Eleven attorneys from Underberg & Kessler LLP have been named 2013 Upstate New York “Super Lawyers” , and one has been named a 2013 Upstate New York “Rising Star”. Jim Coniglio, Steve Gersz, Ron Hull, Kate Karl, Paul Keneally, Tom Knab, Robert Koegel, Gordon Lipson, Anna Lynch, Paul Nunes and Margaret Somerset were included in the 2013 group of Upstate New York “Super Lawyers”.  This group represents the top five percent of attorneys in Upstate New York and is awarded to those attorneys who have attained a high degree of peer recognition and professional achievement. Colin Ramsey was included in the 2013 group of Upstate New York “Rising Stars”.  This group represents the top 2.5 percent of lawyers who are under 40 years old or who have been practicing for 10 years or less. The “Super Lawyer” list is produced annually, through a rigorous selection process of statewide nominations, peer review within the local legal community, and independent research of candidates. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Underberg & Kessler LLP is proud to announce that nine of its attorneys have been selected by their peers for inclusion in The Best Lawyers in America® 2014. Jim Coniglio, Pat Cusato, Steve Gersz, Ron Hull, Kate Karl, Paul Keneally, Anna Lynch, Paul Nunes and Margaret Somerset are included in the 2014 edition under the following specialties: Jim Coniglio - Municipal Law Pat Cusato - Real Estate Law Steve Gersz - Closely Held Companies and Family Businesses Law, Corporate Law Ron Hull - Environmental Law, Litigation - Environmental Kate Karl - Real Estate Law Paul Keneally - Labor & Employment Litigation Anna Lynch - Corporate Law, Elder Law, Health Care Law Paul Nunes - Mass Torts Litigation/Class Actions–Plaintiffs, Personal Injury Litigation–Plaintiffs, Personal Injury Litigation–Defendants Margaret Somerset - Medical Malpractice Law–Defendants Best Lawyers® conducted its annual peer-review survey in which 50,000 attorneys cast nearly five million votes on the legal abilities of other lawyers in their practice areas. Lawyers are neither required nor allowed to pay a fee to be listed, and are included solely based on the results of the peer review. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Does your company have a plan if one of your competitors files for bankruptcy protection? If a bankrupt competitor is liquidating assets to pay creditors (a "Chapter 7 Bankruptcy"), your attorney can advise you about how to acquire customer lists and attractive assets, and negotiate terms with key employees or staff of the failed business. If your competitor obtains protection from the bankruptcy court in a reorganization (a "Chapter 11 Bankruptcy"), it will be relieved of certain debt repayment obligations, which will immediately reduce its burden to generate cash to satisfy creditors. The result, in short, is that the business will not have to be as profitable during the reorganization. In either scenario, the major issue for your competitor in bankruptcy is a cash shortage. Your bankrupt competitor is likely to engage with customers to renegotiate contracts and lower its operational costs. Smart business owners should consider opportunities to gain strategic advantages when competitors file for bankruptcy. Your company may be able to win over your competitor’s customers, pick-up key employees (including high-level sales personnel) and/or acquire key assets through a purchase in the bankruptcy proceeding. When your competitor goes bankrupt, you may be able to force it to yield market share or limit its service offerings. Consider the following tactics if your industry competitor is facing financial trouble: Capture your bankrupt competitor's best customers to gain market share. In a liquidation, this may involve the purchase of a debtor entity's customer list. If your competitor is reorganizing, you should consider increasing advertising to gain market share. Your rival will have to spend to keep up or it will risk losing customers. Research and pursue the sales of your competitor’s attractive assets. If a competitor is selling a portion of its business, it may be doing so at a discount. Make sure your business is at the table for the sale of your competitor's valuable assets. Advantages of acquiring assets in bankruptcy include: (a) elimination of unwanted liabilities (assets are usually bought free and clear of liens or encumbrances), (b) the expectation of owners and creditors are usually lowered after the bankruptcy filing, and (c) federal bankruptcy court approval provides finality, reducing the chance of future legal attack or fraudulent conveyance action. Leverage angst among your rival’s staff by pursuing its top sales talent and strong vendors or suppliers. Of course, as with many business decisions, there are risks when dealing with a competitor in bankruptcy. Contact a lawyer in Underberg & Kessler's Creditors’ Rights Practice Group to discuss strategies for minimizing these risks when acquiring customer lists, key personnel and assets when a competitor declares or is about to declare bankruptcy. Download this Legal Alert As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

