Causes of Action for Books and Records Inspection Dismissed for Lack of Business Purpose

On January 31, 2019, the First Department issued a decision in Austin v. Gould, 2019 NY Slip Op. 00677, dismissing a cause of action seeking to inspect a limited liability company's books and records for failure to identify a business purpose for the inspection, explaining:

The first two causes of action seek to compel access to and examination of the Managing LLCs' and the Retail Partners' books and records. Defendant Gould, the managing member of the named Managing LLCs, properly determined that there was no valid business purpose, as required by the Managing LLCs' operating agreements, for inspecting the Managing LLC's books and records, because plaintiff Austin's purpose for inspecting related to claims for acquisition fees and management fees that had already been dismissed in a 2013 action.

(Internal citations omitted).

This decision relates to a significant part of our practice: business divorce (a break-up between the owners of a closely-held business). Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding a business divorce.