Thursday, July 30, 2009

My N.Y. Court of Appeals Filing

Yesterday I filed the appellant's reply brief in the New York Court of Appeals in Matter of the Estate of Lena Hausman. The case raises the question of whether the de facto corporation doctrine should be applied to a limited liability company (LLC).

Under the de facto doctrine the business transactions of a corporation will be deemed valid although the corporate organizers have not completed all the statutory steps required to be de jure. In a typical case, the corporate organizers will prepare the certificate of incorporation and then engage in corporate business before they actually file the certificate with the Secretary of State. In other instances, organizers file the certificate with the Secretary of State, engage in corporate business, and then learn that either the certificate or the filing itself is defective. The Court of Appeals has recognized the de facto doctrine for at least 150 years. The Court last looked at the doctrine in 1958.

In Hausman a LLC was named the grantee in a deed which was signed by the grantor after the organizers executed the LLC Articles of Organization and the LLC Operating Agreement, but 14 days before the Articles of Organization were filed with the Secretary of State. The question before the Court is whether the LLC could take title as a de facto LLC, or whether the real property is still part of the grantor's estate.

I did not appear in the lower courts. The losing party in the Appellate Division brought me in to make the motion for leave to appeal to the Court of Appeals. The motion was granted in January. Oral argument will be on October 20.

1 comment:

  1. Norman,

    Good Luck on the Appeal on a very interesting issue.