WHERE THERE’S A WILL, THERE’S A FAMILY – By ALEXANDER D. FISHER, ESQ.Permalink
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.