An SPE is a legally distinct entity with a limited life, usually an LLC

General Growth Properties, Inc., which filed the largest real-estate Chapter 11 case in U.S. history. In connection with approving the debtor-in-possession financing facility, Judge Gropper permitted affiliated debtors to use excess cash collateral from bankruptcy-remote special purpose entities which, to the surprise of many market participants, were included in the Chapter 11 proceedings.

In connection with seeking approval of the Company’s proposed debtor-in-possession facility (the “DIP Facility”), the Company also sought use of cash collateral from separately organized subsidiary bankruptcy-remote special purpose entities (“SPEs”). The property owned by each of these SPEs was intended to secure only the obligations of the pre-petition lenders to the SPE owning the property (the “SPE Lenders”). Arguing that the value of the collateral in certain of the SPEs is sufficient to protect the interests of the SPE Lenders, the Company proposed that excess cash collateral from rents be made available to support the DIP Facility.

Several pre-petition agents for the SPE Lenders (the “Pre-Petition SPE Agents”) filed objections to the Company’s proposed DIP Facility on behalf of the SPE Lenders. The Commercial Mortgage Securities Association and the Mortgage Bankers Association also filed an amici curia brief with the court addressing the implications of the proposed use of cash collateral on commercial real estate finance.

Sidney Turner

www.SidneyTurnerllc.com

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Sixth of the Six Major Points Series

Number SIX of the Six Major Points Series

It Means Knowing the Purposes and Limitations of Litigation. When I give presentations on business workouts and reorganizations, I tell the audience that the vast majority of cases involving a viable business ultimately leads to a buyout settlement, and that it’s only a question of how much time, distraction and legal expense the parties are willing to bear before they realize that the legal system is not an efficient or even wise way to decide the fate of a living, breathing company. However, for many different reasons litigation can be an unavoidable and necessary tactic in reaching the strategic goal of separating business partners who no longer can co-exist as owners and managers. Sometimes there’s just no other way to grab the attention of the other side. The litigation will take its normal, unpredictable course. The parties’ expectations of a quick resolution are undermined by many delays and procedural and discovery skirmishes attendant to all litigation. As the case drags on and the legal costs mount, the clients begin to reassess the costs and benefits of a buyout settlement.

The business lawyer must be willing to take the lead in re-evaluating and advising the client of litigation and settlement prospects at every stage of the engagement.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Fifth of the Six Major Points Series:

Number FIVE of the Six Major Points Series

It Means Understanding Valuation Basics. In many instances, by the time lawyers are brought into the picture the relationship between the business owners has deteriorated past the point of no return. If it’s a viable business, one or the other is going to have to be bought out. The single biggest impediment to amicable resolution becomes the disparate views of the company’s value as seen through the very different lenses being worn by the potential purchaser and the potential seller. The business lawyer is not a business appraiser, but he or she must be able to elevate the client’s understanding of basic appraisal approaches and methodology, along with any applicable legal concepts such as the case-law-driven rules surrounding minority and marketability discounts in “fair value” buyout proceedings. The lawyer’s grasp of appraisal doctrine becomes even more critical when collaborating with a professional business appraiser who has been engaged to prepare a valuation report and to testify as an expert at a valuation hearing. The business lawyer must be able to speak the language of appraisal and understand its doctrinal basis to put on a persuasive valuation case.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Forth of the SIX Major Points Series

Number FOUR of the Six Major Points Series

It Means Understanding Finance and Accounting Basics. Almost every business divorce case involves some degree of dispute over company finances and accounting. Many small companies involved in business litigation do not prepare any financial statements; much less do they have an outside CPA who prepares audited financial statements. The company’s tax returns may present a distorted picture of the company’s income, compensation to principals, and other expenses. A business lawyer must have a basic understanding of financial and tax accounting, including the ability to comprehend financial statements, internal reports such as QuickBooks, and (last but not least) tax returns, in order to converse intelligently with the client and the client’s accountant about financial issues that likely will take center stage in the litigation.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Third of the SIX Major Points Series

