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It’s not just judges and lawyers. Big banks, too, are apparently not committed to clear and accurate language when it comes to LLCs (limited liability companies).  A recent antitrust case provides an excerpt from a Barclays Settlement Agreement that states:

Paragraph 2(cc) of the Barclays Settlement Agreement defines “Person” as: “An individual, corporation, limited liability corporation, professional corporation, limited liability partnership, partnership, limited partnership, association, joint stock company, estate, legal representative, trust, unincorporated association, municipality, state, state agency, any entity that is a creature of any state, any government or any political subdivision, authority, office, bureau or agency of any government, and any business or legal entity, and any spouses, heirs, predecessors, successors, representatives, or assignees of the foregoing.” Barclays Settlement Agreement ¶ 2(cc).

In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 CIV. 5450, 2018 WL 3677875, at *20 (S.D.N.Y. Aug. 1, 2018) (emphasis added). 
 
I checked to see if this was the court’s error, but I found a link to what appears to be the settlement agreement, and it, too, includes “limited liability corporation” in paragraph (cc)’s definition.  Given that it is an error in the original, the judge, or at least the

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Within the next few weeks, the Supreme Court will decide a trio of cases about class action waivers, which I wrote about here. The Court will decide whether these waivers in mandatory arbitration agreements violate the National Labor Relations Act (which also applies in the nonunion context) or are permissible under the Federal Arbitration Act. 

I wonder if the Supreme Court clerks helping to draft the Court’s opinion(s) are reading today’s report by the Economic Policy Institute about the growing use of mandatory arbitration. The author of the report reviewed survey responses from 627 private sector employers with 50 employees or more. The report explained that over fifty-six percent of private sector, nonunion employees or sixty million Americans must go to arbitration to address their workplace rights. Sixty-five percent of employers with more than one thousand employees use arbitration provisions. One-third of employers that require mandatory arbitration include the kind of class action waivers that the Court is looking at now. Significantly, women, low-wage workers, and African-Americans are more likely to work for employers that require arbitration. Businesses in Texas, North Carolina, and California (a pro-worker state) are especially fond of the provisions. In most of the highly populated states, over forty…

No one will  be shocked that my last post of the year is about a court referring to a limited liability company (LLC) as a “limited liability corporation.”  It’s wrong to do so, and it’s my thing to point out when it happens.  This case is especially striking (and perhaps upsetting) because of the context of the reference.  In this 2015 case that just showed up on Westlaw (or at least, in my alerts), “Plaintiff argues that because Defendants are all limited liability corporations they must identify and prove the citizenship of their various members and that they have failed to do so.” Skywark v. Healthbridge Mgmt., LLC, No. 15-00058-BJR, 2015 WL 13621058, at *1 (W.D. Pa. July 22, 2015).  They mean LLCs, not corporations.  Okay, so far this is a pretty typical mistake.  But wait! 

In this case, the defendants did not allege the citizenship of the members of the defendants’ LLCs in their initial Notice of Removal, so the plaintiffs claimed that a filed  amendment was more than “technically defective.” In claiming the amendment was “minor, the defendants rely cited  O’Boyle v. Braverman, No. 08-553, 2008 U.S. Dist. LEXIS 62180 (D.N.J. Aug. 12, 2008), which found

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A new Maryland case deals with claims against a limited liability company that the plaintiff claimed was “registered as a limited liability corporation (‘LLC‘).” Farm Fresh Direct Direct By a Cut Above LLC v. Downey, 2017 WL 4865481, at *2 (D. Md., 2017).  The court repeats the mistake, but the complaint is the original source, as it incorrectly identifies the LLC as a “corporation” and not a company.  The court then explains some of the allegations as follows: 
Plaintiff alleges that Sinsky violated 15 U.S.C. § 1125(a)(1)(A) and engaged in unfair and deceptive trade practices, in violation of Maryland common law. ECF 1, ¶¶ 17-22, 23-26. At its core, plaintiff’s contention is that “Sinsky is the resident agent and incorporator” of Farm Fresh Home (ECF 1, ¶¶ 12-13), and in that capacity she “filed” the articles of organization for Farm Fresh Home, creating a name for the “competing company” that is “intentionally confusing” because of its similarity to Farm Fresh Direct. ECF 1, ¶ 12.
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*4 Farm Fresh Home is a limited liability company. As a threshold matter, I must determine whether Sinsky is subject to suit in light of Farm Fresh Home’s

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On Monday, the Supreme Court heard argument on three cases[1] that could have a significant impact on an estimated 55% of employers and 25 million employees. The Court will opine on the controversial use of class action waivers and mandatory arbitration in the employment context. Specifically, the Court will decide whether mandatory arbitration violates the National Labor Relations Act or is permissible under the Federal Arbitration Act. Notably, the NLRA applies in the non-union context as well.

Monday’s argument was noteworthy for another reason—the Trump Administration reversed its position and thus supported the employers instead of the employees as the Obama Administration had done when the cases were first filed. The current administration also argued against its own NLRB’s position that these agreements are invalid.

