Schlam Stone & Dolan is counsel for appellants in the first two commercial cases in which the Appellate Division First Department granted leave to appeal to the New York Court of Appeals during the 2010-11 Term. Both cases involve important issues of LLC fiduciary duties. In the first case, Roni v. Arfa, the Court of Appeals will be asked to decide: (a) whether the organizer of a New York LLC owes a fiduciary duty as a matter of law to the prosective investors he solicits notwithstanding the absence of any trust or confidence being reposed in the organizer by the prosective investors or any superior skill or expertise on the part of the organizer compared to the prosective investors, and (b) whether the anti-fraud provision of New York's Martin Act applies only to public securities offerings and not to private securities offerings. In the second case, Arfa v. Zamir, the Court of Appeals will be asked to decide whether a release given by a fiduciary of a New York LLC is void where the fiduciary failed to disclose material facts to the releasor concerning the released conduct. In each of these two cases, Schlam Stone & Dolan partner David Katz and of-counsel attorney Michael Marcus succeeded in convincing the Appellate Divsion to certify these questions to the Court of Appeals for review. Their success in each case is discussed on the influential web blog nybusinessdivorce.com.
Sometimes the law of New York treats an LLC like a corporation, sometimes like a partnership, and sometimes like a unique entity. In related cases Roni LLC v. Arfa and Arfa v. Zamir the lower court rulings, subsequently appealed in the Appelate Division First Department explored various aspects of a real estate venture gone arwy, one in which the structure of the central entity, a New York LLC, has fostered ambiguities that present the courts with daunting challenges. Rachel L. Arfa, a central party in the two cases, has selected Schlam Stone & Dolan partner David Katz and of-counsel attorney Michael Marcus as appellate counsel. They have been able to appeal a lower court defeat, achieve some initial appelate gains, and subsequently get the New York Court of Appeals to hear the matters.
In the action, plaintiffs claimed a common-law right to expel defendant Winston Chiu, represented by Schlam Stone & Dolan partner Jeffrey Eilender and associate Samuel Butt, from his position as a member of an LLC. In March, 2010, the Second Department upheld a trial court ruling denying that plaintiffs had such a right at common law. Commentators are describing the Second Department’s ruling as representing the end of "the era of freewheeling judicial remedies" in LLC breakup cases.
On January 12, 2010, Schlam Stone & Dolan partner Richard H. Dolan, representing the Governor, the Legislature and the State of New York, argued before the New York Court of Appeals on behalf of the defendants in three judicial pay cases. The three cases, which are being followed around the country, each involve plaintiffs who filed suit seeking to force New York State to give pay raises to the state judiciary, and were consolidated by the Court of Appeals for a joint argument, which lasted two hours.
A Schlam Stone & Dolan victory has been lauded as one of the top ten New York business divorce cases of 2009 by www.nybusinessdivorce.com, a respected commentator on New York law regarding disputes between business owners. The victory occurred in Ficus Investments, Inc. v. Private Capital Management, Inc., a case in which Schlam Stone represents the former CEO of a limited liability company that serviced hundreds of millions of dollars of distressed residential mortgages. In a decision dated February 23, 2009, New York Supreme Court Justice Bernard J. Fried agreed with Schlam Stone that Section 702 of the New York Limited Liability Company Law does not permit a New York limited liability company to be dissolved by the filing of a motion in an ongoing action but instead requires a plenary action to be filed seeking dissolution of the LLC. This is the first ruling by a New York state court to decide this issue.
Schlam Stone & Dolan LLP partner Jeffrey M. Eilender moved to dismiss a law suit to enforce an alleged contingency agreement against Judith Regan by her former law firm, Dreier LLP, on the grounds that in the course of the fee litigation Dreier violated a protective order by revealing confidential information. The motion also alleges that the Dreier firm threatened to reveal the information in order to intimidate Ms. Regan into agreeing to Dreier's settlement demand.
Schlam Stone & Dolan partners Richard Dolan and Thomas Kissane successfully represented the Carlyle Group and Extell Development, which were sued by Trump for alleged fraud arising from the sale by Trump and others of property in the Penn Central rail yards.
Schlam Stone lawyers Jeffrey Eilender, Brad Nash and Hillary Zilz Prudlo , along with Paul Batista, acting of counsel, represent an investor and a trader in connection with a major SEC investigation of alleged insider trading by Swiss-based traders and investors.
Schlam Stone & Dolan LLP partner Jeffrey M. Eilender and associate Samuel L. Butt recently obtained another victory in the SDNY litigation between celebrity online blogger Perez Hilton and a rival blogger, a ruling that the rival's copyright infringement and other claims (filed in retaliation for Hilton's own suit) should be dismissed with prejudice for failure to state a claim.
Schlam Stone & Dolan LLP partner Jeffrey M. Eilender and associate Samuel L. Butt obtained a victory for celebrity blogger Perez Hilton by defeating a motion for a preliminary injunction based on the "Hot News" doctrine by a rival blogger, whom Hilton had initially sued.