Business Divorce Roundtable

This episode features an interview with Professor Meredith Miller of the Touro Law Center on her recently published article in the Indiana Law Review entitled Challenging Gender Discrimination in Closely Held Firms: The Hope and Hazard of Corporate Oppression Doctrine, in which she explores the possibilities and limits of using minority shareholder oppression doctrine as a potential tool to combat sex discrimination against co-owners of privately held companies who generally are considered non-employees outside the protection of Title VII and related anti-discrimination laws.

This episode features an interview with Professor Susan Pace Hamill, a leading authority and commentator on the origins and evolution of the limited liability company. We talk about her latest law review article entitled Some Musings as LLCs Approach the Fifty-Year Milestone in which she discusses how and why LLCs traveled from obscurity to the mainstream in recent decades; critiques the disparities between how LLC statutory default rules treat minority members versus the statutory rights of minority shareholders in close corporations in regard to withdrawal and buyout, highlights business law issues and abusive practices exposed by the current use of LLCs and explains why these problems are not caused by LLCs.

This episode features an interview with Paul Hood, an experienced estate planner, leading expert on the design and drafting of buy-sell agreements, and author of a newly published book, “Buy-Sell Agreements: The Last Will and Testament for Your Business.” Paul's book and the interview should be of great interest both to owners of closely held companies and to their professional advisors.

This episode features a lively interview with Donald J. Weidner, Dean Emeritus of the Florida State University College of Law and one of the leading authorities in the country on partnerships and LLCs. Don’s latest article, entitled LLC Default Rules Are Hazardous to Member Liquidity, forthcoming in the ABA’s prestigious Business Lawyer publication (and available on SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3523876) critiques the “corporate-ization” of LLC statutory default rules to restrict the ability of LLC members to withdraw and monetize their membership interest.

This episode features the second half of a conversation with Associate Professor Peter Molk who teaches business law at the University of Florida Levin College of Law and who recently published in the U.C. Davis Law Review a thought-provoking article entitled Protecting LLC Owners While Preserving LLC Flexibility. In the previous episode we discuss more generally the pros and cons of LLC contractual freedom for sophisticated versus unsophisticated owners. In this episode we focus on Professor Molk’s concept of the accredited LLC investor as a means of distinguishing between those LLCs that should or shouldn’t be permitted to waive standard governance protections typically mandated in business corporation statutes.

This episode features Part One of a two-part conversation with Associate Professor Peter Molk who teaches business law at the University of Florida Levin College of Law and who recently published in the U.C. Davis Law Review a thought-provoking article entitled Protecting LLC Owners While Preserving LLC Flexibility in which he addresses the tension between, on the one hand, LLC freedom-of-contract which functions well with sophisticated owners and, on the other hand, the need for mandatory rules to avoid the problems and inefficiencies freedom-of-contract can generate with LLCs populated by unsophisticated owners. The article is available on SSRN here.

Texas lawyer Steve Robinson lately has been writing up a storm on topics of interest to business divorce practitioners, which is how I discovered him. Steve brings to his law practice and to his highly thoughtful articles a distinctive approach to dispute resolution in the business divorce arena drawn from his decades of experience as a corporate and transactional lawyer. My interview with Steve features a lively discussion of whether, how, and when business divorce clients should make the jump into litigation versus pursuing a negotiated outcome.

When 50/50 co-owners of a business are deadlocked on a major business decision, unless they have a written agreement that dictates a buy-sell process or appoints a “third director,” the unresolved deadlock may lead to litigation or even dissolution of the business entity. This episode of the Business Divorce Roundtable features an interview with arbitrator and mediator Erica Garay of Garay ADR Services, who proposes a novel solution: an arbitration clause that expressly delegates to the arbitrator the duty to break the deadlock by casting the deciding “vote”. Agree or disagree, tune in for a lively and thought-provoking discussion of an important topic in the world of business divorce.

