Recently, the Firm succeeded in obtaining summary
judgment on behalf of our client - a well-known catering establishment in Great
Neck, New York - in a case involving a dispute over the ownership rights of
shares in a family-owned business.
In
this matter, Plaintiff, one of the sons of the deceased founder of the
business, sought to block his stepmother from taking shares of the company that
had been bequeathed to her by the decedent’s “pour over” will and subsequent
trust. Plaintiff argued that per the
terms of a shareholders agreement for the business, which pre-dated the will by
almost 20 years, his stepmother was not entitled to hold the shares because the
agreement had purportedly limited the right to hold shares to “family members”. Plaintiff argued that as a spouse of the
decedent, his step-mother did not qualify as a “blood” relative, and therefore
was not a family member. He also noted
that a separate clause in the agreement required any spouse who was no longer
married to a member of the decedent’s family to return her shares in the
company, and argued that since the decedent had passed away, his stepmother
could no longer be married to him. He
accordingly commenced a declaratory judgment action seeking a declaration that
his stepmother was not entitled to hold these shares, and forcing her to sell
the shares to the remaining shareholders, including Plaintiff.
In
our motion for summary judgment, we argued that there was no language in the shareholders
agreement that limited the right to hold shares to “blood” relatives – rather,
the agreement limited the right to hold shares to family members. Accordingly, as the spouse of the decedent at
the time of his death, the stepmother was clearly a family member under any
reasonable definition of the term. We
noted that the requirement in the agreement requiring divestiture of shares in
the company once a spouse was no longer married to a member of the decedent’s
family was clearly limited to spouses of the decedent’s relatives – there was
no clause requiring the spouse of the decedent himself to return any shares she
held. We also noted that Plaintiff had
repeatedly acquiesced to his stepmother receiving the shares, both in a very
detailed waiver agreement signed in Florida at the time of the distribution of
shares from the trust, and in multiple clear ratifications of his stepmother’s
status as a shareholder thereafter. Furthermore,
we argued that per the terms of the waiver, any contest to the terms of the
trust were to be made in Florida under Florida law, and that pursuant to the
statute of limitations governing such claims in Florida, Plaintiff was barred
by the statute of limitations from challenging the terms of the trust.
In
his decision, Nassau County Justice Thomas Feinman agreed with our position
that Plaintiff’s stepmother unquestionably qualified as a member of the family
based upon even a narrow reading of the term “family”. The Court also found that the terms of the
agreement did not contemplate the return of shares held by the decedent’s
spouse upon his death, but only those shares held by a spouse of the decedent’s
relatives. Moreover, Justice Feinman noted
that Plaintiff had unequivocally waived his right to challenge the grant of
shares to his stepmother when he executed the waiver agreement at the time the
shares were transferred. The Court therefore
granted our clients summary judgment as to all claims asserted against them.
This
decision highlights the value of a well-worded waiver agreement relating to the
distribution of property from an estate or a trust, particularly when there may
be the potential for inter-family squabbles down the line. Such an agreement allows the parties
finality, and ensures that an aggrieved relative will not seek to undo various
grants of property years later. The
decision also illustrates the value of a carefully drafted agreement regarding
transfer of shares in a business, and how a seemingly mundane choice of words
when drafting agreements can have massive unforeseen consequences a generation
later.
The decision, Sessa v Sessa, can be found
on this Firm’s website under Publications.
-7/19/16
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