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…
The Business Divorce Law Report
Shotgun Agreements and Other Methods to Break Deadlock
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…
Dividing Fees in a Law Firm Business Divorce
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…
Anti-Deadlock Agreements in Business Divorce Litigation
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…
Direct or Derivative Lawsuits: Who Owns the Recovery
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…
Dissolution and the Reasonably Practicable Standard
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…
Understanding Deadlock in Limited Liability Companies and Partnerships
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.…
Valuation Clause in Operating Agreement Controls Buyout Price of Medical Practice
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…
Business Judgment Rule Trumps Oppression; Minority Shareholder Entitled to Attorney’s Fees in Defense of Counterclaim
The business judgment rule insulates decisions made in good faith and in the best interests of the enterprise from being subject to judicial second guessing ordinary business decisions Majority shareholders that failed to pay dividends to a non-employee minority shareholders in valid exercise of business judgment rule did not…
Action by Written Consent of LLC Managers is Valid to Fire Executive
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…