Business Divorce Roundtable

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.