August 20, 2008

Tzolis v. Wolff Update

Posted by Gordon Smith

Larry Ribstein reports on "The Legacy of Tzolis," a case on derivative litigation that we included in Chapter 3 ("Limited Liability Companies"):

There the court read a derivative suit remedy into the NY LLC statute despite fairly clear evidence that the legislature didn’t want it there.

One danger of this sort of shenanigans is loss of predictability. If the court’s going to read stuff into statutes, how can we tell what statutes do and don’t say?

Well, it didn’t take long for the birds to come home to roost in Albany. Appleton Acquisition, LLC v. National Housing Partnership, 10 N.Y.3d 250, 886 N.E.2d 144, 856 N.Y.S.2d 522 (2008) held that NY’s limited partnership statutory appraisal remedy precluded common law fraud remedies. But wait, said the dissent: since the statute didn’t clearly abrogate the common law fraud remedy, it should be allowed.

For Larry's original post on Tzolis, see here.

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