I am a 55 year-old board certified psychiatrist with a full practice. How does the New York State Secure Ammunition and Firearms Enforcement (SAFE) Act effect my practice? The mental health provisions of the SAFE Act, which went into effect on March 16, 2013, require that any patient deemed to be unfit to own a weapon be reported to the State. The changes apply to physicians, psychologists, registered nurses, and/or licensed clinical social workers providing mental health care, regardless of setting. A mental health provider is to use professional judgment in determining if a patient is a threat to themselves or others. The website for the New York State Office of Mental Health recently posted an “Introduction for Mental Health Providers” to assist in applying the new rules. Mental Hygiene Law Section 9.46 now requires a “mental health professional” to report a person who “is likely to engage in conduct that would result in serious harm to self or others” to the County Director of Community Service (DCS) or designee as soon as practicable. If DCS concludes that the individual is likely to engage in such conduct, it must submit an online form to the NYS Division of Criminal Justice Services (DCJS). DCJS then checks for firearm applications, permits or assault weapon registrations. DCJS and/or the State Police notify the appropriate county firearms licensing official, who must suspend or revoke the license. The official also informs local law enforcement, who are charged with removing the guns. The statute now requires mental health professionals to report to the county DCS when, in their “reasonable professional judgment,” a current mental health patient meets the “serious harm to self or others” standard. This is the same standard as “likelihood to result in serious harm” as defined in MHL Section 9.01 and means threats of, or attempts at, suicide/serious bodily harm to self, or homicidal/violent behavior towards others. This standard is necessary to justify the need for immediate intervention, which includes mental health arrest and transport to a psychiatric hospital for involuntary examination. Once the reporting conditions are met, the mental health professional must report to the local DCS, or designee, information necessary for DCS/designee to determine if the concerns are substantiated. If so, DCS/designee must file the standard Section 9.46 form with DCJS, which collects demographic information without medical information/diagnosis. This information is available to a limited number of DCJS and State Police staff who are responsible for matching the individual with pending or active firearms licenses or assault weapons registrations. However, reporting a patient is not required when, in the provider’s reasonable professional judgment, doing so would endanger the provider or a potential victim. In addition, a mental health professional is not criminally or civilly liable if he or she uses “reasonable professional judgment” and acts in “good faith” when deciding to report. Download the Reprint from The April 2013 Edition of 'The Bulletin' by MCMS As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Anna E. Lynch has been named one of the 2013 “Top Women in Law” by The Daily Record. The Top Women in Law award recognizes the outstanding accomplishments of women attorneys who are making notable contributions to the legal profession, while inspiring a positive change in the community. Anna is Underberg & Kessler’s managing partner, chair of the firm’s Health Care Practice Group and a member of our Corporate & Business Practice Group.  She represents hospitals, long-term care providers, physicians and other providers throughout the Upstate New York region. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Most commercial disputes are settled without getting the lawyers involved, but some disputes prove to be so intractable that they require legal action. Because lawsuits are often time consuming and expensive, businesses and their lawyers have used alternative forms of dispute resolution, commonly referred to as “ADR.” One form of ADR is mediation. In mediation, a neutral party (the mediator) works with the opposing parties to try to reach a settlement. The mediator’s skill and the parties’ willingness to negotiate in good faith are critical to a productive mediation. Generally speaking, there are three ways a Western New York business can find itself in mediation: the business is a party to a contract which requires that some or all disputes be submitted to mediation; the business is a party to a lawsuit in the United States District Court for the Western District of New York where essentially all civil cases (with limited exceptions) are referred automatically to mediation; or during the course of a lawsuit the opposing parties agree to mediate all or part of their dispute, either privately or through a program in the New York State Supreme Court. Preparation is the key to “winning” a mediation. First, the client and their lawyer must prepare their mediation presentation, articulating the legal and factual strengths of the client’s position and the fairness of the outcome proposed. This presentation is usually detailed in a mediation memorandum submitted to the mediator (and sometimes, by agreement, to the opposing party) in advance of the mediation. The client and their lawyer should also be prepared to expand upon the issues addressed in the mediation memorandum through oral advocacy at the mediation session. Second, the client and their lawyer must make a realistic assessment of the strengths and weaknesses of the client’s case, notwithstanding the “best case” arguments made through the mediation memorandum and their oral advocacy. Third, the client should insist that the lawyer provide a well-reasoned estimate of the future cost of litigation. The first task will help convince the mediator of the merits of the client’s position, and give her