Number THREE of the Six Major Points Series

It Means Knowing the Law. Each form of business entity, be it partnership, corporation or limited liability company, is governed by a separate statutory scheme with rules that, in many key instances, are significantly different as is the case law that has developed around each form. The standing requirements to bring a dissolution proceeding vary among the entities, and even within the same type of entity depending on the statute invoked. The availability of a buyout remedy depends on the type of entity and the alleged statutory basis for dissolution. Under still-evolving case law the filing of a dissolution petition may inadvertently trigger a right of first refusal under a shareholders’ agreement. Particularly with corporations, there are numerous, mandatory, statutory provisions that come into play at the board level. The availability of a court-appointed receiver can differ depending on the entity type. The list goes on and on. The business lawyer must have a thorough understanding of the legal framework within which closely held businesses operate and whose rules govern forced judicial dissolution, derivative actions and other varieties of owner vs. owner litigation.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

The situation of an employee’s brief period of employment with the company, with a series of  informal discussions, email exchanges and an unsigned offer letter is not uncommon. Do they coalesce into an enforceable agreement giving the employee a desired 10% interest in the company?

Plaintiff and defendant were long-time acquaintances when plaintiff assisted defendant, in establishing a company. In 2008, after defendant thought he had lined up $10 million private equity financing, defendant recruited plaintiff for CEO of company.

After plaintiff began his services as CEO, he prepared and emailed to defendant an employment letter for himself with a three-year term and a 10% stake in the company. Defendant never signed the letter.

The investor backed out leaving the company with insufficient funds to pay plaintiff’s salary. Plaintiff leaves his job. Defendant sells company a few years later.

Plaintiff sued for breach of contract and breach of fiduciary duty, claiming that he was entitled to statutory notice of the sale transaction and a portion of the proceeds as 10% shareholder.

The court finds that defendant’s promise, if any, to grant plaintiff a 10% interest in company did not create a legally binding and enforceable contract because the alleged exchange or agreement lacks two essential elements of any contract, mutual assent to be bound and definiteness.

Sidney Turner

www.SidneyTurnerllc.com

Controlling owner or partner of closely held company buys out interests of non-controlling owners who subsequently sue for damages raised for example by the general partner of a real estate limited partnership who misled the limited partners into selling him their interests at a price far below market value. It can be argued that damages can be calculated as the difference between the actual sale price and the value of the asset or interest at the time of the trial or at the time of the transaction at issue.

Sidney Turner

www.SidneyTurnerllc.com

Estate

No. 3D11-196
Lower Tribunal No. 10-4540

Third District Court of Appeal State of Florida

January Term, A.D. 2011
Filed: May 18, 2011

Opinion filed May 18, 2011.

Not final until disposition of timely filed motion for rehearing.

An appeal from a non-final order from the Circuit Court for Miami-Dade County, Lawrence A. Schwartz and Gerald D. Hubbart, Judges.

May, Meacham & Davell, and William C. Davell, Carolyn B. Brombacher and Christopher D. Barber (Fort Lauderdale), for appellant.

Steven Silverman, for appellee.

Before GERSTEN and SALTER, JJ., and SCHWARTZ, Senior Judge.

SALTER, J.

Page 2

BankAtlantic appeals two non-final circuit court orders directing it to transfer the funds in a deceased physician’s professional association account to the depository account (at a different bank) established for the administration of his estate. We reverse both orders and remand for the entry of an order directing repayment of the funds (and any earnings thereon) to the account from which they were transferred.

BankAtlantic was a secured creditor of the late doctor’s professional association under a note and mortgage. The promissory note included a right of setoff:

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account)…. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

The decedent personally guaranteed his professional association’s promissory note, and his death constituted an event of default under that note. The orders requiring transfer of the funds to a different bank thus impaired BankAtlantic’s right of setoff. Although the parties agreed that the deceased physician owned all of the shares of his professional association, there was no evidence presented to support a “piercing of the corporate veil” under Dania Jai-Alai Palace v. Sykes, 450 So. 2d 1114 (Fla. 1984), or any other alter ego theory.

