January, 2010

Contents

• When One Business 'Steals' Another, Its Net Profits Can Provide Basis for Damages
• Dissenter Was Not Victim in Sale of Real Estate Holdings
• Family LLC's in Court: Round-Up

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When One Business 'Steals' Another, Its Net Profits Can Provide Basis for Damages

Electronic Funds Solution, LLC, v. Murphy, 2009 WL 1717383 (Cal. App. 4 Dist.)
June 19, 2009 (unpublished)

It's the high school garage band story all over again in this case—the band mysteriously dissolves, only to re-form an almost identical group with a different bass player.  Here, three partners designed a company to help commercial establishments electronically recover funds from customers' bank accounts after their checks bounced.  Within a few months, the company had over 50 clients and licensing agreements with suppliers. Within nine months, however, two of the partners decided to oust the third.  They changed the locks on the office, removed his electronic access, appropriated his mail, and stopped forwarding calls. They also converted company funds and entered into new customer contracts without his knowledge or consent; and they renamed the company, telling customers that nothing else had changed.  The former partner sued (a big difference from high school).

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Dissenter Was Not Victim in Sale of Real Estate Holdings

Brynwood Co. v. Schweisberger, 2009 WL 2218728 (Ill. App. 2 Dist.)
July 23, 2009 (unpublished)

Several professional tenants in a commercial office formed a C corporation to purchase the property in 1979. The owner of an accounting firm took a lead interest (26%), served on the board of directors, and provided the company's accounting services until he retired in 1996. The company owned and operated the building as its sole asset for nearly 25 years when the directors considered converting to an S corporation, primarily to avoid double taxation (at the corporate and shareholder level). The board also discussed selling the building and dissolving the company. In 2000, the company repurchased the shares of two non-tenant owners at $42.50 per share. During the next year, it offered to repurchase the interests of all non-tenant owners, including the retired accountant, for $48.50 to $50.00 per share.

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Family LLC's in Court: Round-Up

Parents want to take the best possible financial care of their children. Sometimes their efforts come close to, or cross over, a legal line. Using family LLCs to gift assets and cash to one's children is one such place where the risk arises.

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