sound reasons why the opposing party should be the one who compromises their position. The second and third tasks put the client in a position to decide whether to accept an offered compromise in light of the known risks, costs and benefits. Most mediations follow a standard protocol. The parties, their lawyers and the mediator meet at the offices of the mediator or one of the lawyers. The mediator conducts a joint introductory session in which he explains his role and the applicable rules of engagement, and the lawyers make opening statements summarizing their clients’ positions. The mediation then usually evolves into a kind of “shuttle diplomacy”, in which each side meets separately with the mediator, and the mediator shuttles between the parties, evaluating their positions and looking for opportunities for compromise. A skilled mediator will, as appropriate, show empathy for a party’s convictions on the legal and equitable merits, but also play devil’s advocate, challenging those convictions (often after being prompted to do so by the opposing party’s arguments). Although mediations are nonbinding and a party may reject any proposed resolution, the mediation dynamic can lead to compromises that the parties were unwilling to make on their own. For example, the District Court’s ADR program has a settlement rate of over 70%. All settlements are formally confirmed in writing before the parties leave the mediation. Even if the parties do not settle in the mediation, each side comes away with the benefit of a neutral party’s pragmatic assessment of its case. Download the Reprint from Buffalo Business First As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Talk to small business owners, and one of their biggest fears is becoming embroiled in litigation against their will, and over which they have little control. An even bigger fear is when the small business’ adversaries are multi-million or multi-billion dollar corporations, with seemingly unlimited litigation budgets. Irrespective of the merits of the claim against the small business, it has no choice but to defend itself or it risks a default judgment that may very well put it out of business. However, going toe-to-toe with a multi-million dollar corporation through years of protracted discovery, motion practice and trial may very well put it out of business as well. Given these two undesirable options, what is a small business to do? Unfortunately, faced with the situation described above, the options are fairly limited. Again, the small business can neither afford a default judgment, nor can it engage in protracted litigation and a lengthy trial given its limited resources. Unless the large corporation is interested in discussing a settlement at a number the small business can afford (putting aside the merits of the claim), the only realistic option available to the small business may be a limited defense whereby it strategically allocates its litigation resources. At first blush, most attorneys would be loath to undertake this type of “limited defense,” as they would perceive (perhaps correctly) that a limited defense concomitantly provides a limited chance of success, and may subject the attorney to a malpractice claim if things turn out poorly for the client. However, many attorneys also have small business clients for whom a limited defense is the best option, so the attorney may wish to consider this unorthodox representation. While the limited defense strategy may be workable in some instances, before engaging in such representation an attorney is wise to take a number of steps to both manage the client’s expectations, as well as protect the attorney and firm from a potential malpractice claim. First, if the attorney agrees to accept the representation and employ the “limited defense” strategy, the retainer agreement needs to explicitly state that the client acknowledges and understands that were it not for the financial restrictions being imposed by the client, the attorney would not recommend the limited defense strategy, and would likely employ additional discovery devices and litigation tactics that could change the outcome of the litigation. The engagement agreement should further state that although the attorney will do everything he or she can to manage costs, there are certain aspects of litigation that are out of his or her control, and that costs may be incurred despite the best efforts to limit such costs. To that end, if the case is large enough to potentially put the client out of business, it is likely a large enough case to warrant significant discovery, depositions and potentially motion practice. Further, given the present reliance on technology, it is likely that there will be significant e-discovery issues that need to be addressed. The question then becomes, how best to represent the client and minimize the costs, while still providing an adequate, albeit “limited” defense. First, with respect to discovery, rather than blanket all parties with as much written discovery as possible, an attorney can specifically tailor his or her requests to only the most important issues that will ultimately affect the client’s case. While an attorney will have no choice but to respond to discovery served on him or her, and the client will simply need to accept that those costs cannot be avoided, the attorney may not need to go tit for tat with the unlimited resources of the opponent. Similarly, with respect to e-discovery and document production, many large companies engage third-party vendors to provide and