Page 3

While the appellee Estate was apparently entitled to take possession of the professional association stock held by the doctor at his death, ¹ no such conclusion extended to the association’s funds on deposit in the corporate name at BankAtlantic. In Gettinger v. Gettinger, 165 So. 2d 757 (Fla. 1964), the Supreme Court of Florida held that “the affairs of a corporation, even though substantially owned by a decedent, cannot be administered by decedent’s executor as assets of the decedent’s estate.” In this case, “substantially” is 100%, and the result is identical.

The Estate seeks affirmance of the orders below on three independent grounds: (1) that the orders are not appealable; (2) that the Estate has the power to “take charge of and marshal” the funds in the professional association account; and (3) that the probate court ruling should be upheld because no decision was made regarding any competing claims to the funds. None of these arguments is persuasive.

As to jurisdiction, the orders are reviewable non-final orders under Florida Rule of Appellate Procedure 9.130(a)(3)(B). CRM Distrib., Inc. v. Resolution Trust Corp., 593 So. 2d 593 (Fla. 3d DCA 1992). Regarding the Estate’s second argument, section 69.031(1), Florida Statutes (2010), and the cases cited by the Estate refer to marshaling “part or all of the personal assets of the estate” and to the

Page 4

use of court-approved depositories for such assets. The point in this case is that the stock of the professional association is an asset of the Estate, but the funds of the professional association are a step removed from the Estate. The decedent’s Estate essentially ignored the separate corporate existence of the professional association and that entity’s obligations to its own creditors.

The third argument also fails. BankAtlantic’s rights are not protected just because the funds are frozen in a restricted depository account of the Estate. In this case, BankAtlantic’s possessory and contractual rights to setoff are impaired by the transfer to a different bank.²

Reversed and remanded, with directions to order the return of the transferred funds (and any interest earned on such funds while in the transferee bank’s possession) to BankAtlantic.
——–

Notes:

^1. § 733.607(1), Fla. Stat. (2010); Perez v. Lopez, 454 So. 2d 777 (Fla. 3d DCA 1984).

^2.As an example of another such impairment, if the transferee bank later failed, BankAtlantic would have to protect its interests as an indirect creditor of the estate’s depository account (not as a direct creditor of a named account holder/debtor) in the transferee bank’s liquidation.

Sidney Turner

www.SidneyTurnerllc.com

If you’re the majority member of a Florida or New York limited liability company (LLC) and need more capital for your business, and either you have no written operating agreement (in Florida oral operating agreements are difficult to prove as to terms and substance), or you have one but it’s silent on the issue, You cannot make a compulsory capital call.

Without an operating agreement, or without an express provision for it an agreement expressly authorizing a call for additional capital contributions, that is the critical point, additional to the original capital contribution called for, and specifying the consequences of failing to make the contribution, you cannot make a compulsory capital call.

Sidney Turner

www.SidneyTurnerllc.com

Did you know that;

An email between attorneys, so long as it contains all the essential and material terms to the settlement, can constitute a binding settlement agreement notwithstanding one party later refused to sign the settlement paperwork.

Warrior Creek Development, Inc. v. Cummings, — So.3d —-, 2011 WL 1004691 (Fla. 2d DCA 2011).

The Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., is a strict liability statute, and a violating debt collector may escape liability only for “bona fide errors” which are unintentional notwithstanding the maintenance of procedures reasonably adapted to avoid such errors. Whether the procedures are reasonable under the circumstances is a fact intensive inquiry that in each individual case.

Owen v. I.C. Systems, Inc., — F.3d —-, 2011 WL 43525 (11th Cir. 2011).

Sidney Turner

www.SidneyTurnerllc.com