Peter Mahler on his New York Business Divorce Blog, here, discusses a New York case that involves a claim by an LLC member against the accountant of a Delaware LLC that was the subject of a dissolution proceeding in the Delaware Chancery Court. The Chancery Court case settled but one member later claimed that the LLC’s accountant impermissibly help the other member in the dissolution proceeding. Excerpts from the excellent blog post follow:
… until Anda Management, LLC v. Needlemen & Schacter, LLP, 2008 NY Slip Op 31534(U) (Sup Ct Nassau County May 20, 2008), I’d never heard of spin-off litigation involving charges against a professional for improperly taking sides in the underlying dissolution case.
Here’s what happened: Anda Management and Wilmington Paper Corp. formed a Delaware LLC called Worldwide Fibers to market paper products overseas. Worldwide retained the defendant accounting firm as its accountant without a written agreement. Three years later, Worldwide’s principals had a falling out, prompting Wilmington to file a proceeding for judicial dissolution of Worldwide in Delaware Chancery Court. Wilmington accused Anda’s principals of impermissibly withdrawing funds from Worldwide for personal reasons and then falsely booking them as legitimate business expenses.
The Delaware proceeding ultimately settled when Anda acquired Wilmington’s interest in Worldwide.
Anda and its principals subsequently brought a New York action against the accountant for breach of fiduciary duty and malpractice arising from its conduct in the Delaware case. The plaintiffs alleged that the accountant consulted with and assisted Wilmington’s trial counsel by reviewing a proposed complaint, participating in conference calls with Wilmington’s counsel, and submitting affidavits supportive of Worldwide’s claims in which the accountant allegedly made false and contradictory statements concerning accounting advice previously given by the accountant to the plaintiffs prior to the dissolution. The plaintiffs also alleged that the accountant was aware that the expenses challenged by Wilmington were proper, and that the accountant had affirmatively counseled the plaintiffs to take some of the disbursements challenged by Wilmington. The plaintiffs further alleged that one of the accountant’s employees gave the social security numbers of Anda’s principals to Wilmington’s counsel in order to perform credit searches on them.