Professor Douglas Moll, featured in Episode 8 on the subject of minority oppression in LLCs, returns to the Business Divorce Roundtable to discuss his recently published article analyzing significant commonalities and variations among the LLC statutes across the country governing judicial dissolution of LLCs.

In this episode of the Business Divorce Roundtable, Chris Mercer, one of the country’s leading business appraisers as well as a prolific author and frequent lecturer, shares what he calls “Confessions of a Reluctant Expert Witness” in which, with equal parts wisdom and good humor, he provides insight into how he views the job of expert witnessing after many years in the trenches.

This is the first in what I hope will be a recurring feature of this podcast featuring war stories told by business divorce professionals. In this episode we hear stories from business appraiser Tony Cotrupe (Meliora Advisors) and attorney Jeffrey Eilender (Schlam Stone & Dolan). While both involve disputes between pairs of brothers in need of a business divorce, the way in which they got there couldn’t be more different.

During her many years as Presiding Justice of the Brooklyn Commercial Division, New York Supreme Court Justice Carolyn E. Demarest (Ret.) decided some of the most important and challenging business divorce matters including the Mizrahi case which established equitable buy-out as an available remedy in LLC dissolution cases, and the Natanel case in which after trial she ordered dissolution of a 50/50 real estate LLC that had no operating agreement based on conflicting testimony as to its purpose. In this episode of the Business Divorce Roundtable, Justice Demarest shares her judicial perspective on those cases and a variety of other issues in business divorce litigation. The interview also features a discussion with Justice Demarest, who joined JAMS as a neutral after leaving the bench last year, about the benefits of mediating business divorce disputes.

Forensics means different things to different people in different contexts. But what does it mean in the context of valuing equity interests in closely held business entities? You’ll learn the answer – and a lot more – in this episode of the Business Divorce Roundtable featuring a lively interview with Jaime d’Almeida, a Managing Director at industry leader Duff & Phelps in its Disputes & Investigations practice, in which Jaime lays the conceptual framework and shares practical tips for effective analysis of a subject firm’s financial metrics.

Mediation has grown in popularity as a means of resolving legal disputes in lockstep with the rising costs and delays attendant to litigation and arbitration, including business divorce cases. This episode features an interview with Arthur Rosenbloom, a veteran mediator and arbitrator who, through careers in law and investment banking, has developed an expertise in business valuation that he combines with mediation skills to assist feuding business owners in reaching buy-out settlement agreements. After you listen to the podcast, you can also read Art’s article, Mediating Valuation Disputes in Minority Oppression Litigation, published in the New York Law Journal and available on the New York Business Divorce blog (www.NYBusinessDivorce.com) and Art’s website (www.mediate.com/ARosenbloom).

The marketability discount as applied in New York fair value proceedings remains a hot topic in business valuation and legal circles. In this episode, I interview business appraiser Greg Barber of Barber Analytics who recently published in the NY State Bar Association Journal a thoughtful and scholarly article on New York’s approach to the marketability discount – one not followed in the great majority of states – in which he analyzes the leading New York case authorities and proposes a flexible, economics-based approach to the discount’s application. You can read Greg’s article by visiting his Barber Analytics website. I also recommend listening to Episodes 1 and 2 of this podcast in which I interviewed another leading voice on the topic of marketability discount, Chris Mercer.

A business divorce within a marital divorce presents challenges that tax the skills of even the most experienced business lawyers. Dallas attorney Ladd Hirsch, a litigation partner at Diamond McCarthy LLP, has developed a practice specialty working with matrimonial counsel and their clients in marital divorce cases where the assets include illiquid ownership interests in businesses held jointly by the divorcing spouses. As you’ll hear in this lively interview, Ladd’s focus in such engagements is to evaluate and implement the various options for continued joint ownership of the business interests for a period of time post-divorce to optimize value for both spouses and provide for an eventual, orderly transition to sole ownership by one spouse or a sale of the business to a third party. It’s a “win-win” approach that defies the conventional wisdom of needing to separate at all costs the interests of the divorcing couple.

