We have one of the leading Business Divorce practices in New York and Delaware. Our lawyers have won large verdicts and leading decisions regarding minority investor rights and appraisal rights. If you have questions or a dispute regarding your rights in a partnership, limited liability company or corporate entity, we are your advocate.
Business divorce happens for all types of reasons. Some of the most common are theft or fraud by one or more of the partners, members or shareholders. Theft can consist of stealing business opportunities, self-dealing, cooking the books, providing friends or family products or services below cost and stealing intellectual property of the business.
Often, minority investors are unaware of the many rights and remedies that are available to address this wrongful conduct. Below is a list of the top five most common mistakes minority investors make:
Top Five Minority Investor Mistakes:
“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.
“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.
“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.
“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%-200% over the deal price, with total recoveries over $60 million.
“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 fee arrangement, you can stand up to the bully.
With over 25 years of experience litigating complex partnership and shareholder disputes, the lawyers at Sadis and Goldberg have the experience and expertise to obtain the results you expect and deserve. Our cases are regularly featured in legal articles and are at the forefront of this constantly developing area of the law.
In the news
Eric Celia, individually and derivatively on behalf of Celia Construction and Trackside L.P. v. Sam Celia et al.. Supreme Court, Saratoga County,Index No.: EF20202282.
Court ruled that "fiduciary exception" to lawyer client privilege applied to emails and communications between officers of corporation and corporation's counsel, and therefore, the communications were not privileged.
Appellate Division held that emails and WhatsApp messages were sufficient to demonstrate a course of conduct that admission requirements to LLC had been waived and CTO had standing as a member of the LLC to bring derivative claims.
Representative Matters
Manichaen Capital, LLC v. SourceHov Holdings, Inc., Court of Chancery Delaware, 2020 WL 496606. Obtained a $57.7 million trial victory as lead counsel for private equity investors in appraisal action. Won a valuation that was 25 times higher than trading price of merger consideration on date of judgment, three times higher than the opposing party's position, and a substantial premium to deal price.
SkyBridge Capital II LLC v. Premium Point Investments LP, et al., Supreme Court New York, Index No. 653172/2018. Obtained $26M of recoveries for investor in a limited partnership as a result of fraudulent marking of partnership assets.
Weisz v. Palliatech Florida LLC,, AAA Arbitration, secured 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.
In re Orchard Enterprises, Inc. Stockholder Litigation, Obtained a $10,250,000 settlement for stockholder class's claims that take private action undervalued stock. Court awarded $2,250,000 in lawyer fees.
Stavroulakis v. Bareburger Group LLC et. al., Index No. 653478/2015 (N.Y. County – J. Kornreich). Summary judgment in favor of minority investor for breach of fiduciary duty and oppression. Recovered multi-million dollar settlement for client.
Contingency Fees
We regularly handle 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 or Sam Lieberman.
We regularly handle 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. Contact Doug Hirsch at 212.573.6670 Let‘s talk:
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