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Stefan J. Padfield

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Director of the NCPPR's Free Enterprise Project. Prior experience includes 15+ years as a law professor, two federal judicial clerkships, private practice at Cravath, Swaine & Moore, LLP, and 6 years enlisted active duty (US Army). Immigrant (naturalized).

A recent California court order granting a motion for final settlement in an antitrust class action suit appears to have left LLCs out as “person(s)” in the definitions.  Here’s the clause, which is repeated a few times in the Settlement Agreement: 

(w) “Person(s)” means an individual, corporation, limited liability corporation, professional corporation, limited liability partnership, partnership, limited partnership, association, joint stock company, estate, legal representative, trust, unincorporated association, government or any political subdivision or agency thereof, and any business or legal entity and any spouses, heirs, predecessors, successors, representatives or assignees of any of the foregoing.

IN RE: LITHIUM ION BATTERIES ANTITRUST LITIGATION, 2019 WL 3856413, Slip Copy (N.D.Cal. Aug. 16, 2019) (emphasis added). 

A “limited liability corporation” and a “corporation” are the same thing.  I am certain the “limited liability corporation” language was intended to cover “limited liability companies” or LLCs.  But it doesn’t cover LLCs, which are different entities. Of course, the fact that the definition includes all “unincorporated associations,” LLCs are included, but this is sloppy and in my humble view, should never have been approved. 

California has been know to make this distinction murky (see here) and some California courts like to just plain get…

Yesterday was the first day of 1L Orientation at Creighton University School of Law, which meant it was really my first day of school as a dean, too. I’ve been on the job for a month, but summer school has a very different feel.  This morning I also dropped my son off for this first day of high school.  (And my daughter starts 6th grade tomorrow.) It’s a lot of firsts in our new city, at our new schools, and it’s exciting. And perhaps a little intimidating. I am sure it was for our 1Ls, just like it was back when I started law school.  And I was about to turn 30.

There’s lots of good advice for new law students our there (here, for example), so I focused my brief welcome to our new 1Ls on introducing myself and laying out my expectations for all of us.  This is obviously specific to Creighton Law, though I think and hope it is true at a lot of other places, too. I didn’t actually write out a speech, but here’s the gist: 

First, I let our new students know that we’re in this together. I chose to be here…

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I decided to track the path of “limited liability corporation” (which should be “limited liability company” when referring to an LLC) in a recent court case.  It’s my thing.  Anyway, this gem popped up today: 

This Court previously held “although wage, investment, and other economic losses may flow to an individual from discriminatory harm suffered by a corporation, those injuries are not ‘separate and distinct’ from those suffered by that corporation.” Club Xtreme, Inc. v. City of Wayne, 2010 WL 1626415 at *5 (E.D. Mich. Apr. 21, 2010). Under Michigan law, rules with respect to corporations apply equally to limited liability corporations. Hills and Dales General Hosp. v. Pantig, 295 Mich.App. 14, 21 (2011). As such, a limited liability company is its own “person,” separate and distinct from its owners. Id. Here, Darakjian is separate and distinct from his LLC, TIR.

Darakjian v. City of Birmingham, 2019 WL 3412883 (E.D.Mich.) at * 4. 
 
First, “Club Xtreme?”  Yeah, that’s my Michigan. 
 

Second, “Under Michigan law, rules with respect to corporations apply equally to limited liability corporations.” True as to LLCs, but, um, no, LLCs are not corporations. So where did that come from? 

Well, this part

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I made a similar post on social media last night, but with the first bar exam of my time as a law school dean beginning this morning, I thought I post those thoughts here.  To this taking this bar exam (and any future bar exam): 

You have worked hard, now is the time for you to show what you know. I wish you success. As you get ready to sit for the exam, your preparation is done. But there are still things you can do to improve your odds. Here’s what I ask you to do when you take the #BarExam:

*Be thorough.* Answer every question, written and multiple choice. Leave nothing blank. Give yourself a chance.

*Be focused.* Pay attention to time. Don’t spend twenty-five minutes on one multiple choice question or fail to get to an essay. Spend no more than your allotted time for each question, give an answer, and move on. Come back if you have time after everything else is answered.

*Be relentless.* If you make a mistake, do your best to work around it. If you don’t know something, give it your best guess and move on. Don’t give up. Don’t

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In 2010, an Illinois court reviewed Delaware business law making the following observations:

With respect to a limited liability corporation, Delaware law states that “[u]nless otherwise provided in a limited liability company agreement, the management of a limited liability company shall be vested in its members….” 6 Del.C. § 18–402. Thus, pursuant to Delaware law, directors are generally provided with authority for managing the corporation and members are generally provided with authority for managing the limited liability company. The bankruptcy court therefore properly found that a member of a LLC would be an analogous position to a director of a corporation under Delaware law.

Longview Aluminum, L.L.C. v. Brandt, 431 B.R. 193, 197 (N.D. Ill. 2010), aff’d sub nom. In re Longview Aluminum, L.L.C., 657 F.3d 507 (7th Cir. 2011).

Well, initially, it must be noted that an LLC is not a corporation at all.  As the quoted Delaware law observes, it is a “limited liability company.” Corporations and LLCs are distinct entities. 

I’ll also take issue with adopting the bankruptcy court’s finding “that a member of an LLC would be an analogous position to a director of a corporation under Delaware law.”  I will concede…

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