The combination of majority rule and lack of exit rights leaves minority members of LLCs vulnerable to oppressive conduct by the majority, yet unlike legislation in most states giving dissolution and buy-out remedies to oppressed minority shareholders in close corporations, most states do not offer similar protection and remedies for minority LLC members. In this episode, Professor Douglas K. Moll, one of the country’s leading experts on disputes among co-owners of closely held business entities, tells us how the relative lack of minority protections came about and explains why the same protections afforded minority shareholders should be afforded to minority LLC members.

As many litigators will tell you, “business divorce on steroids” aptly describes the tenor of litigation that can erupt when members of a family-owned business have a falling out. No one has devoted more scholarship to the topic of legal conflict in the family-owned business than Benjamin Means, a rising young Assistant Professor at the University Of South Carolina School Of Law. My New York Business Divorce blog previously featured an online interview of Ben on the subject. In this episode, Ben discusses the factors that contribute to conflict in the family-owned business and some of his ideas on dispute avoidance and resolution.

Expulsion a/k/a dissociation of an LLC member is a hot-button topic whether it’s pursuant to the terms of an operating agreement or by court order. This episode of the Business Divorce Roundtable features an interview with Kentucky lawyer Tom Rutledge, one of the nation’s leading experts on alternative entities, who, among his many scholarly writings, recently published an article in the Journal of Passthrough Entities called “It’s Not Me, It’s You: Planning for Expulsion of Members from LLCs.” The interview also highlights the very recent decision by the New Jersey Supreme Court in IE Test v. Carroll in which the court reversed a lower court’s order expelling a member and crafted its own set of factors for deciding whether a party satisfies its burden under the “not reasonably practicable” prong of the statute authorizing judicial expulsion of an LLC member.

The Chancery Court of Delaware is considered by many to be the most influential U.S. court when it comes to business law, mostly due to that state's dominant role as the preferred state of incorporation of publicly held companies. Business divorce lawyers know that it also plays an outsized role when it comes to disputes among co-owners of closely held business entities. This episode features an interview of two leading Delaware lawyers -- Kurt Heyman and Peter Ladig -- talking about what it's like to litigate business divorce cases in the Chancery Court and current developments in Delaware law affecting such cases.

A huge percentage of limited liability companies consist of two co-equal, 50% members, which poses the danger of management deadlock and dysfunction leading to dissolution or other litigation. In this episode, you'll hear my interview with John Cunningham, one of the country's foremost experts on LLC formation and operating agreements, talking about the problem of deadlock and how to avoid it in LLC operating agreements.

In this episode, Prof. Peter Molk of the Willamette University College of Law discusses his groundbreaking study and forthcoming law review article on how LLC owners draft their agreements to strengthen or weaken the owner protections provided by the LLC statutes’ default rules. You may be surprised by his findings.

If you haven't already listened to Episode 1/Part 1 of my interview with Chris Mercer, in which Chris discusses the fundamentals of the controversy surrounding application of the marketability discount in statutory fair value proceedings, I suggest you start there before listening to this Part 2 in which Chris dives into the appraisal case law in which the marketability discount has been battled over, including the high-stakes AriZona Iced Tea case in which Chris testified as an expert witness.

The premiere episode of Business Divorce Roundtable starts out with a bang or, more accurately, Part One of a two-part interview with one of the nation’s leading business appraisers, Chris Mercer, discussing the controversy surrounding the discount for lack of marketability in fair value proceedings including Chris’ well-known advocacy in high-profile cases against application of the discount to controlling interests in closely held business entities.

Peter Mahler, author of the New York Business Divorce blog, and the Farrell Fritz law firm proudly announce the launch of the Business Divorce Roundtable podcast. In this preview, Peter talks about the topics and guests to be featured on the podcast.