An agreement to arbitrate that is contained in the governance documents of a business, e.g, an operating agreement or shareholder agreement, may result in multiple proceedings when the dispute ripens into litigation. A party may seek to stay a pending federal court action based on a collateral arbitration proceeding that…
There are circumstances in which a member of a limited liability company in most states may be expelled as a member from the company. This is known as involuntary dissociation. An action may be brought by the LLC seeking a court order of involuntary dissociation on the basis that the…
Law firms should recognize that lawyer resignations and the loss of clients are inevitable in the modern law practice due to prohibitions on agreements that restrict competition. Law firms can protect the interests of clients and the firm by adopting best practices that govern lawyer resignations. Law firms should recognize…
Most limited liability company and partnership statutes make no mention of ‘deadlock’ as grounds to order the involuntary dissolution of a business. Deadlock arises when the members or partners are no longer able to pursue the basic agreements on which the business was organized, typically an operating agreement or partnership…
A limited liability company operating agreement may be amended informally by oral agreement or by a course of conduct. The party that claims amendment of an operating agreement by a course of conduct must establish the clear and mutual intent of the parties to agree to the amendment. A clear…
Any action that the managers of a Limited Liability Company might take at a meeting can also be taken by executing a written consent. An action by written consent may, in some circumstances, avoid the need to assemble a quorum of the managers. The managers of an LLC many be…
New York does not recognize a cause of action for minority oppression of a member of a limited liability company. Judicial dissolution is a remedy available to the minority LLC member when the majority is unwilling or unable to promote the purpose of the company or continuing the business has…
A trial court reasons that because a member-managed limited liability company is similar in management to a partnership, the court may reason from partnership law in fashioning a remedy for an expelled member. The majority members of the LLC, who voted under the Operating Agreement, to compel the withdrawal of…
New York’s BCL requires at least 50 percent of shares to petition for dissolution based on deadlock, unless there has been a failure to elect directors. The fact that a shareholders agreement required the election of two deadlocked directors was not a basis to waive the statutory requirement. Parties avoid…
Clark v. Butoku Karate Sch., LLC, No. 326638 (Mich. App., 2016) Statutes: MCL 450.4101, MCL 450.4305, MCL 450.4509 Plaintiff Joby Clark and Defendant were the sole members of a Michigan Limited Liability Company operating a karate school. Clark was the subject of a rumor that he had a sexual relationship…