Business Divorce Douglas Hirsch

Representative Matters
 

Some of Mr. Hirsch’s representative cases include:

• SkyBridge Capital II LLC v. Premium Point Investments LP, et al., Supreme Court New York, Index No. 653172/2018. Obtained $26M of recoveries for an investor in a limited partnership as a result of fraudulent marking of partnership assets.
• Fasano et al. v. Dangdang Holding Company Ltd. et al., United States District Court, S.D.N.Y., Civil Action No. 16-8759. Obtained $21M settlement for a class of ADR holders who alleged the company was taken private by controlling shareholders at a below fair value price.
• Weisz v. Palliatech Florida LLC, AAA Arbitration. Secured a first of its kind ruling under Florida’s revised LLC Act that a minority member could not waive its right to dissolution. Recovered $14.5M for client.
• SDF Funding LLC v. Fry, Delaware Court of Chancery, C.A. No. 2017-0732. Secured $12M settlement in a derivative action on behalf of minority shareholders alleging breach of fiduciary duty by a controlling shareholder.
• Stavroulakis v. Bareburger Group LLC et al., Index No. 653478/2015 (N.Y. County, J. Kornreich). Summary judgment in favor of a minority investor for breach of fiduciary duty and oppression. Recovered a multi-million dollar settlement for client.
• Celia v. Celia, NY Supreme Court, Saratoga County, Index No. 2020-2282. Secured a confidential settlement for a minority shareholder in a dispute over ownership and valuation of a successful New York-based construction company as well as a related development company.
• Moyal v. Group IX, Inc. et al., Supreme Court of NY, Index No. 601973/2007. Obtained a complete defense verdict in a shareholder derivative suit alleging breach of fiduciary duty.

Mr. Hirsch often represents clients on a full contingency basis. If you are entangled in a dispute or have questions about your rights in a partnership, limited liability company, or corporate entity, please contact Douglas Hirsch.

 

Common Causes of Action

Business divorce can arise for a variety of reasons. Common causes include theft or fraud by partners, members, or shareholders. Examples of this misconduct include stealing business opportunities, self-dealing, falsifying financial records, providing goods or services to friends or family below cost, and misappropriating the business’s intellectual property.

Unfortunately, many minority investors are unaware of the extensive rights and remedies available to address these issues. Below is a list of the top five most common mistakes minority investors make.
 

Top Five Mistakes Minority Investors Make in Business Divorce Disputes

1. “I own a very small interest in the entity so I really have no rights.” This is incorrect. Minority investors have many rights provided by statute and common law, some of which cannot be waived.
2. “I signed an LLC Operating Agreement with a provision stating I waived my right to seek a dissolution, so therefore, I cannot seek dissolution.” Not all waivers are enforceable. States that adopted the model Uniform LLC Act often have LLC Acts that prohibit the waiver of the right to dissolution. We recently handled such a case and obtained a ruling that the dissolution waiver was unenforceable. This was a primary factor in allowing us to secure a $14.5 million buyout of our client’s minority membership interest in a Florida cannabis LLC.
3. “I don’t have a formal signed agreement documenting my interest in the company, so I have no rights.” This is not necessarily true. Oftentimes, emails or other conduct are a sufficient writing to form an enforceable contract. In certain situations, even an oral agreement regarding ownership in a partnership or company can be enforceable.
4. “The Deal Will Be Approved No Matter How I Vote, So There’s Nothing I Can Do.” Wrong. Minority investors have appraisal rights to opt out of a bad merger, acquisition, or similar deal and to instead get paid the fair value of their investment plus interest, as decided by a court. Minority investors can also sue to recover damages for deals involving conflicts of interest or a grossly unfair deal price. We have won appraisal rights actions awarding investors a premium of 12% to 200% over the deal price, with total recoveries over $60 million.
5. “The Largest Investor Has All the Power, So I Have to Do What He Says Or Else.” Not true. The law protects minority investors against coercion, self-dealing, oppression, waste, and other misconduct by majority investors, officers, and directors. Courts can award you significant damages, or invalidate majority investor actions that involve wrongdoing. We have won many cases for minority investors who thought they had no real options before they spoke to us. With the right lawyer and the right fee arrangement, you can stand up to the bully.

With over 30 years of experience litigating complex limited liability, partnership, and shareholder disputes, Mr. Hirsch has the experience and expertise to obtain the results you expect and deserve.
 

Contingency Fees

Mr. Hirsch regularly handles business divorce and shareholder rights cases on a full contingency basis or a hybrid hourly process and success fee basis. If you have a case that you would like to discuss free of charge, please contact Douglas Hirsch.