• Home
  • News

Sichenzia Ross Ference Carmel LLP’s Litigation Partner Scott Furst Wins First-Impression Victory For New Jersey Limited Liability Company’s Expulsion of Alleged Member

Press Release – New York, NY – November 20, 2023Sichenzia Ross Ference Carmel LLP Litigation Partner Scott Furst achieved a case of first-impression victory in the New Jersey Superior Court Appellate Division on October 26, 2023, resolving a multi-year business litigation in which Mr. Furst earlier won a unanimous jury verdict and contract damages and all post-trial motions denying a new trial, denying judgment notwithstanding the jury verdict and granting the disassociation and expulsion of a purported member of a New Jersey limited liability company without valuation or buyout of the membership interest.  The underlying order of dissociation and expulsion is the first issued by a New Jersey trial court and also affirmed by the New Jersey Superior Court Appellate Division since the State of New Jersey adopted the New Jersey Revised Uniform Limited Liability Company Act in 2012 (the “Act”) reaching all such issues.

The Act applies to every New Jersey limited liability company in effect before or after 2012.  The Revised Uniform Limited Liability Company Act has been adopted by nineteen (19) states, Alabama, Arizona, Arkansas, California, Connecticut, Florida, Idaho, Illinois, Iowa, Minnesota, Nebraska, New Jersey, North Dakota, Pennsylvania, South Dakota, Utah, Vermont, Washington, and Wyoming, and the District of Columbia.

On appeal, the Defendant, GreenbergFarrow Architecture, Inc., a global architecture, engineering, planning and development services firm with offices in the United States, Latin America and Asia, challenged the jury’s award of compensatory damages arising from Defendant’s abandonment of a new limited liability company, Engenuity Infrastructure, LLC, Defendant had agreed to support professionally and financially that was led by Plaintiff Jaclyn Flor.  The Appellate Division affirmed both liability and damages in favor of the Plaintiffs, an individual and the managing member of the limited liability company who had separated from her prior employment where she was an equity holder, to start Engenuity Infrastructure, LLC.  GreenbergFarrow also challenged the trial court’s declaratory judgment order directing GreenbergFarrow’s expulsion and dissociation from the limited liability company without valuation or compensation for its abandoned membership interest.

In affirming the disassociation and expulsion of GreenbergFarrow as a purported member, the Appellate Division cited the extensive trial record of documents and testimony that demonstrated that GreenberFarrow “ha[d] ignored the new business in which it claim[ed] an economic interest” when it “walked away” from the limited liability company many years earlier.

The New Jersey Supreme Court first issued controlling principles for dissociation and expulsion in 2016, in a case titled, IT Test, LLC v. Carroll, setting forth a high burden of proof for expulsion arising from a member’s “wrongful conduct” or conducting rendering it “not reasonably practicable” for the member to continue membership within the limited liability company.  In affirming the jury’s verdict and all of the trial court’s post-trial motions, including its decision not to award any compensation to the purported member that had abandoned the limited liability company, the Appellate Division emphasized that, “no provision of N.J.S.A. 42:2C-47 requires a court to award a dissociated member compensation when the member abandoned its interest and is expelled by court order for wrongful conduct. Subsection (c) provides a court ‘may’ order a sale of the expelled member’s interest, but only if, ‘in its discretion,’ the court determines that a sale ‘is required’ by some legal authority or would be equitable to all parties. N.J.S.A. 42:2C-47(c).”  Under the circumstances, the Appellate Division also held that the jury’s compensatory damages verdict against GreenbergFarrow also constituted a debt as to which GreenbergFarrow was obligated to pay.

Flor v. GreenbergFarrow Architecture Incorporated, No. A-2208-20, 2023 WL 7036278 (App. Div. Oct. 26, 2023).

Scott Furst is a member of Sichenzia Ross Ference Carmel’s Business Litigation & Arbitration, Broker-Dealer Regulation, and Compliance Groups. He has extensive civil litigation, regulatory action, investigations, and enforcement defense experience with a specialization in securities, business, complex commercial litigation, and employment matters involving senior executives, including with regard to contract disputes, investor, shareholder, and member disputes, covenants litigation, and statutory discrimination claims, in state and federal courts, before the Securities and Exchange Commission, Financial Industry Regulatory Authority, American Arbitration Association, and JAMS.  Mr. Furst also routinely advises, negotiates, and drafts transactional agreements for senior executives, officers and investors in the fund structure and formation space for private equity funds, hedge funds, real estate funds, and hybrid vehicles for alternative investments.

Sichenzia Ross Ference Carmel LLP is a full-service law firm with a nationally-recognized corporate, securities and litigation practice that provides experienced representation in all matters involving the securities industry.  In addition to handling routine to complex commercial matters, SRFC’s litigation practice specializes in representing public and private companies, private funds, investment banks, broker-dealers, investment advisers, placement agents, directors and officers, special committees, and corporate and individual investors in securities and commercial litigation, arbitration, regulatory actions and enforcement defense, including class action lawsuits, shareholder derivative actions, and matters involving allegations of fraud, misrepresentation or other securities violations.  The firm complements its core practice areas with an established tax, commercial real estate and trusts and estates practice.

Sichenzia Ross Ference Carmel LLP