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 2011. In 2003, the partners formed a new LLC maintaining the same ownership percentages as the partnership, to which the partnership transferred the property for purposes of refinancing the existing mortgage loan. View Full Post
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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.) decided numerous important and challenging business divorce cases. I should know, having featured on this blog in the last 10 years no less than 19 of her decisions. View Full Post
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Minority Shareholders’ Derivative Suit Foiled by Voiding of Corporation’s Charter for Nonpayment of Taxes

Franklin C. McRoberts, counsel in the Uniondale office of Farrell Fritz and a member of the firm’s Business Divorce Group, prepared this article. A business’s failure to pay state taxes can be a problem if the entity later wants to bring a lawsuit, or its non-controlling owners want to sue on the entity’s behalf. View Full Post
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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. A-5055-15T1 [N.J. Super. Ct. App. Div. June 27, 2017], decided last week by a New Jersey appellate panel which rebuffed a limited partner’s attack on the validity of the partnership’s conversion to a limited liability company. View Full Post
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Appraisers’ Valuations Are Light-Years Apart, but Does That Make Them Hired Guns?

Gun4HireThe 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 business appraiser titans whose conclusions of value differed by almost 400%, did not refer to them as “hired guns.” But the judge did not mince her words in expressing the view that, while “unquestionably qualified to testify on the issue of valuation,” the two experts, whose “zealous advocacy” for their respective clients “compromised their reliability,” offered “wildly disparate” values that were “tailored to suit the party who is paying for them.” Ouch! View Full Post
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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 would like to share your experience with others? Are you a lawyer with a great war story to share about a business divorce case you handled? View Full Post
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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 give their cases substantial individualized attention. Lawsuits progress relatively quickly. The procedural rules in federal court have been litigated nationwide, so lawyers can easily find case law on almost every procedural nuance. View Full Post
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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 Suffolk County May 11, 2017], achieved her derivative lawsuit’s goal when the defendant controlling shareholder, about a month after suit was filed, suddenly reversed course by revoking the corporation’s allegedly wrongful voluntary dissolution that seemingly was the lawsuit’s raison d’être. View Full Post
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“Food Fight” Sequel Ends Badly for Ousted Sibling

Food-Fight1A little over three years ago I reported on the first round of a fascinating “food fight” among four siblings, each of whom is a 25% shareholder of a Brooklyn-based, second-generation food distributor known as Jersey Lynne Farms, Inc. (the “Corporation”), and each of whom also is a 25% member of Catarina Realty, LLC (the “LLC”) which leases its sole realty asset to the Corporation. View Full Post
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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 generally is friendlier to, and more protective of, majority ownership and management interests. Two recent cases — one from each state — highlight at least one important area where the common perception does not apply: majority rights under the statutory default rules to adopt or amend an LLC operating agreement without the consent of all the members. View Full Post
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