Prior LLC Jungle posts have addressed the tricky issue of LLC managerial authority in the context of the LLC’s dealings with third parties...
As referenced in those posts, under Corporations Code section 17703.01, when an...more
7/5/2024
/ Actual or Constructive Knowledge ,
Agents ,
Board of Directors ,
Buyers ,
Commercial Litigation ,
Corporations Code ,
Lack of Authority ,
Limited Liability Company (LLC) ,
Managing Members ,
Operating Agreements ,
Property Owners ,
Purchase and Sale Agreements ,
Sellers ,
Third-Party Relationships ,
Unauthorized Transactions
Can the sledgehammer remedies of California Penal Code section 496 — treble (triple) damages and attorney fees — apply for misappropriation of an LLC’s property?
The California Supreme Court is set to answer that question...more
8/20/2020
/ Attorney's Fees ,
Breach of Duty ,
CA Supreme Court ,
Fraud ,
Limited Liability Company (LLC) ,
Litigation Fees & Costs ,
Managing Members ,
Members ,
Misappropriation ,
Penal Code ,
Receiving Stolen Property ,
Remedies ,
Split of Authority ,
Theft ,
Treble Damages
LLC managers (or members vested with decision-making authority) are sometimes lulled into a false sense of security by “sole discretion” provisions in their LLC’s operating agreement. That can be a costly mistake....more
Almost one year ago, in Switzer v. Wood, California’s Fifth Appellate District held that an LLC manager or member participating in the theft of the LLC’s property could face liability under Penal Code section 496 — a statute...more
4/20/2020
/ Appeals ,
Attorney's Fees ,
Breach of Duty ,
Fraud ,
Limited Liability Company (LLC) ,
Managing Members ,
Members ,
Misappropriation ,
Misrepresentation ,
Penal Code ,
Punitive Damages ,
Receiving Stolen Property ,
Split of Authority ,
Theft ,
Treble Damages
Under the “default” rules of most limited liability company laws, including California’s Revised Uniform Limited Liability Company Act, LLC managers owe fiduciary duties to the LLC and its members. Those default fiduciary...more
In the LLC Jungle, allegations of “misappropriation” are common. LLC members and managers sometimes improperly divert the LLC’s funds and property for their own personal use. That bad behavior usually leads to claims of...more
12/16/2019
/ Appeals ,
Attorney's Fees ,
Breach of Duty ,
Fiduciary Duty ,
Limited Liability Company (LLC) ,
Managing Members ,
Members ,
Misappropriation ,
Penal Code ,
Receiving Stolen Property ,
Remedies ,
Stolen Goods ,
Theft ,
Treble Damages
Not long ago, The LLC Jungle posted an article addressing the perils of attorney representation of an LLC with two equal “co-managing members.” See Why Having “Co-Managers” for Your LLC is a Terrible Idea.
This post...more
11/20/2019
/ Appeals ,
Attorney Malpractice ,
Attorney Representation Agreements ,
Breach of Duty ,
Business Disputes ,
Client Representation ,
Copyright Infringement ,
Copyright Litigation ,
Corporate Counsel ,
Duty of Care ,
Involuntary Dissolution ,
Limited Liability Company (LLC) ,
Managing Members ,
Members ,
Operating Agreements ,
Reaffirmation ,
Summary Judgment
One of the hot button issues frequently leading to litigation in “The LLC Jungle” is the removal of an LLC’s manager.
Thoughtfully drafted LLC Operating Agreements contain provisions addressing the criteria and procedures...more
The trend in most real estate-related LLCs is to have a single appointed manager. Under the LLC’s operating agreement, the manager typically has authority to make the day to day business decisions on behalf of the LLC, while...more
6/10/2019
/ Appeals ,
Attorney Representation Agreements ,
Co-Management ,
Conflict Resolution ,
Disqualification ,
Lack of Authority ,
Limited Liability Company (LLC) ,
Limited Partnerships ,
Managing Members ,
Operating Agreements ,
Partnership Agreements ,
Petition for Partition ,
Real Estate Investments
Under California’s Revised Limited Liability Company Act (“RULLCA”), LLC participants have substantial freedom to structure their relationship in a customized manner under their governing operating agreement. But one of the...more
5/16/2019
/ Attorney's Fees ,
Books & Records ,
Breach of Duty ,
Fiduciary Duty ,
Good Cause ,
Inspection Rights ,
Limited Liability Company (LLC) ,
Managing Members ,
Members ,
Operating Agreements ,
Prevailing Party ,
RULLCA
Many California-based LLC managers and members are lured by the potential benefits of forming the LLC under the laws of a jurisdiction outside of California. Delaware can be an enticing option. Delaware is known for its...more
4/25/2019
/ Breach of Duty ,
Business Formation ,
Business Property ,
Choice of Entity ,
Civil Liability ,
Corporate Dissolution ,
Fiduciary Duty ,
Forum State ,
Jurisdiction ,
Limited Liability Company (LLC) ,
Litigation Fees & Costs ,
Managing Members ,
Members ,
Multidistrict Litigation ,
Multistate Corporations ,
Out-of-State Companies ,
State of Incorporation
One of the recurring issues I see in my litigation practice is LLC managers engaging in “questionable conduct” with third parties — outsiders to the LLC.
By “questionable conduct,” I generally mean binding the LLC to...more
2/25/2019
/ Actual or Constructive Knowledge ,
Agents ,
Appeals ,
Indemnity Agreements ,
Lack of Authority ,
Limited Liability Company (LLC) ,
Managing Members ,
Operating Agreements ,
RULLCA ,
Third-Party Relationships ,
Unauthorized Transactions
LLCs are celebrated for allowing business partners to freely define their relationship by contract — i.e., the LLC operating agreement. The operating agreement generally covers all of the important aspects of the company and...more
11/26/2018
/ Capital Contributions ,
Contract Amendments ,
Corporate Dissolution ,
Dismissals ,
Family Businesses ,
Limited Liability Company (LLC) ,
Managing Members ,
Member Removal ,
Membership Interest ,
Motion to Dismiss ,
Operating Agreements
There are not many published California Court of Appeal opinions providing guidance for LLC managers and members. That’s why it’s an “LLC Jungle” out there.
While unpublished opinions are not binding precedent outside of...more
10/22/2018
/ Bad Faith ,
Breach of Duty ,
Creditors ,
Debtors ,
Default ,
Demurrers ,
Distribution Rules ,
Fiduciary Duty ,
Limited Liability Company (LLC) ,
Managing Members ,
Membership Interest ,
Operating Agreements
The “Seven Critical Mistakes LLCs Make” Series -
This series of posts covers some of the most serious mistakes that LLCs regularly make. Here are...short summaries of each:
Choosing the Wrong Business Partners —...more
10/8/2018
/ Alter Ego ,
Apparent Authority ,
Business Divorce ,
Business Formation ,
Business Partners ,
Covenant of Good Faith and Fair Dealing ,
Due Diligence ,
Duty of Loyalty ,
Fiduciary Duty ,
Founding Members ,
Guaranty Claims ,
Intellectual Property Protection ,
Limited Liability Company (LLC) ,
Managing Members ,
Membership Agreements ,
Membership Interest ,
Operating Agreements ,
Prohibited Transactions ,
Secured Debt ,
Trade Secrets