In a decision handed down by the NLRB before the Trump Administration switched sides on the issue, the agency ruled that Dish Network’s mandatory arbitration provision violates §8(a)(1) of the NLRA because it “specifies in broad terms that it applies to ‘any claim, controversy and/or dispute between them, arising out of and/or in any way related to Employee’s application for employment, employment and/or termination of employment, whenever and wherever brought.’” The Board believed…

Yesterday, Professor Bainbridge posted “Is there a case for abolishing derivative litigation? He makes the case as follows: 

A radical solution would be elimination of derivative litigation. For lawyers, the idea of a wrong without a legal remedy is so counter-intuitive that it scarcely can be contemplated. Yet, derivative litigation appears to have little if any beneficial accountability effects. On the other side of the equation, derivative litigation is a high cost constraint and infringement upon the board’s authority. If making corporate law consists mainly of balancing the competing claims of accountability and authority, the balance arguably tips against derivative litigation. Note, moreover, that eliminating derivative litigation does not eliminate director accountability. Directors would remain subject to various forms of market discipline, including the important markets for corporate control and employment, proxy contests, and shareholder litigation where the challenged misconduct gives rise to a direct cause of action.

If eliminating derivative litigation seems too extreme, why not allow firms to opt out of the derivative suit process by charter amendment? Virtually all states now allow corporations to adopt charter provisions limiting director and officer liability. If corporate law consists of a set of default rules the parties generally should be

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Last Thursday, Jay Brown filed an amicus brief with the U.S. Supreme Court coauthored by him, me, Jim Cox, and Lyman Johnson.  The brief was filed in Leidos, Inc., fka SAIC, Inc., Petitioners, v. Indiana Public Retirement System, Indiana State Teachers’ Retirement Fund, and Indiana Public Employees’ Retirement Fund, an omission case brought under Section 10(b) of and Rule 10b-5 under the Securities Exchange Act of 1934, as amended.   An abstract of the brief follows.

This Amicus Brief was filed with the U.S. Supreme Court on behalf of nearly 50 law and business faculty in the United States and Canada who have a common interest in ensuring a proper interpretation of the statutory securities regulation framework put in place by the U.S. Congress. Specifically, all amici agree that Item 303 of the Securities and Exchange Commission’s Regulation S-K creates a duty to disclose for purposes of Rule 10b-5(b) under the Securities Exchange Act of 1934.

The Court’s affirmation of a duty to disclose would have little effect on existing practice. Under the current state of the law, investors can and do bring fraud claims for nondisclosure of required information by public companies. Thus, affirming the existence of…

We are in the middle of the final exam period, so this post will be short.

A friend of mine recently told me about a situation where he had been cheated out of a few thousand dollars. A clear contract was involved, and based on the facts I was told, the other party seems obviously in the wrong.

These situations, even if clear from the legal side, are often not worth pursuing through litigation in our current U.S. system. As most readers surely know, in the U.S. parties generally have to pay their own lawyers regardless of the outcome. In some situations, the lawyers may take the case on contingency, but most lawyers I know will not take a contingency case where the maximum recovery is a few thousand dollars. Maybe small claims court would be appropriate, but the learning and time costs involved may outweigh the potential recovery.

Perhaps this is as it should be. Perhaps we want parties to settle these smaller disputes outside the courts.

But, especially when the party in the wrong is much larger, and especially when the wrong is quite clear, it seems like we might want the courts involved to prevent this type of bad action…

As Haskell earlier announced here at the BLPB, The first U.S. benefit corporation went public back in February–just before publication of my paper from last summer’s 8th Annual Berle Symposium (about which I and other BLPB participants contemporaneously wrote here, here, and here).  Although I was able to mark the closing of Laureate Education, Inc.’s public offering in last-minute footnotes, my paper for the symposium treats the publicly held benefit corporation as a future likelihood, rather than a reality.  Now, the actual experiment has begun.  It is time to test the “visioning” in this paper, which I recently posted to SSRN.  Here is the abstract.

Benefit corporations have enjoyed legislative and, to a lesser extent, popular success over the past few years. This article anticipates what recently (at the eve of its publication) became a reality: the advent of a publicly held U.S. benefit corporation — a corporation with public equity holders that is organized under a specialized U.S. state statute requiring corporations to serve both shareholder wealth aims and social or environmental objectives. Specifically, the article undertakes to identify and comment on the structure and function of U.S. benefit corporations and the unique litigation…

A new case, out just yesterday from the Southern District of Ohio, makes a mess of LLC veil piercing law. It appears that the legal basis put forth by the court in granting a motion to dismiss a veil piercing claim was probably right, but the statement of veil piercing law was not quite there.  

The case is ACKISON SURVEYING, LLC, Plaintiff, v. FOCUS FIBER SOLUTIONS, LLC, et al., Defendants., No. 2:15-CV-2044, 2017 WL 958620, at *1 (S.D. Ohio Mar. 13, 2017).  Here are the parties: the defendant is FTE Networks, Inc. (FTE), which filed a motion to dismiss claiming a failure to state a claim. FTE is the parent company of another defendant, Focus Fiber Solutions, LLC (Focus). The plaintiff, Ackison Surveying, LLC (Ackison) filed  a number of claims against Focus, added an alter ego/veil piercing claim against FTE. Thus, Ackison is, among other things, seeking to pierce the veil of an LLC (Focus). Focus appears to be a Pennsylvania LLC, based on a search here.

Pennsylvania law provides the liability cannot be imposed on a member of an LLC for failing to observe formalities. The law states: 

The failure of a limited liability partnership, limited partnership, limited liability limited partnership, electing partnership or limited liability

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