Divorcing With A Small Business

Business partner disputes can become so contentious as to lead to dissolution of the business or expulsion of a partner, and things can become even more complicated in the event the business partners are divorcing spouses. Many small businesses are started by one spouse and ultimately, as the business grows, both spouses become full-time employees. With these businesses starting as a simple idea that grows, it is rare to find an operating agreement in place. During divorce it often becomes impracticable for the parties to cooperate on any level as a result hurt feelings and the raw emotions which arise thereafter. Limited Liability Company (LLC) is one of the most common forms of business today. Formerly governed by the Ne w Jersey Limited Liability Company Act (LLCA), partners could be removed from the business for enumerated reasons including wrongful conduct, significant breach of the LLC's operating agreement or it unreasonable to expect the business to continue with the member involved. The LLCA was replaced by the Revised Uniform Limited Liability Company Act (RULLCA) in 2013, leaving the expulsion provisions substantially intact as can be seen by review of N.J.S.A. 42:2C-46(e). The unpublished case, IE Test LLC v. Carroll, A-6159-12T4, 2015 N.J. Super. Unpub. LEXIS 567 (Mar. 17, 2015), heard in the Essex County Chancery Division, was a case of first impression in New Jersey regarding removal of a member of an ongoing and viable LLC that the other members wished to continue. The members failed to enter into an operating agreement upon formation of the business, leaving the N.J. Appellate Division to interpret N.J.S.A. 42:2B-24(b)(3)(c) noting that expulsion of a member does not require past wrongful conduct but rather charges the court with determining whether it is feasible for the business to continue with any viability if the member is not expelled. The court found that the it need not find it impossible for the business to continue but rather that the business cannot carry out its purpose without substantial dysfunction if the member remains. The NJ Appellate Division also looked to Gagne v. Gagne, 338 P.3d 1152 (Colo. Ct. App. 2014), wherein the Colorado Court of Appeals interpreted the same factors as wet forth in RULLCA resulting in a 7 factor test for determining whether expulsion is appropriate. The factors set forth in Gagne include 1) whether management is unwilling or unable to reasonably promote the reasons for which the company was formed; 2) whether there was misconduct on the part of the member the others are seeking to expel; 3) whether the members are clearly unable to work together for the benefit of the company; 4) whether there is a deadlock between the members; 5) whether there are provisions in the operating agreement that can resolve a deadlock; 6) whether the business remains viable; and 7) whether it will be financially feasible to continue the company after any harm from the dispute and payment to the expelled member. After considering the language of N.J.S.A. 42:2B-24(b)(3)(c), the factors set forth by the Colorado Court of Appeals in Gagne and the fact that the members had failed to prepare an operating agreement to govern their acts, the N.J. Appellate Division upheld the decision of the Essex County Chancery Division Judge that the minority member should be expelled. If you are involved in, or considering, divorce and own a small business with your spouse, it is critical that you speak with an experienced attorney to ensure you are aware of your rights. Whether you will be paying or receiving alimony or child support, the continued viability of the business will likely be critical to your and your family's economic future. For more information about small business divorce, high net worth divorce, partner and shareholder agreements or other matters involving divorce or business in New Jersey visit DarlingFirm.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.

