Physicians are subject to reasonable restrictions on post-employment activities that will limit their competition with a previous employer. A restrictive covenant that prohibits competition must protect a legitimate interest, impose not undue hardship on the former employee and not injury the public interest. Restrictive covenants must be narrowly tailored so…
The Business Divorce Law Report
Estate Plan Sows Father and Son Business Divorce
Managers of a limited liability company owe to the company fiduciary duties of loyalty and care, must act in good faith, and refrain from reckless or unlawful conduct. A member who seeks information about a manager-managed limited liability company must state the purpose for the request under the Uniform Limited…
One Business Divorce, Multiple Actions
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…
A Non-Competition Agreement from the Great Beyond
A case in which a restrictive covenant was enforced against an accountant who happened to be beneficiary under her deceased former employer’s will is among recent business divorce cases worthy of note. Restrictive Covenant Given in Purchase Agreement Survives Death A covenant not to compete given in connection with the…
Surrender of Membership Certificates Was Dissociation from LLC
A limited liability company member withdraws by voluntary dissociation, which occurs when the company has notice of his ‘express will” to withdraw. Voluntary dissociation terminates management rights, but not economic rights. A court may refuse relief on a claim when the plaintiff has acted with unclean hands with regard to…
Psychologists, Like Lawyers, Not Subject to Restrictive Covenants
Restrictive covenants preventing competition by former employers are enforceable only to the extent that they are reasonable under New Jersey law. Lawyers and psychologists are exceptions to the general rule, however, because both are subject to disciplinary rules that prohibit restrictions against competition. Courts have recognized that the personal relationship…
Controlling Shareholders owe Fiduciary Duties to Minority Members
The controlling shareholders of a corporation owe fiduciary duties to the minority shareholders by virtue of their ability to control the affairs of the company. Even when a merger complies with statutory requirements, where it benefits the controlling shareholders and does not have an apparent business purpose, it must also…
Does Your Law Firm Have an Attorney Separation Agreement? It Should.
Attorney separation agreements may require that a lawyer give reasonable notice to his firm before resignation, reducing conflict with departing lawyers. Lawyers may agree in advance how they will handle such issues as billing, transfer of file responsibilities and return of equipment. Joint notice to clients by the law firm…
ABA Says Minimum Notice Requirements Are Ethical
Law firms may not limit the ability of lawyers to resign, solicit clients and compete with the firm, but they may contract for a reasonable notice period necessary for the orderly transfer of client matters. Both the departing lawyer and the law firm share an ethical obligation to assure the…
How to Expel an LLC Member
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…