New York Business Divorce

Commentary on Dissolution and Other Disputes Among Co-Owners of Closely Held Business Entities

Latest from New York Business Divorce

As it approaches its sixth anniversary with little sign of letting up, the highly contentious litigation between brothers and business partners Nissim and Avraham Kassab is the gift that keeps on giving, at least to us outside observers and business divorce aficionados. In one after another decision over the years, Justices Orin Kitzes (since retired) and Timothy J. Dufficy of the Queens County Supreme Court have tackled a series of thorny legal issues arising out of the…
One of the great ironies of New York business divorce litigation is that so much of it involves the breakup of law firms. Perhaps it’s because New York is the center of the legal universe and the home state of thousands of law firms. Maybe it’s because lawyers are litigious by nature. Another, less obvious reason: law firms often imprecisely use the term “partner” to describe their lawyers. Under Section 10 of the Partnership Law, the term…
Most judicial dissolution cases in New York courts involve a single entity. When the target of dissolution is structured as a holding company for one or more operating or asset-based companies with asymmetric management, the issues can get hairier. Case in point: Brooklyn Commercial Division Justice Lawrence Knipel’s recent decision in Matter of Lev v Rosenberg, 2019 NY Slip Op 30824(U) [Sup Ct Kings County Mar. 13, 2019]. I’ll get to the mulligan in a bit. The Lev case pits two co-owners…
The discoverability of materials in civil litigation in general resists any hard and fast rules, other than that the scope of discovery is broadly defined and liberally applied under the rules of civil procedure in both state and federal cases, and that judges are afforded broad discretion in deciding what’s “material and necessary” (NY CPLR 3101 (a)) or “relevant” (Fed.R.Civ.P. 26 (b) (1)) based on the specific facts and issues in each case. In contested stock valuations triggered by elections to purchase in statutory dissolution or dissenting shareholder cases, it’s…
When 50/50 co-owners of a business are deadlocked on a major business decision, unless they have a written agreement in which a declared deadlock triggers a buy-sell process or appointment of a specific third person to cast a deciding vote, the unresolved deadlock may lead to litigation or even dissolution of the business entity. In many instances deadlock is not the cause of a dysfunctional relationship between the 50/50 owners but, rather, is symptomatic of an irreconcilable breakdown of their personal…
Years ago, we wrote about the perils of “impromptu” settlements in business divorce cases – settlements eked out at the courthouse, on the fly, under pressure, during conferences, hearings, or trials. The resulting agreements tend to be memorialized in on-the-record, transcribed settlements made verbally between lawyers, clients, and the judge. In-court settlements are both common and vital to litigation, the ultimate goal of which, of course, is to resolve disputes. But sometimes the parties’ eagerness to…
When it comes to business valuation principles in contested appraisal proceedings, I’d say the 50 states have far more in common than separates them. Certainly this is true in cases applying the fair market value standard deriving not from state law but from generally accepted appraisal doctrine as embodied in a number of IRS revenue rulings. But even in cases applying the statutory fair value standard, which is derived purely from state law governing buyouts in dissolution and…
This week’s post is by Matthew D. Donovan, a commercial litigation partner and member of Farrell Fritz’s business divorce practice group.  There is a bit of folk wisdom that’s been passed down through my family over the generations that speaks to the rite of passage when one is confronted with the reality that there is more to life than oneself. The familial adage, as usually (and colorfully) pronounced by a superior elder, went something like: “The sun…
nu•cle•ar op•tion (noun): the most drastic or extreme response possible to a particular situation The litigation arsenal of business divorce lawyers contains weapons of varying firepower. The choice of weapon for any particular assignment will depend on many factors including the type and size of the business; whether the client is a controlling or non-controlling owner; the nature of the dispute; the form of the business entity (LLC, close corporation, partnership); the character and magnitude of the adverse owner’s complained-of actions and whether the…
It’s simply in the nature of things that business divorce litigants tend to accuse one another of all manner of heinous, dastardly misdeeds. Phrases like “oppression,” “fraud,” “deceit,” “theft,” “siphoning” of assets, “diversion” of opportunities, etc., are the norm. As a litigant, if you make those kinds of allegations, and they turn out to be unsuccessful, or you withdraw them, can you be sued for defamation? Staten Island Supreme Court Justice Wayne M. Ozzi considered that question in Seneca v Cangro, 2018