The History of Common Law Dissolution Judicial dissolution of a corporation at the request of a minority shareholder “is a remedy of relatively recent vintage in New York.” Matter of Kemp & Beatley (Gardstein) , 64 N.Y.2d 63, 69 (1984). Historically, New York courts were prevented from exercising their equity powers to order dissolution, as statutory prescriptions were deemed exclusive. Id . (citation omitted). Statutory dissolution was either limited by the types of corpora

This Blog has previously written about the enforceability of informal agreements. ( Here , here , here , and here .) In that regard, we have noted that an exchange of term sheets, memoranda of understanding, emails or correspondence may constitute an enforceable agreement if the writings include all the essential terms of an agreement. Sullivan v. Ruvoldt , 16 Civ. 583, 2017 WL 1157150 at *6 (S.D.N.Y. Mar. 27, 2017). Thus, if the informal writings contain the necessary elemen

This Blog has written about cases involving disputes between members of a limited liability company (“LLC”) in which resolution of the matter would be governed by an operating agreement if one were in place. These cases illustrate the importance of having an operating agreement that addresses the myriad issues an LLC may encounter throughout its existence. Yet, despite the fact that the New York Limited Liability Company Law (“LLCL”) requires members of an LLC to “adopt a wri

Under Section 702 of New York’s Limited Liability Company Law (“LLCL”), a court may dissolve a company “whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.” LLCL § 702. (This Blog addressed Section 702 here , here and here .) To successfully petition for the dissolution of a limited liability company (“LLC”) under LLCL § 702, the petitioning member must demonstrate the following: 1) the m

The simplest misstep has the potential to derail years of litigation and result in a massive financial sanction, as happened here. It is in everyone’s best interest, both the litigants’ and the courts’, to verify that diversity jurisdiction exists before proceeding with the case. Everyone involved in this case trusted that diversity jurisdiction existed, but no one verified it. Purchasing Power v. Bluestem Brands , 851 F.3d 1218, 1220 (11th Cir. 2017). Recently, the foregoin

There are times when a party to a contract wants to be excused from the obligations set forth in their agreement. Under New York, the circumstances under which a court will excuse a party from performance are limited, namely, where there is an intervening event that was both unforeseeable and destroyed either the subject matter of the contract or the means by which the parties could perform thereunder. Since the circumstances in which a contract will be deemed impossible to p

Fraud Claim Dismissed on Statute of Limitations Grounds: Plaintiff Unable to Use The Discovery Rule to Save His Claims Under New York law, an action based upon fraud must be commenced within six years of the date the cause of action accrued, or within two years of the time the plaintiff discovered or could have discovered the fraud with reasonable diligence, whichever is greater. C.P.L.R. § 213(8). See also Sargiss v. Magarelli , 12 N.Y.3d 527, 532 (2009); Carbon Capital Mgm

Last year, this Blog wrote about the basic principles of contract interpretation under New York law. ( Here .) Much of that legal discussion sets the table for today’s article. When parties enter into a contract, each assumes that the language in their agreement accurately memorializes their understandings and intentions. For this reason, when a dispute arises, the courts in New York look to the intent of the parties as expressed by the language they chose to put into their

Family-run businesses are very common in the commercial world. In fact, according to recent studies, more than one-half of all U.S. companies are family operated. Think of mom and pop stores and Walmart. The stress of running a family business can ruin a relationship. One need only look at Nissim Kassab (“Nissim”) and Avraham Kasab (“Avraham” and together with Nissim the “Brothers”), brothers and owners of Mall 92-30 Associates LLC (“Mall”). The Brothers have been in litig

Given the spate of high-profile sexual harassment cases that have been reported in the media, employers must understand their rights and responsibilities under state and federal employment laws. In particular, business owners must establish policies and procedures that clarify relationships with employees. By enlisting the services of experienced attorneys, you can protect your business from civil lawsuits brought by employees -- here’s how. Employee Policies and Procedures R

