Category Archives: LLC Cases 2008

December 2008 — Issue 34

LLPs: iCore Networks, Inc. v. McQuade Brennan LLP

No. 1:08cv748 (JCC), 2008 WL 4550988 (E.D. Va. Oct. 7, 2008)

(limited liability of partner)

LLCs: Greetham v. Sogima L-A Manager LLC

C.A. No. 2084-VCL, 2008 WL 4767722 (Del. Ch. Nov. 3, 2008)

The parties formed an LLC and acquired several portfolios of tax liens and related property, but a dispute developed over who would service the assets acquired. The plaintiffs relied upon a draft servicing agreement and a side letter in asserting that the parties agreed the plaintiffs’ entity would be the sole and permanent servicer. As a threshold issue, the court determined that Delaware law applied to the dispute. The plaintiffs argued that Delaware law applied based on the choice of Continue reading

November 2008 — Issue 33

LLCs: Harvey v. Grey Wolf Drilling Company

542 F.3d 1077, No. 07-31106 (5th Cir. (La.) 2008)

As a matter of first impression in that circuit, the Fifth Circuit Court of Appeals determined that the citizenship of an LLC for diversity jurisdiction purposes is determined by the citizenship of all of its members. Noting that the United States Supreme Court has not specifically addressed the citizenship of an LLC, the court joined other circuits in applying the Supreme Court’s decision in Carden v. Arkoma Associates (which held that the citizenship of an unincorporated association, such as a limited partnership, is based on the citizenship of all of its members) to LLCs. Continue reading

October 2008 — Issue 32

LLCs: NetJets Aviation, Inc. v. LHC Communications, LLC

537 F.3d 168, No. 06-3340-cv (2d Cir. 2008)

The plaintiffs sought to hold the sole member of a Delaware LLC liable for the breach of contract of the LLC on the basis that the member was the LLC’s alter ego. The trial court granted summary judgment in favor of the member on the ground that the plaintiffs had not adduced sufficient evidence to pierce the veil of the LLC. The Second Circuit Court of Appeals discussed Delaware corporate veil piercing principles and concluded that such principles are generally applicable to an LLC, with the caveat that somewhat less emphasis is placed on whether the LLC observed internal formalities in an alter ego analysis of an LLC. Continue reading

September 2008 — Issue 31

LLPs: In re Rambo Imaging, L.L.P.

No. 07-11190-FRM, 2008 WL 2778846 (Bankr. W.D. Tex. July 15, 2008).

The issue in this case was whether an individual who was a partner of a Texas LLP was a general partner with standing to be a petitioner in an involuntary bankruptcy case. The partnership was a general partnership registered under the Texas full-shield LLP statute. The court stated that it had been unable to find any case law addressing the ability of a partner in an LLP to file an involuntary action, and the court relied upon Collier on Bankruptcy in concluding that the petitioning general partner should be treated as a shareholder of a corporation under the Bankruptcy Code and thus ineligible to be a petitioning partner under Section 303(b)(3). Continue reading

August 2008 — Issue 30

LLPs: Red River Wings, Inc. v. Hoot, Inc.

751 N.W.2d 206, Nos. 20070087, 20070088, 20070089 (N.D. 2008)

Two individuals who were partners in an LLP that was a limited partner in limited partnerships that owned franchised restaurants were held liable for the LLP’s breach of fiduciary duty as a limited partner in connection with seizing control of the limited partnerships and ousting the general partner. The court relied upon the veil piercing provision of the North Dakota LLP statute which states that principles of corporate veil piercing apply to LLPs. Continue reading

July 2008 — Issue 29

Fisk Ventures, LLC v. Segal

Civil Action No. 3017-CC, 2008 WL 1961156 (Del. Ch. May 7, 2008)

Disagreements between the members of two classes of membership interest in a Delaware LLC led to a deadlock, and one of the Class B members filed a petition for dissolution. Segal, a Class A member who was the LLC’s founding member, president, and sole officer, filed counterclaims and third-party claims against the Class B members. Johnson, a Class B member, filed a motion to dismiss Segal’s claims against him for lack of personal jurisdiction, and the other Class B members filed a motion to dismiss Segal’s counterclaims and third-party claims for failure to state a claim. Continue reading

June 2008 — Issue 28

LLPs: Kuslansky v. Kuslansky, Robbins, Stechel and Cunningham, LLP

50 A.D.3d 1100, 858 N.Y.S.2d 213 (N.Y.A.D. 2 Dept. 2008)

A withdrawn partner sought to recover payment from the remaining partners for the value of his partnership interest under the partnership agreement. The defendant partners argued that they were shielded from liability by the New York LLP provisions, but the court pointed out that the New York Court of Appeals held in Ederer v. Gursky that the LLP liability shield only applies to a partner’s liability to third parties and does not shield a general partner in an LLP from breaches of the partnership’s or partner’s obligations to each other.
Continue reading

May 2008 — Issue 27

K.C. Properties of N.W. Arkansas, Inc. v. Lowell Investment Partners, LLC

373 Ark. 14, __ S.W.3d __, 2008 WL 659825, No. 07-471 (Ark. 2008)

Ozark Mountain Water Park, LLC (“Water Park LLC”) was formed for the purpose of operating a water park on land owned by Pinnacle Hills Realty, LLC (“Realty LLC”). Pinnacle Management Services, LLC (“Management LLC”) was the manager of Water Park LLC, and the members of Realty LLC and Management LLC were three LLCs owned by the three individuals who were the managers of Management LLC. Realty LLC sold the land to another party, and the 49% member of Water Park LLC sued the 51% member Continue reading

April 2008 — Issue 26

Venezia Amos, LLC v. Favret

No. 3:07cv146/MCR, 2008 WL 410163 (N.D. Fla. Feb. 12, 2008)

The plaintiff sued an LLC and its managing member for federal securities fraud in connection with the plaintiff’s purchase of a 40% interest in the LLC. The defendants argued that the court lacked personal jurisdiction over them, that the membership interest purchased by the plaintiff was not a security, and that the plaintiff’s allegations failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act. Continue reading

March 2008 — Issue 25

EuroCapital Advisors, LLC v. Colburn

C.A. No. 3035-VCN, 2008 WL 401352 (Del. Ch. Feb. 14, 2008).

The court exercised its discretion to stay this action in Delaware brought by a Delaware LLC and an individual who claimed to be its sole member (Dyne) against an individual (Colburn) who claimed to be a member in the LLC by virtue of an oral agreement with Dyne. In the Delaware action, the LLC and Dyne sought a declaratory judgment that Colburn was not a member in Continue reading

February 2008 — Issue 24

LLPs: Ederer v. Gursky

9 N.Y.3d 514, __ N.E.2d __, 2007 WL 4438937 (N.Y. 2007)

A withdrawn partner sued the partnership and its partners for breach of contract and an accounting of funds owed the withdrawn partner under a withdrawal agreement between the partner and the partnership. The partners claimed that they did not have personal liability because the partnership was an LLP, but the court concluded that the New York LLP liability shield only applies to debts and Continue reading

January 2008 — Issue 23

Brown v. T-Ink, LLC, Civil Action No. 3190-VCP

2007 WL 4302594 (Del. Ch. Dec. 4, 2007)

This action was filed by an LLC member (“Brown”) to enjoin another member (T-Ink, LLC or “T-Ink”) from proceeding with an arbitration. T-Ink argued the court should dismiss the case on the grounds that the arbitrator should decide matters of substantive arbitrability (i.e., whether T-Ink’s claims are arbitrable) as well as procedural arbitrability (i.e., whether T-Ink complied with the terms of the arbitration clause). Continue reading