Always Check Provenance Before Taking an Assignment of LLC Interest

Always Check Provenance Before Taking an Assignment of LLC Interest

       Peter Mahler, in his blog New York Business Divorce, on March 2 posted an interesting article under the title Always Check Provenance Before Taking an Assignment of LLC Interest; HERE IS A LINK to that posting.

      Therein, he reviewed the decision rendered in Behrend v. New Windsor Group, LLC,180 A.D.3d 636, 118 N.Y.S.3d 709 (N.Y. App. Div. 2020).  Essentially, an assignee claimed that they owned a 50% interest in an LLC that owned a shopping center. It turned out, however, that the alleged assignor did not own a 50% membership interest, but rather held a contingent interest, the terms of which were never satisfied. As such, the purported assignor did not own the membership interest, and as such could not transfer it. 

      Peter’s advice, which I would second, is that anyone seeking to take an assignment of an LLC interest needs to adopt an attitude of “buyer beware” and undertake the often significant due diligence that is necessary to confirm they are buying what they really think they are buying.