Mizrahi v. Cohen

KINGS COUNTY
Business Law

New York Law Journal

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Justice Carolyn Demarest

Fifty percent member of the subject LLC, Mizrahi, was granted a petition for dissolution. Partner Cohen moved for appointment of a receiver, but the court denied the motion noting it would further dissipate the resources of the LLC, when Mizrahi was adequately managing and protecting its assets. Mizrahi has offered to buy out Cohen's interest based on the appraised value of the real property, yet Cohen insisted on a public auction sale. The court found such sale would be "prohibitively costly" and would exhaust all the LLC's assets without actually paying off any of its debts. It also noted it would render Cohen liable for any shortfall in funds, and given his prior defaults and unauthorized withdrawal of capital, it was unlikely he would make good on such obligation. The court found the operating agreement did not expressly authorize the relief Mizrahi sought in the context of a judicial dissolution. Yet, in light of Cohen's continued failure to pay even use and occupancy due on his premises, thereby unjustly enriching him, the inequity was "profound and warrants court intervention." It appointed a liquidation trustee permitting Cohen and Mizrahi to submit bids to purchase the others interest, but absent same, the trustee would hold a public auction sale.

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