LLCs

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As I have noted previously, LLCs (also known as limited liability companies) are generally required to be represented by counsel in court proceedings.  This is unremarkable, as entities, like corporations and LLCs are deemed, by law, to be separate from their owners. They are often known as “fictional people.” Because they are not natural persons, they cannot (usually) represent themselves pro se and shareholder/member/owners cannot do so for them.

A recent case from the Eastern District of Wisconsin agrees with the well-established principal. Unfortunately, it also follows suit with a less productive prior practice, calling an LLC a limited liability corporation. An LLC, again, is a limited liability company, and it is a separate and distinct entity from a corporation, with its own statute and everything.  Here’s an excerpt:

Leszczynski is representing himself in the case, which he has a statutory right to do. 28 U.S.C. § 1654 (“In all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.”). But even though he is president of Rustic Retreats Log Homes, Inc., Leszczynski

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I recently received the final version of my short article, “The Benefits and Burdens of Limited Liability,” in Transactions: The Tennessee Journal of Business Law.  The article is based on some of my prior blog posts, as well as my presentation as part of the fourth annual Business Law Prof Blog symposium, Connecting the Threads. It was great event, as always, thanks to Joan and the whole crew at Tennessee Law, and it was my pleasure to be part of it.  

Here’s the abstract: 

Law students in business associations and people starting businesses often think the only choice for forming a business entity is a limited liability entity like a corporation or a limited liability company (LLC). Although seeking a limited liability entity is usually justifiable, and usually wise, this Article addresses some of the burdens that come from making that decision. We often focus only on the benefits. This Article ponders limited liability as a default rule for contracts with a named business and considers circumstances when choosing a limited liability entity might not communicate what a business owner intends. The Article notes also that when choosing an entity, you get benefits, like limited liability,

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A recent federal court order gets the basics of entity law representation right, but it’s pretty murky on exactly what entity is involved.  The case involves a claim of trademark infringement in which the plaintiff, International Watchman, Inc., sued OnceWill, LLC.  The order explains: 

In OnceWill’s Motion, OnceWill indicated that it “is a sole proprietorship consisting of proprietor Ryan Sood.” (Id.) OnceWill’s Motion also showed that it was filed by Ryan Sood, acting pro se. (Id.) The Court granted OnceWill’s Motion that same day.

Subsequently, also on November 12, 2020, Plaintiff filed its Motion, requesting that the Court strike OnceWill’s Motion and reconsider its order granting the requested extension of time for OnceWill to respond to Plaintiff’s Complaint. (Doc. No. 13.) Plaintiff asserts that OnceWill is a limited liability company (“LLC”), not a sole proprietorship as OnceWill represented. (Id. at 2.) In support of this assertion, Plaintiff provided a printout from the Washington Secretary of State’s website showing that OnceWill is listed as an LLC. (Id.; Doc. No. 13-1.) As a result of OnceWill’s status as an LLC, Plaintiff argues that OnceWill only can maintain litigation or appear in court through an attorney

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In September of 2015, I did a Westlaw search, which returned 4575 cases referring to a “limited liability corporation,” rather than the proper “limited liability company” or LLC.   That search followed one that I had done on May 2011, and the 2015 search showed a jump of 1802 new cases.  Today’s search returned 5,211 such cases, an increase of 636 cases in five and a half years. That’s still more than 100 cases per year, but it’s a reduction of about half the rate we were seeing between 2011 and 2015.  (I concede this is not especially scientific, but it’s still instructive.) 

It appears, then, that we’re making progress, but two steps forward, one step back. Even Jeopardy — Jeopardy! — recently got this wrong.  I thank Professor Samantha Prince at Penn State Dickinson Law for bringing this to my attention, upsetting as it is.   

In addition, a recent tax court opinion followed suit: “All limited liability corporations, or LLCs, mentioned in this opinion are entities treated as partnerships for federal tax purposes.” …

ABALogo(2020)
I have written about the American Bar Association Limited Liability Institute in this space before.  See, e.g., here, here, here, here, and here.  The 2020 LLC Institute is being hosted virtually and begins next Friday–something to look forward to at the end of election week!  This ABA program is always a premier event, and it is the only national annual program that focuses in exclusively on LLCs and unincorporated business associations.

Importantly, this year’s institute is free to law students.  I have recommended registration and attendance to mine.  Click here for more information, including the agenda, list of speakers (including yours truly!), and registration.

If one is going to ignore entity distinctions, I supposed one may as well go all in.  Following is from an opinion issued last week that involves Christeyns Laundry Technology, LLC (“Christeyns”), which is a limited liability company.  The opinion, though, asserts: 

Selective is a New Jersey corporation with its principal place of business in New Jersey. [Docket No. 1-1, ¶ 2.] Christeyns is a Limited Liability Corporation with two partners: Christeyns Holding, Inc., and Rudi Moors. [Docket No. 25, at 14, ¶ 7.] Christeyns Holding, Inc., is a Delaware corporation with its principal place of business in East Bridgewater, Massachusetts. [Id. at 14, ¶ 8.] Rudi Moors is a resident of South-Easton, Massachusetts. [Id. at 14, ¶ 9.] The remaining parties’ claims arise out of a common nucleus of operative fact.