store electronically-produced information — usually at a significant cost. While the small business certainly has obligations that it must adhere to as far as producing electronic discovery, it does not generally have an obligation to hire expensive third-party vendors, and may find it more cost effective to enlist its own employees in meeting its e-discovery obligations. Next, with respect to depositions, it may be possible to strategically pick which depositions to attend — particularly if it is a multi-party litigation. This would be especially true if depositions are not local, and attending them would not only involve the expense of the deposition, but travel and lodging costs. In the event that the attorney and client can be reasonably sure that their presence at the deposition is not critical to one of the penultimate issues in the case, simply ordering the transcript for the attorney to review may suffice. It should also be noted that, to the extent that the other party or their counsel is complaining about an aspect of the attorney’s participation in the discovery process (or even if they are not), it is worth ascertaining whether you and your client may find an ally in the judge who does not wish to perpetuate the David versus Goliath dynamic. While the judge certainly has an obligation to treat all parties in a fair and even-handed manner, he or she may be willing to either explicitly or implicitly assist the attorney and the client in leveling the playing field by relaxing or limiting the burden that litigation in general, and discovery in particular, places on the client. Throughout the entire process, the client must be kept explicitly informed of the status of the case, and candidly advised if the limited defense strategy is becoming unworkable. In the event this occurs, the attorney can then direct the client back to the engagement letter, which will have disclosed this risk at the outset. Not surprisingly, a good result for the client will obviate any fears on the part of both the attorney and the client about the desirability of such a strategy, whereas a bad result may lead to second-guessing, and in a worst-case scenario, a malpractice claim. While this risk cannot be completely discounted, a clearly defined engagement letter explicitly setting forth the risks and obtaining the client’s acknowledgement and consent, should render the likelihood of a malpractice claim remote. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

New York Labor Law § 193 and New York Compilation of Codes, Rules and Regulations Title 12, § 195.1 govern employer deductions from employee’s wages. Until now, § 193 generally prohibited employers from making deductions from employees’ wages, with two exceptions: First, when the deductions were authorized by law, such as income tax withholdings and court ordered garnishments; and second, when the deductions were authorized in writing and for the benefit of the employee, such as health insurance premiums, pension or health and welfare benefits, contributions to labor organizations and charitable organizations, and/or similar types of payments. The regulations provided that permissible deductions for all non-enumerated items must not exceed 10 percent of the gross wages due to the employee in a payroll period. Initially, the law was interpreted to mean that employers could make deductions from employees’ wages provided the deduction was authorized in writing by the employee, for the benefit of the employee, and were for purposes that were “similar” to the purposes authorized by the statute. However, in recent years the New York State Department of Labor changed its interpretation of § 193 and drastically reduced the types of deductions an employer could make. The Department of Labor interpreted the old law as prohibiting deductions for accidental overpayment of wages or payment advances on vacations or loans because the deductions were not considered as being “for the benefit of the employee,” even in cases where the employee specifically consented. The New York State Department of Labor’s interpretations were so strict that even obvious and gross overpayments to an employee could not be deducted, again, even where the employee agreed to the deduction. The recent interpretation also prohibited employers from requiring employees to repay the employer by means of a separate transaction by threat of discipline. This left employers with no recourse but to sue current and former employees when they refused to voluntarily repay an overpayment or an advance. Because of the narrow interpretation, the legislature recently amended the provision, and the new law became effective on Nov. 6. New York Labor Law § 193 now gives employers greater leeway in making deductions from employee paychecks. Under the amended legislation, employers are permitted to deduct from employees’ paychecks to repay advances of salary or wages, and to recoup overpayments stemming from clerical or mathematical errors, subject to regulations promulgated by the New York State Department of Labor. It is presently unclear if overpaid “Paid Time Off” and vacation would be subject to inclusion under the amendments. The amended law also permits employers to take deductions out of the paychecks of employees who consent in writing for certain categories of payments, including: Tuition, room, board, and fees for pre-school, nursery, primary, secondary, and/or post-secondary educational institutions; Day care, before-school and after-school care expenses; Fitness center, health