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Florida Court Allowed to Appoint Referee to Facilitate Board Meetings for Delaware Business Entities

IMAG1946Sometimes, corporate divorces can be just as messy (if not more so) that marital ones. The disintegration of a joint venture between two sides intended to broadcast TV programming to the Caribbean ended in the Florida courts. The 3d District Court of Appeal recently ruled in the case, determining that, even though the business entities the venture partners created were Delaware ones, the Florida courts could appoint a referee to hear the dispute because the venture was based in Miami-Dade County.

The dispute was the courtroom culmination of a long-simmering business battle. It started in 2009, when Caribevision, a Spanish-language TV network, decided to enter into a 50-50 joint venture with a group led by Omar Romay, the owner of several Spanish-language TV stations, to produce television programs that would broadcast to viewers in the Caribbean. The groups formed several Delaware business entities, including an LLC, that they headquartered in South Florida.

The venture partners soon disagreed, and the operation eventually fell into gridlock, with the venture’s entities unable even to hold board meetings because they could not establish the quorum required by their founding documents. In 2013, Caribevision sued Romay, seeking dissolution of the venture’s entities and the appointment of a receiver for the entities. The trial court concluded that the venture’s entities faced irreparable harm because of their continued inability to hold a board meeting, but, since the entities were Delaware ones, the court opted to appoint a referee to facilitate the holding of the board meetings, as opposed to appointing a receiver.

Both sides appealed, with Romay’s side arguing that Florida courts did not have the required jurisdiction to appoint the referee, since doing so amounted to illegally regulating the internal affairs of a non-Florida corporation. The appeals court rejected this argument, going as far as to state that the trial court could have appointed a receiver and still been within the confines of what Florida law allows. Florida’s Business Corporations Act and the state’s Limited Liability Company Act explicitly give Florida courts the authority to appoint a receiver in the state for a foreign business organization, even if no receiver exists in the entity’s home state. That receivership becomes an ancillary one only after a court in the entity’s home state appoints a receiver there. The Legislature put these statutory provisions into effect after realizing that an entity, whether a Florida one or a foreign one, might need local supervision if it had “an office, property and operations” in the state.

The court also rejected Caribevision’s contention that the trial court erred in not appointing the receiver. When Caribevision made its arguments to the trial court, it requested the receivership under the law of Delaware, not the statutory provisions of the Business Corporation Act and the Limited Liability Company Act. The court instructed Caribevision that, on remand, it could either renew its receivership request under Florida law or file an action in the Delaware Chancery Court.

Commercial joint ventures offer the promise of two sides joining forces for the benefit of both. Unfortunately, not all joint ventures have happy endings. If you’re involved in a dispute regarding your joint venture, contact the Florida business law and commercial litigation attorneys at Stok Folk and Kon. Our attorneys can help you put a plan in place to protect your interests properly and provide you with aggressive representation if litigation becomes necessary.

Contact us online or by calling (305) 935-4440 to schedule your consultation.

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