On June 11, 2018, the United States Supreme Court held that the filing of a putative class action equitably tolls the limitations period for absent class members to file individual claims but does not toll the limitations period for the filing of a new class action involving the same or substantially the same claims. China Agritech, Inc. v. Resh , No. 17-432. ( Here .) Nearly 45 years ago, the Supreme Court decided American Pipe & Construction Co. v. Utah , 414 U.S. 538 (197

This Blog has previously written about the difficulties plaintiffs often have distinguishing between direct and derivative claims. ( Here and here .) In today’s post, this Blog looks at Khan v. Garg , 2018 N.Y. Slip Op. 31061(U) (Sup. Ct. N.Y. County, May 30, 2018) ( here ). In Khan , the court dismissed a fraud claim because the plaintiff failed to demonstrate whether the claim belonged to the plaintiff or his company. A Brief Primer on the Applicable Rules Where the wrong

When a complaint is served and filed, a defendant can respond to the pleading in many ways. For example, he/she can answer the complaint or file a motion to dismiss. If the defendant files an answer or the court denies the motion, discovery ensues. Sometimes, a party may conclude that the facts and law necessitate the filing of a motion for summary judgment, even before the close of discovery. Regardless of the timing, the moving party must establish their prima facie entitle

Contract provisions containing deadlines for giving notice of an event or occurrence, such as a claimed default, are key parts of commercial transactions. These provisions vary from contract to contract, often requiring different forms of notice and different timing requirements for notice to be given on different issues. Not surprisingly, notice provisions, and compliance with these provisions, are often a basis for disputes. Recently, the Delaware Court of Chancery undersc

It is not uncommon for a person or entity holding money to be placed in a situation where multiple parties claim entitlement to the funds being held. Given the competing claims to the funds, the holder can wait for the parties to resolve their dispute or file an interpleader action asking the court to decide who should get the funds being held. An interpleader action “is an equitable proceeding” brought by a third party to have a court determine the ownership rights of multi

On March 29, 2018, the New York Court of Appeals decided Kolchins v. Evolution Markets, Inc. , a case that addresses several important practice issues. Plaintiff in Kolchins was a commodity trader who, in 2005, joined defendant as a commodity broker. In 2006, and again in 2009, the parties entered into three-year employment agreements. The 2009 agreement, which had an end date of August 31, 2012, provided for various forms of compensation including a base salary, a “sign

It is well-settled that a plaintiff asserting a derivative claim seeks to recover for injury to the business entity. A plaintiff asserting a direct claim seeks redress for injury to himself/herself individually. Sometimes, the distinction between the two types of actions is not readily apparent. Yudell v. Gilbert , 99 A.D.3d 108, 113 (1st Dept. 2012). In considering whether a claim is direct or derivative, courts look to the nature of the wrong and the person or entity to wh

Like many things in life, operating a business with another person, or many persons, is a risk. There is always the possibility that your business associates may act for their own benefit, rather than for the benefit of the business. The law recognizes this risk and assigns special obligations of fidelity to business partners. These obligations are commonly known as fiduciary duties, which require business partners (including officers, directors and managing shareholders of c

Under Section 702 of New York’s Limited Liability Company Law (“LLCL”), a court sitting in the judicial district in which the office of the company is located may dissolve the company “whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.” LLCL § 702. (This Blog addressed Section 702 here and here .) To successfully petition for the dissolution of a limited liability company under LLCL § 70

What word that comes to mind when you hear the term “professional malpractice”? Medical? Legal? To be sure, doctors and lawyers are the more common professionals subject to malpractice claims. But, there are other professionals who can commit malpractice. These include accountants, architects, and engineers. Yet, not all professionals are subject to malpractice claims. In Gutterman v. Stark , 2017 NY Slip Op. 32618(U) (Sup.Ct. N.Y. County, Dec. 18, 2017) ( here ), a financia