club, and/or gym membership dues; Discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that entitle the employee to use mass transit; Events sponsored by charitable organizations; Cafeteria and vending machine purchases made at the employer’s place of business and purchases made at gift shops operated by the employer, where the employer is a hospital, college, or university; Pharmacy purchases made at the employer’s place of business; and Similar payments for the benefit of the employee. Prior to making these deductions, employers will be required to provide employees with written notice detailing the purpose of the deductions and the manner in which they will be made. The new provisions specify that the notice must be updated whenever there is a substantial change in the manner of the deduction, the amount or the terms of the conditions of the payment for which the deduction is being made. Employers must comply with the notice requirements in addition to obtaining written employee authorizations. A word of warning to employers. Although the new law took effect Nov. 6, the New York Department of Labor has yet to issue its regulations. The regulations will likely deal with the timing and frequency of deductions, the amounts that may be recovered, as well as notice requirements and a requirement that employers implement a procedure that employees can use to dispute the amount of overpayment or salary/wage advance. Employers are cautioned to wait for the regulations before acting in accordance with the amended provisions. Finally, the law has a sunset provision stating that it expires in three years, so if the legislature does not renew the amendments, it will revert back. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Jillian K. Farrar and Leah E. Tarantino have joined Underberg & Kessler LLP in Rochester, New York. Ms. Farrar is an associate in the firm’s Litigation and Creditors’ Rights Practice Groups, and will focus her practice in the areas of bankruptcy, collection and foreclosures. Prior to joining the firm, Ms. Farrar was an associate with Shapiro, DiCaro & Barak LLC. Ms. Farrar earned her B.A. from Vassar College, and her J.D. from Syracuse University College of Law. Ms. Tarantino is an associate in the firm’s Litigation Practice Group. She concentrates her practice in the areas of matrimonial and family law. Before joining Underberg & Kessler, Ms. Tarantino was an Assistant Commonwealth’s Attorney for Fairfax County, Virginia. Ms. Tarantino received her J.D. from Albany Law School, and her undergraduate degree from the State University of New York at Geneseo. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Underberg & Kessler LLP is proud to announce that ten of its attorneys have been named to the 2013 edition of Best Lawyers in America®. Jim Coniglio, Pat Cusato, Steve Gersz, Ron Hull, Kate Karl, Larry Keller, Paul Keneally, Anna Lynch, Paul Nunes and Margaret Somerset are included in the 2013 edition under the following specialties: Jim Coniglio - Municipal Law Pat Cusato - Real Estate Law Steve Gersz - Closely Held Companies and Family Businesses Law Ron Hull - Environmental Law Kate Karl - Real Estate Law Larry Keller - Trusts & Estates Paul Keneally - Labor & Employment Litigation Anna Lynch - Corporate Law, Elder Law, Health Care Law Paul Nunes - Mass Torts Litigation/Class Actions–Plaintiffs, Personal Injury Litigation–Plaintiffs, Personal Injury Litigation–Defendants Margaret Somerset - Medical Malpractice Law–Defendants Best Lawyers® conducted its annual peer-review survey in which 39,000 attorneys cast 3.1 million votes on the legal abilities of other lawyers in their practice areas. Lawyers are neither required nor allowed to pay a fee to be listed, and are included solely based on the results of the peer review. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Fourteen attorneys from Underberg & Kessler LLP have been named 2012 Upstate New York “Super Lawyers.” Jim Coniglio, Steve Gersz, Lewis Heisman, Ron Hull, Kate Karl, Larry Keller, Paul Keneally, Tom Knab, Robert Koegel, Gordon Lipson, Anna Lynch, Paul Nunes, Margaret Somerset and Ed Yankelunas were included in the 2012 group of Upstate New York “Super Lawyers”. This group represents the top five percent of attorneys in Upstate New York and is awarded to those attorneys who have attained a high degree of peer recognition and professional achievement. The “Super Lawyer” list is produced annually, through a rigorous selection process of statewide nominations, peer review within the local legal community, and independent research of candidates. This is the fifth year that the “Super Lawyer” designation has been awarded in Upstate New York. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Limited liability companies appeared in New York state in 1994, when the New York Limited Liability Company Law (LLCL) went into effect. An LLC is an unincorporated organization (but not a partnership or a trust) of one or more persons having limited liability for the contractual obligations and other liabilities of the business. The LLC combines aspects of the corporate form and the partnership form. An LLC can be used to limit the personal liability of its owners (called members) like a corporation, and offers flexibility in management and operations, capital formation, and the allocation and distribution of benefits like a partnership. Last, but certainly not least in the minds of business owners who use the LLC form, the LLC may provide significant tax advantages to those owners. LLCL §417 requires the