SELECTIVE INSURANCE COMPANY OF AMERICA, Plaintiff, v. CHRISTEYNS LAUNDRY TECHNOLOGY, LLC, et al., Defendants. Additional Party Names: Clean Green Textile Servs., LLC, Lavatec Laundry Tech., Inc., Single Source Laundry Sol., No. CV1911723RMBAMD, 2020 WL 6194015, at *3 n.2 (D.N.J. Oct. 22, 2020) (emphasis added).

We have already established that an LLC is a limited liability company, and not a corporation. And while the opinion seems to track…

I was today years old when I learned that the California courts have a group of cases captioned the “Franchise Tax Board Limited Liability Corporation Tax Refund Cases.”  This is distressing.  

In that case, the court explains: “This coordinated litigation involves the remedies available to certain limited liability companies (LLCs) that paid a levy pursuant to section 17942 of the Revenue and Taxation Code which was later determined by this District to be unconstitutional.”  Fran. Tax Bd. Ltd. Liab. Corp. Tax Refund Cases, 235 Cal. Rptr. 3d 692, 697 (Cal. App. 1st Dist. 2018), reh’g denied (Aug. 6, 2018), review denied (Oct. 31, 2018) (emphasis added).  We can see clearly that rhe courts knows these are limited liability companies, and not limited liability corporations. Nonetheless, for eternity, when citied, these cases will refer to limited liability corporations. See, e..g, Union Band Wage & Hour Case v. Union Bank, B295835, 2020 WL 6018545, at *18 (Cal. App. 2d Dist. Oct. 9, 2020) (“Their reliance on Franchise Tax Board Limited Liability Corp. Tax Refund Cases (2018) 25 Cal.App.5th 369, 395-396 does not support their position.”). 

Another recent case makes a similar mistake, thought it seems to have gotten…

The dreaded “limited liability corporation” strikes again.  In today’s find, the United States District Court for the North District California makes a boo boo. In assessing whether a court had jurisdiction over an LLC (limited liability company), the court proceeded through the following:
 
As to the first element, the Court agrees that the Eastern District of Michigan would have subject matter jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). The Class Action Fairness Act vests federal courts with original jurisdiction over class actions that meet the following prerequisites: (1) “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs”; (2) the parties meet minimal requirements for diversity such that “any member of a class of plaintiffs is a citizen of a State different from any defendant”; and (3) the class equals to or exceeds 100 individuals in the aggregate. 28 U.S.C. § 1332(d). Those requirements are satisfied here. … [A]t least one class member is a citizen of a different state from Defendant: Plaintiff Esquer is a citizen of California, id. ¶ 17, whereas Defendant is a Michigan limited liability company with its principal place of business in Michigan, id.

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Call for Papers
AALS Section on Agency, Partnership, LLCs & Unincorporated Associations 

Entrepreneurship and the Entity 

January 5-9, 2021, AALS Annual Meeting 

The AALS Section on Agency, Partnership, LLCs & Unincorporated Associations will sponsor a panel on “Entrepreneurship and the Entity” at the 2021 AALS Annual Meeting in San Francisco, California. This panel will showcase scholarship on subjects relating to business law and entrepreneurship, including entity choice throughout a company’s evolution, financing alternatives, and how legal rules promote and discourage different kinds of entrepreneurship. Scholars are encouraged to interpret the subject of the Call for Papers broadly and creatively. 

SUBMISSION PROCEDURE: Scholars should send a summary of a work or a work-in-progress of no more than 600 words to Professor Sarah C. Haan at haans@wlu.edu on or before Friday, August 21, 2020. The summary should be a pdf or Word document that has been stripped of information identifying the author; only the cover email should connect the author to the submission. The subject line of the email should read: “Submission—[author name & title].” Papers will be selected through an anonymous review by the Section’s Executive Committee. 

SPECIAL NOTE: Interested parties are encouraged to submit…

I am teaching Business Associations this summer, and I am excited to get back in the classroom. Well, I was. Instead, I am teaching in virtual class room via Zoom.  I am still glad to be interacting with students in a teaching capacity, but I sure miss the classroom setting. I am glad, though, to have this experience so I am closer to what this has been like for our students and faculty.  I still have the benefit of my colleagues experiences, students who have been in the online learning environment, and a little time to plan, so it’s better for me than it was for everyone in March. Still, there is quite a learning curve on all of this. 

Over the past several years, I have asked students to create a fictional limited liability company (LLC) for our first class.  It does a number of things. To begin, it connects them with a whole host of decisions businesses must make in choosing their entity form.  It also introduces them to the use of forms and how that works.  I always give them an old version of the form. This year, I used 2017 Articles of Organization for a West…