Child Custody Transfer To Father Stands While Awaiting Plenary Hearing

Custody of a 13 year old child was transferred from the mother to the father in Skinner v. Cole. The parties were never married and the mother, Janice Skinner, Plaintiff, was Noah's primary caregiver since birth as before he was 2 years old she and Noah moved to Pennsylvania while the father remained in New Jersey. When Noah was 13, the Defendant, Bruce Cole, Noah's father, filed a petition for custody claiming Noah desired to live with him, Plaintiff's relatives used drugs in the residence, the Plaintiff worked long hours and rarely gave him attention, and Noah was frequently subject to assaults in the school he attended at his mother's residence. Alternatively, the Defendant claimed to enjoy a good relationship with Noah and live in a drug-free environment with a good school district. Plaintiff's reply maintained that she enjoyed a good relationship with Noah, he had a glucose problem that the mother was used to managing properly while the father mismanaged the problem while Noah was visiting with him, the father's house offered inadequate quarters for Noah , and Noah was an honor roll student in his current school yet she was still seeking a better school system for him. The Plaintiff further added that the Defendant frequently lied to Noah to destroy his faith in his mother, that her family members did not use drugs, and the only reason for the Defendant's motion was to terminate child support. The trial judge interviewed Noah who expressed a desire to live with his father and offered positive reasons for the change and negative reasons for wishing to leave his mother's residence. The trial judge took no testimony from the parties and only briefly addressed some of the factors set forth in N.J.S.A. 9:2-4(c), which are required considerations in making custody decisions, then rendered the decision that custody of Noah would be transferred to the Defendant. The mother, Plaintiff, appealed the transfer of custody on the basis of the trial court's failure to hold a plenary hearing before rendering its decision. The NJ Appellate Decision considered the requirement of Hand v. Hand, 391 N.J. Super. 102, 105 (App. Div. 2007) that a party seeking a modification of child custody must first demonstrate a change in circumstances substantial enough to affect the welfare of the child, especially when there are material issues of fact in dispute. Further, Faucett v. Vasquez, 411 N.J. Super. 108, 119 (App. Div. 2009) wherein the court set forth that custody should only be modified after a full hearing unless exigent circumstances evidencing extreme danger are present. The NJ Appellate Division reversed and remanded the matter for a plenary hearing to resolve the issues in dispute between the parties. It should be noted that, pending the plenary hearing following appeal, custody of Noah remained with the Defendant as the parent of primary residence rather than being returned to the mother. If you are seeking a modification in child custody or defending a motion filed by your child's other parent, it is critical that you are aware of the factors and procedures involved. For more information regarding child custody, child support, divorce, emancipation, relocation of a child or other family law matters in New Jersey, visit DarlingFirm.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.

Emancipation Requires Oral Argument

Thomas Mynes sought the emancipation of his 22-year old daughter and the concomitant termination of child support to Mary Mynes, his former spouse. The application for emancipation was terminated without a hearing and Plaintiff appealed. The parties divorce included a property settlement agreement (PSA) which addressed the termination of child support. In 2012, the Plaintiff sought emancipation of the parties two children and the Defendant did not oppose the motion but the Family Part judge determined that only the parties' son need be emancipated and no oral argument was needed. In 2014, the Plaintiff again filed for emancipation of the parties' daughter claiming that she would have been done with school had she attended full-time and the Defendant filed papers in opposition claiming the parties' daughter was still in school and seeking counsel fees. The court again did not hear oral argument, as required by N.J.C.R. 5:5-4 which requires oral argument "when significant substantive issues are raised and argument is requested." Palombi v. Palombi, 414 N.J. Super. 274 (App. Div. 2010). The judge denied the motion and denied both parties' requests for counsel fees. The judge determined that R.M. remained in school due to a time off for a medical hiatus which is not an emancipation event. The judge held that emancipation of the parties' daughter should occur in 2016. On appeal in Mynes v. Mynes, the Plaintiff claimed that a hearing was required. The N.J. Appellate Division looked to Patetta v. Patetta, 358 N.J. Super. 90 (App. Div. 2003), Keegan v. Keegan, 326 N.J. Super. 289 (App. Div. 1999) and Llewelyn v. Shewchuk, 440 N.J. Super. 207 (App. Div. 2015) in review of standards and presumptions relating to emancipation. The Family Part judge failed to address whether R.M. had moved beyond the sphere of parental influence. The judge's denial of oral argument based on the conclusion that no evidence outside the motion papers existed was misplaced as there was a question regarding the extent and reason for any interruption of the daughter's education. In light of the discrepancies in the parties' positions, the N.J. Appellate Division reversed and remanded the matter for a plenary hearing regarding the contested issues. If you are seeking or fighting the emancipation of a child, you should consult an experienced family law attorney immediately in order to protect your rights and ensure your request is viable. For more information on child support, custody, parenting time/visitation, divorce, alimony, palimony, modification of a family court order or other family or juvenile law matters in New Jersey visit DarlingFirm.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney.