Franklin C. McRoberts

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Accounting Unchained: Is the Closely Held Business Owner’s Right to an Accounting Absolute?

By Franklin C. McRoberts on October 29, 2018

Let’s face it. In business divorce, the accounting cause of action doesn’t get a lot of love. It’s not as sexy as the torts (conversion, breach of fiduciary duty, waste, etc). It lacks the oomph of judicial dissolution. Nonetheless, accounting claims are ubiquitous in business divorce litigation, pleaded practically as a matter of course. Sometimes the claim is tacked on as if by rote, perhaps simply to beef up a petition, complaint, or counter complaint. But other times, like the books …

New York Business Divorce

Stock Pledge Agreement Defeats Minority Shareholder’s Standing to Sue for Statutory But Not Common-Law Dissolution

By Franklin C. McRoberts on October 1, 2018

Last week, this blog wrote about a decision by Manhattan Commercial Division Justice Saliann Scarpulla in the burgeoning Yu family melee, in that case pitting one brother against the other and their sister over dissolution of two single-asset real estate holding LLCs. In her decision, Justice Scarpulla denied dissolution of the LLCs, despite the plaintiff’s allegations that his brother and sister had a personal “vendetta” against him, which they carried out by amending the operating agreement to remove the plaintiff as a manager, authorizing a…

New York Business Divorce

Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 3

By Franklin C. McRoberts on September 3, 2018

This is the final installment of a three-part series about the basics of contested New York business appraisal proceedings. The first post addresses the various ways in which business owners can steer a dispute into an appraisal proceeding. The second post addresses the legal rules and principles that apply in appraisal proceedings. This final post addresses the appraisal methodologies and principles that apply in valuation proceedings. Without further ado, let’s talk accounting. Valuation Date The date on…

New York Business Divorce

Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 2

By Franklin C. McRoberts on August 6, 2018

A few weeks ago, this blog – in the first of a three-part series about business valuation proceedings – addressed the various statutory triggers by which owners of New York partnerships, corporations, and limited liability companies can wind up in a contested business appraisal proceeding. So you, or your client, have found yourself in an appraisal proceeding. The question then becomes: What are the legal rules, principles, and standards that apply in the valuation proceeding itself? That is the subject of today’s article.…

New York Business Divorce

Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 1

By Franklin C. McRoberts on July 9, 2018

Last month, seasoned business appraiser Andy Ross of Getty Marcus CPA, P.C., and I made a presentation at the Nassau County Bar Association about appraisal proceedings in business divorce cases. With the subject of business valuations front of mind, this article – the first in a three-part series – is a treetops summary of the rules governing how business owners may wind up in an appraisal proceeding. Later articles will address the legal and accounting principles that apply in the valuation proceedings. But before we get started, some…

New York Business Divorce

A Trip Down Business Divorce Lane with Recently Retired Justice Shirley Werner Kornreich

By Franklin C. McRoberts on June 11, 2018

With a genuine sense of loss, we bid adieu to Manhattan Commercial Division Justice Shirley Werner Kornreich, who retired at the end of May after more than three decades of service on the bench, including nearly ten years as a Justice of the Commercial Division. Her accomplishments are many and varied. She is a detailed and scholarly writer. She ran an orderly and efficient part. Invariably well prepared, she asked probing questions at oral argument, arriving quickly at the “nub”…

New York Business Divorce

Corporate Frankenstein “Partnership to Form a Corporation” Lives Another Day

By Franklin C. McRoberts on May 14, 2018

Lawyers are famous for arguing seemingly inconsistent positions at the same time. We practitioners lovingly refer to the technique as “arguing in the alternative.” The famous Texas trial lawyer, Richard “Racehorse” Haynes, gave a vivid example: Say you sue me because you say my dog bit you. Well, this is my defense: My dog doesn’t bite. And second, in the alternative, my dog was tied up that night. And third, I don’t believe you really got bit. And fourth, I don’t…

New York Business Divorce

Operating Agreement Dooms Derivative Claims by Deceased LLC Member’s Estate

By Franklin C. McRoberts on April 16, 2018

In business divorce litigation, petitioners / plaintiffs often want to start the case with a bang. A common tactic is to file a petition / complaint simultaneously with an injunction motion. Often there is a real need for an injunction – the respondent / defendant may be engaging in activities that could cause real, irreparable harm. But often another objective is that if the injunction motion succeeds, it will be an early win in the case, set the stage favorably for the…

New York Business Divorce

The Cash-Out Merger Solution to the Problem Minority Owner

By Franklin C. McRoberts on March 19, 2018

How can majority business owners legally rid themselves of a problematic minority owner? Not by transferring the business’s assets to another entity for no consideration. That was the conclusion of Manhattan Commercial Division Justice Shirley Werner Kornreich last month in a lawsuit over a minority shareholder’s stake in Bareburger, Inc., owner of its namesake restaurant chain. The Bareburger Litigation In Stavroulakis v Pelakanos, 2018 NY Slip Op 50180(U) [Sup Ct NY County Feb 13, 2018], Bareburger had no written shareholders agreement. Stavroulakis…

New York Business Divorce

The LLC Equitable Buyout: Past, Present, Future

By Franklin C. McRoberts on February 19, 2018

Under the right set of facts, New York courts occasionally find remedies for LLC owners not explicitly authorized in the Limited Liability Company Law (“LLC Law”). Judges have a natural inclination to try to find solutions for legal problems where existing law falls short, which is part of how the common law came to be. One striking example is the LLC derivative cause of action. In Tzolis v Wolff, 10 NY3d 100 [2008], the Court of Appeals ruled that members of an LLC “may bring…

Franklin C. McRoberts

Accounting Unchained: Is the Closely Held Business Owner’s Right to an Accounting Absolute?

Stock Pledge Agreement Defeats Minority Shareholder’s Standing to Sue for Statutory But Not Common-Law Dissolution

Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 3

Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 2

Basics of Valuation Proceedings – Litigating an Appraisal from Start to Finish – Part 1

A Trip Down Business Divorce Lane with Recently Retired Justice Shirley Werner Kornreich

Corporate Frankenstein “Partnership to Form a Corporation” Lives Another Day

Operating Agreement Dooms Derivative Claims by Deceased LLC Member’s Estate

The Cash-Out Merger Solution to the Problem Minority Owner

The LLC Equitable Buyout: Past, Present, Future

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