Category: Dispute Resolution

ARBITRATION

By , March 29, 2017 9:30 am

It is often appropriate to include arbitration clauses in the operating agreements of multi-member LLCs, and these clauses should often provide “delegation clauses” providing that all issues under the agreement, including even issues about the arbitration clauses themselves, must be addressed by the arbitrator. The link below addresses a 10th circuit case on the issue whether these delegation clauses are valid. If you are engaged in LLC formation practice in the 10th circuit, you need to know about this case.

Here is the link: http://arbitrationnation.com/10th-circuit-resolves-one-arbitrability-circuit-split-but-creates-another/

ARBITRATION

By , March 7, 2017 10:03 am

Arbitration provisions are important in the operating agreements of many multi-member LLCs.  In my experience, trial lawyers usually don’t like these provisions.  The article under the link below, entitled Businesses and Law Firms: What Not to Believe about Arbitration, provides an interesting discussion of what the authors believe and what they think is untrue about arbitration.  But do consider the source of the article:  The American Arbitration Association. . .

Here’s the link:  http://leadsight.insidecounsel.com/files/b/b5/b51185ae40fc6141abeea7b3e3e806b3.pdf

THE FEDERAL ARBITRATION ACT AND LLCS

By , January 18, 2017 12:51 pm

Many multi-member LLC  operating agreements contain arbitration provisions that are rooted in the Federal Arbitration Act (the “FAA”).  The decision summarized in the post under the link below is by the Nebraska Supreme Court, but it is relevant in all states.  In essence, it holds that the FAA applies even if the dispute in issue does not directly involve interstate commerce.

Here’s the link:  http://arbitrationnation.com/nebraska-real-estate-and-nebraska-borrowers-but-federal-arbitration-act-applies/

ARBITRATION

By , November 30, 2016 11:39 am

Arbitration provisions are indispensable in most multi-member LLC operating agreements.  The new blog post under the link below addresses the issue of which is better in an arbitration:  a single arbitrator or a three-arbitrator panel.  For most multi-member LLCs, a single arbitrator is the answer, but we should all be aware of arguments to the contrary.

Here’s the link:

http://www.corpcounsel.com/home/native-ad?mvi=1c297f3f629e4143b89a6ed6f8a7a897&cn=20160929&pt=Daily%20Alert&src=EMC-Email&et=editorial&bu=Corporate%20Counsel&slreturn=20160829074252#!/?

POSTS ABOUT LITIGATION VS. ARBITRATION

By , August 30, 2016 10:07 am

Every LLC operating agreement should contain an appropriate dispute resolution provision.  A key issue in planning and drafting these provisions is whether the client will be better served by arbitration or by litigation.  The link below is to a blog post about cost issues in making the above choice.  The post provides a link to an earlier article about litigation vs. arbitration.  However, to read either post, you have to subscribe as indicated in the link.

Here is the link:  http://www.insidecounsel.com/2012/12/06/which-costs-less-arbitration-or-litigation?&slreturn=1469107523

“TIE-BREAKER” CASE

By , August 22, 2016 12:25 pm

Tie-breaker provisions in LLC operating agreements can serve many valuable functions for your LLC formation clients—and can also, for some LLC members, have shocking results, as shown by Peter Mahler in his discussion of a recent New York case under the link below.  The case involves a New York corporation, but it is equally applicable to LLCs.

Here’s the link:

http://www.nybusinessdivorce.com/2016/07/articles/buyout/tie-breaker-shareholders-agreement-defeats-deadlock-dissolution-petition/

NEW ARTICLE ON DIRECT VS. DERIVATIVE SUITS BY LLC MEMBERS

By , July 1, 2016 7:35 am

In planning and drafting LLC operating agreements, lawyers have to give major attention to dispute resolution issues and provisions.  This means, among other things, that they have to understand in some detail the relevant LLC law concerning direct vs. derivation litigation by LLC members.   A brief but excellent new article about this topic from the Lexology blog is under this link:

http://www.lexology.com/library/detail.aspx?g=e9840e55-1399-47a9-b080-2e7494c65afd&l=7RH8T2R

AAA SEMINAR ON ARBITRATION

By , May 31, 2016 10:24 am

Dispute resolution provisions are key in many operating agreements in multi-member LLCs and sometimes even in single-member LLCs.  The American Arbitration Association is hosting a webinar on arbitration provisions.  I intend to attend it.  Should you?

NEW ARTICLE ON LLCS AND DISPUTE RESOLUTION

By , May 25, 2016 9:18 am

The dispute resolution provisions in LLC operating agreements are among the most important provisions in those agreements.  Below are the title, the table of contents and the first paragraph of a new law journal article about LLCs and the private ordering of dispute resolution.  When I read the article, I’ll post a message in this blog about its significance for LLC formation lawyers.

41 J. Corp. L. 795
Journal of Corporation Law
Summer 2016
Article
LLCS AND THE PRIVATE ORDERING OF DISPUTE RESOLUTION
Peter Molk & Verity Winship
Copyright (c) 2016 University of Iowa (The Journal of Corporation Law); Peter Molk; Verity Winship

DELAWARE CASE RE: FORUM SELECTION

By , April 13, 2016 10:36 am

I’ve been drafting an operating agreement under the Delaware Limited Liability Company Act for the members of a two-member LLC in which one member has cash and business know-how and the other has less cash but good technical know-how.  One member will work for the LLC in New York, the other in Massachusetts.  I decided that the dispute resolution method should be mediation followed by single arbitrator American Arbitration Association arbitration, and that the forum should be Delaware—a neutral and somewhat geographically equidistant forum.  I believe the case referred in to the following post will support my approach:

http://www.delawarecounselgroup.com/delaware-law-updates2.html