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 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…
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…
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…
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…
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…
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…
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…
Courts determine whether an individual has an equity interest in a law firm partnership by examining the financial investment and risk taken by the claimed owner, such as payment of capital and guarantees of obligations. The rise of the non-equity partner in law firms management has changed the status associated…