawg 100 Honoree

Farrell Fritz is pleased to announce that the firm’s New York Business Divorce blog, authored by Peter A. Mahler, was…

November 25, 2015

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30 Farrell Fritz Attorneys Recognized as 2015 Leading Lawyers in their Respective Areas of Practice

Farrell Fritz had a combined total of 30 attorneys selected to the 2015 New York Super Lawyers and New York…

September 16, 2015

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30 Farrell Fritz Attorneys Recognized as 2014 Leading Lawyers in their Respective Areas of Practice

Farrell Fritz had a combined total of 30 attorneys named to the 2014 New York Super Lawyers and New York…

September 23, 2014

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On Demand Webcasts

Deadlock-Breaking Mechanisms in LLCs: Avoiding Litigation and Dissolution When Members and Managers Fail to Agree

January 16, 2020

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