Tag: equity

Three Short Takes: (1) Exclusive Nature of Florida Charging Order Precludes Garnishment; (2) Tricky Signature Block on Contract Personally Obligates Georgia LLC’s Manager; (3) Idaho Clarifies That Veil-Piercing Claims Are Equitable

We have a roundup this week of three recent LLC cases. 1.   Charging Order. A dispute between two members of a Florida LLC resulted in litigation, in which the trial court ultimately awarded one member a $41,409 judgment against the other member. After an appeal that affirmed the judgment, and on the prevailing member’s motion, the … Continue Reading

Sometimes a Lie Is Fraud, But Sometimes a Lie Is Just a Lie

Lies are generally bad, but not all lies result in legal liability. In a recent case in point, a Delaware LLC member allegedly lied about his reasons for withdrawing from the LLC and about his post-withdrawal plans. After his withdrawal he competed against his former LLC, in contradiction of his prior statements. We can infer … Continue Reading

Ohio Court Says Member’s LLC Loan Is Also a Capital Contribution

Debt and equity are normally viewed as distinctly different financing methods – stock versus bonds, for example. In closely held companies the boundaries can be unclear, though, as a recent decision of the Ohio Court of Appeals demonstrated. Germano v. Beaujean, No. WD-12-032, 2013 WL 4790315 (Ohio Ct. App. Aug. 30, 2013). Background. Christopher Germano and … Continue Reading

Uncertainty Over Delaware LLC Fiduciary Duties To Be Clarified

Last fall the Delaware Supreme Court surprised many corporate lawyers when it declared that whether the Delaware LLC Act imposes fiduciary duties on LLC managers is an open question. Gatz Props., LLC v. Auriga Capital Corp., 59 A.3d 1206, 1218 n.62 (Del. 2012). Prior to Gatz, most Delaware lawyers believed that Delaware LLC managers were … Continue Reading

Delaware Court of Chancery Retains Jurisdiction in Dispute Over LLC Member Redemption Agreements

Delaware’s Court of Chancery is not a court of general jurisdiction, and in a recent case involving an LLC’s redemption agreements, the defendant LLC sought dismissal on grounds that Chancery did not have subject matter jurisdiction. Duff v. Innovative Discovery LLC, No. 7599-VCP, 2012 WL 6097660 (Del. Ch. Dec. 7, 2012) (slip op.). Relying on … Continue Reading

Attorney Expelled from Mississippi Law Firm Is Not Entitled to Share in Proceeds of Large Contingent Fee – a Deal’s a Deal

Freedom of contract is a basic principle of Mississippi’s LLC Act, but freedom of contract includes the freedom to make a bad contract. Case in point: the Mississippi Court of Appeals recently held that the plain language of a law firm’s LLC operating agreement allowed the members to expel attorney David Martindale and pay him … Continue Reading

Delaware Court Corrects Error in LLC Agreements’ Waterfall Provisions

Reformation is an equitable remedy that courts use to “reform” or correct a mistake in a written agreement, to conform it to what the parties actually intended their agreement to say. The Delaware Court of Chancery recently reformed the cash distribution waterfall provisions of the limited liability company agreements for three real estate joint ventures … Continue Reading

New York Court Orders Dissolution of LLC – Recharacterizes Capital Contributions as Loans to Reach Equitable Result

An involuntary dissolution case was decided by the New York Supreme Court (the trial court) two weeks ago, on a petition for dissolution by one of the two members of a limited liability company. Mizrahi v. Cohen, No. 3865/10, 2012 WL 104775 (N.Y. Sup. Ct. Jan. 12, 2012). Background. Mizrahi and Cohen’s LLC owned a four-story … Continue Reading

New York LLC Derivative Suit Fails for So Many Reasons

Judge Karas thoroughly dissects the plaintiff’s derivative and other claims in Cordts-Auth v. Crunk, LLC, No. 09-CV-8017, 2011 U.S. Dist. LEXIS 109600 (S.D.N.Y. Sept. 27, 2011). The opinion usefully sheds light on some of the corners of New York law on LLC derivative suits. Plaintiff Renate Cordts-Auth filed suit on September 18, 2009, asserting:  ●         derivative … Continue Reading

Appointment of Receiver Upheld for Delaware LLC

The appointment of a receiver is one of the oldest equitable remedies. A receiver can receive, preserve, and manage property and funds, and even take charge of an operating business, as directed by the court. Appointing a receiver is a powerful remedy, not undertaken lightly by the courts. The Delaware Court of Chancery in September … Continue Reading