In Court Decision Weds Business Divorce with Matrimonial Divorce, on New York Business Divorce Blog, Peter Mahler reports on Rossignol v. Rossignol, 2011 NY Slip Op 01560 (3d Dept Mar. 3, 2011). In Rossignol, husband and wife were members of an LLC. After wife filed for divorce, the court entered a restraining order against the husband preventing him from accessing funds in both their personal and the LLC’s banking accounts. When husband then brought a separate action for involuntary dissolution of the LLC, the trial court dismissed the action because the proceeding for the divorce and the division of marital property involved the “same parties for the same cause of action.” The appellate court affirmed, reasoning as follows:
Inasmuch as the husband and wife are the only owners of the LLC, and both are parties to the divorce action, we see no reason why any issues should be left for resolution after equitable distribution of the parties’ property. Given the availability of complete relief pursuant to Domestic Relations Law § 234 and our public policy of resolving equitable distribution within the context of a divorce action, we conclude that dismissal of the second action was within Supreme Court’s broad discretion….
Slip Op., at 3-4 (citations omitted).
Mahler is rightly concerned about the apparent disregard of the difference between the LLC and its members. After the Florida Supreme Court’s opinion Olmstead v. FTC, expanding the rights of personal creditors of the single-member on an LLC (see Charging Orders and Two Kinds of Exclusivity), the Court in Rossignol at least opens the door to a similar result in marital dissolution actions where the spouses are the sole members of the LLC.
posted by Gary Rosin