LLC’s members to adopt an operating agreement addressing the business of the LLC, the conduct of its affairs, and the rights, powers, preferences, limitations or responsibilities of its members, managers, employees or agents. A well-considered operating agreement should address, among other things, decision-making procedures, access to the business’ books and records and exit strategies such as buyout provisions. In the absence of an operating agreement, and in the event of legal action, a court will enforce the rights and obligations in issue by reference to the “default” provisions of the LLCL. Business owners may choose the LLC form without much thought (and sometimes without an operating agreement), or they may elect to form an LLC in consultation with lawyers experienced in business formation and tax law. Either way, the members hope common goals and the LLC form will lead to financial success. However, sometimes members may encounter irreconcilable differences even when dealing with one another in good faith, and sometimes one member’s intentional misconduct, such as fraud, misappropriation, and misuse of LLC assets for personal gain, will cause harm to the LLC, and the other member or members will be forced to go to court to protect the LLC and their ownership interests, or to obtain a remedy that will extricate them from an untenable situation. While the LLCL provides for judicial dissolution under certain limited circumstances, it does not expressly provide an aggrieved member with remedies such as the right to bring a derivative action, the right to an accounting or the right to a buyout of her ownership interest. Therefore, given the hybrid nature of the LLC form, lawyers who handle “business divorce” cases have advocated, and the courts have evaluated, an LLC member’s potential remedies by analogy, using the Business Corporation Law (BCL), the Partnership Law, and the common law. At the threshold level, the courts have recognized that members of LLCs owe fiduciary duties to one another, see, e.g., McGuire Children LLC v. Huntress, 24 Misc.3d 1202A (Erie Sup. Ct. 2009), aff’d 83 A.D.3d 1418 (4th Dept. 2011); Willoughby Rehabilitation and Health Care Center LLC v. Webster, 13 Misc.3d 1230A (N.Y. Sup. Ct. 2006), aff’d 46 A.D.3d 801 (2nd Dept. 2007). These decisions, which analogize a member’s duties to other members to a partner’s duties to other partners, provide a foundation for the advocacy of a member’s rights and remedies in the face of misconduct by other members. In Tzolis v. Wolff, 10 N.Y.3d 100 (2008), the Court of Appeals held that LLC members may sue derivatively, even though the LLCL does not expressly authorize such actions. The court, after reviewing the development of the law authorizing derivative actions on behalf of trusts, corporations and limited partnerships, found that an LLC member had the right to bring a derivative action, stating that “to hold that there is no remedy when corporate fiduciaries use corporate assets to enrich themselves” was unacceptable. In Gottlieb v. Northriver Trading Co., LLC, 58 A.D.3d 550 (1st Dept. 2009), a minority member of an LLC sued the LLC and the majority member for an accounting. Supreme Court dismissed the complaint, holding, among other things, that the LLCL did not give the plaintiff member the right to an accounting; the court refused to apply the cases cited by the member plaintiff, which addressed the right to an accounting in business entities other than LLCs. The First Department reversed, holding that “members of a limited liability company may seek an equitable accounting under common law”, and rejecting any assertion that LLC members “are limited to statutory remedies with respect to potential fraud” as inconsistent with the reasoning of Tzolis. Although the LLCL provides for the judicial dissolution of an LLC, unlike the BCL, which includes provisions authorizing the buyout of a complaining shareholder as a means of resolving a dissolution action brought by that shareholder, the LLCL does not contain any provision which authorizes a buyout as a means of avoiding dissolution. Notwithstanding this absence of statutory authority, in Matter of the Dissolution of Superior Vending, LLC, 71 A.D.3d 1153 (2nd Dept. 2010), an action in which the members consented to the dissolution of their LLC, the Second Department approved Supreme Court’s order that one member buy out the other member’s ownership interests as “the most equitable method of liquidation.” Also, in Matter of Gold (Cosmo Holdings, LLC) (Nassau County Index No. 6722/11), the court denied an LLC member’s application for judicial dissolution but ordered an appraisal proceeding for the buyout of that member’s ownership interest, holding that the member “has the common law right to an appraisal proceeding for the purpose of determining the fair market value of her membership interest in the limited liability company.” As authority for this proposition, the court cited Appleton Acquisition, LLC v. National Housing Partnership, 10 N.Y.3d 250, 256 (2008), a case in which the Court of Appeals addressed a limited partner’s remedies under the New York Revised Limited Partnership Law. Each of the decisions discussed above is worthy of analysis, but the takeaway for practitioners is that the courts will likely continue to follow the Court of Appeals’ lead in Tzolis and look, where appropriate, to the New York law on corporations and partnerships for guidance in the development of remedies for LLC members. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.