New York Small Business Law

Lack of Shareholder Agreement leaves Dentist's widow empty handed

As New York Business Divorce reports today, the lack of a shareholder agreement caused a New York widow of a dentist, who was practicing dentistry in a professional corporation, to be left with nothing.  

Despite the fact that the deceased dentist was a 75% shareholder in the dentist professional corporation and his widow had found a dentist purchaser for the dentist practice offering $530,000, the minority dentist shareholder was able to defeat her and will likely be able to force her to sell her late husband's share in the business for $0.  

The reason for all this was the fact that shareholders of professional corporations must all be licensed to exercise the profession of the corporation, in this case dentistry.  If one dentist dies, his non dentist heirs, here the widow, are severely limited in their rights to exercise rights of a shareholder.  

However, all of this could have been prevented by a properly drafted shareholder agreement including provisions dealing with the death of any shareholder and his heirs' rights.  The shareholder agreement would have preempted the New York default provisions contained in the business corporation law.  These default provisions caused the widow's dilemma.  

Read New York Business Divorce for a full analysis of the case.

Can you be liable for third party defamatory comments about your competitor posted on your Blog?

Most businesses now have a blog connected to their website.  Blogs attract comments.  What if a particular nasty comment is posted by a visitor about one of your competitors?  Can the competitor come after you for defamation or unfair competition? New York's Highest Court has recently said, no, a business is not liable for the defamatory comment of a visitor on its blog  (Shiamili v. Real Estate Group of N.Y., Inc).  

Communications Decency Act

The court based its decision on  Section 230 of the Communications Decency Act. This federal law provides that no provider of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.  Thus, the publisher of a blog is generally not liable for comments by its readers.

However, this case had an interesting twist which makes you wonder whether there should be some liability on the blogging business after all.

An employee of the company who was the moderator of the blog took it upon himself to repost the nasty comments in a new post on the blog and added some commentary of his own; to introduce the comments, he wrote "an now it's time for your weekly dose of hate".  Then he posted a picture of Jesus Christ with the competitor's face and the caption "[competitor name]: King of the Token Jews".  Still, the court decided, no liability on the company's part.      

Even though the company got away with the employee's conduct, I'd say it would be more advisable to let comments be and stay away from highlighting or embellishing any ugly comments about your competitors. This is how some of the judges of the court felt as well; Chief Judge Jonathan Lippman wrote in his dissenting opinion that the company's complicity in defaming a direct competitor takes takes us so far afield from the purpose of the Communications Decency Act as to make it unrecognizable.