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…
Attorneys have common law and statutory security interests in the proceeds of recoveries of their clients, generally referred to as charging liens. A statutory lien is created when a lawyer files a pleading with an affirmative claim for recovery and may be enforced by filing a petition in the underlying…
Buy-sell agreements, like a shotgun sale triggered by a deadlock, are the principal means by which the owners of closely held businesses protect against the worst consequences of deadlock. Commonly used shotgun provisions allow one party to set the price and allow the other party to decided whether to buy…
Business divorce disputes among lawyers will often require the division of contingent fees realized after the parties have separated their business interests. An agreement between lawyers in a firm to divide fees in the event of their separation cannot function as a restriction on a lawyers right to practice and…
Owners of a closely held business, be it a corporation, limited liability company or partnership, may enter into contracts that are triggered when the principals have become deadlocked. Anti-deadlock provisions may provide for the appointment of an independent director, for alternative dispute resolution, or for the compelled sale of an…
When a shareholder, LLC member or partner sues to recover for damages based on wrongs committed against the business entity, the claim is derivative and the recovery belongs to the business. Derivative claims have special procedural rules. Courts have discretion to allow the owners of closely held businesses to sue…
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…
Deadlock in a limited liability company or partnership occurs when the members can no longer pursue the purpose of the business as agreed in an operating agreement or partnership agreement. A ‘minority veto’ occurs when a minority member or partner uses the unanimity requirement to block the will of majority.…
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…