In 2022, The LLC Jungle covered the opinion Friend of Camden, Inc. v. Brandt in a post titled LLC Dissolution Vote Defeats Statutory Buyout. In the Friend of Camden case, the Court of Appeal held that an LLC membership vote...more
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
Many posts on The LLC Jungle blog have focused on the fiduciary duties owed by LLC managers to both the LLC’s members and the LLC itself.
Other posts have focused on the pitfalls of LLC Operating Agreements that fail to...more
Asserting claims derivatively on behalf of an LLC, as opposed to directly on behalf of an LLC member, can be tricky business for even experienced litigators. The requirements for derivative claims have been explored in...more
LLC managers often enjoy wide latitude and unrestricted “discretion” under the LLC’s operating agreement. At the same time, all contracts — including LLC operating agreements — are subject to the implied covenant of good...more
Courts often appoint receivers to manage the affairs of LLCs when the internal management is conflicted or broken. General equity receivers (as opposed to more limited receiverships such as deed of trust receivers) enjoy...more
In litigation, the plaintiff must include as parties to the action all persons or entities whose interests are so directly involved that the court cannot render a fair adjudication in their absence. If the plaintiff fails to...more
In the world of LLCs, buyouts — where one member sells his/her membership interest to another member or the LLC itself — are commonplace. Buyouts generally fall into one of two categories:
contractual — where the...more
6/26/2023
/ Appeals ,
Breach of Duty ,
Buyouts ,
California Consumer Privacy Act (CCPA) ,
Corporations Code ,
Damages ,
Dissolution ,
Equity ,
Fiduciary Duty ,
Fraud ,
Limited Liability Company (LLC) ,
Operating Agreements
LLC operating agreements frequently provide for indemnity to the LLC’s manager. This is consistent with the statutory default rule embodied by California Corporations Code section 17704.08(a), which provides for indemnity...more
11/21/2022
/ Appeals ,
Arbitration ,
Attorney's Fees ,
Breach of Duty ,
Capital Contributions ,
Fiduciary Duty ,
Indemnity ,
Limited Liability Company (LLC) ,
Operating Agreements ,
Private Equity ,
Reconciliation
California’s anti-SLAPP statute (Code of Civil Procedure section 425.16) aims to protect defendants from meritless lawsuits designed to chill “protected activity” — i.e., the exercise of rights of petition or free speech on...more
10/17/2022
/ Anti-SLAPP ,
Appeals ,
Breach of Duty ,
Cal Code of Civil Procedure ,
California ,
Cross-Complaints ,
Fiduciary Duty ,
Limited Liability Company (LLC) ,
Motion To Strike ,
Operating Agreements ,
Protected Activity ,
Real Estate Investments ,
Reversal
In a long-awaited opinion — Siry Investment, L.P. v. Farkhondehpour — the California Supreme Court held that California Penal Code section 496 can apply to a business dispute. The opinion resolves a split of authority among...more
7/27/2022
/ Appeals ,
Attorney's Fees ,
Business Disputes ,
CA Supreme Court ,
Compensatory Damages ,
Criminal Prosecution ,
Damages ,
Extortion ,
Fraud ,
Misappropriation ,
Operating Agreements ,
Penal Code ,
Receiving Stolen Property ,
Split of Authority ,
Theft ,
Treble Damages
If an LLC’s Operating Agreement contains a sufficiently broad arbitration clause, most disputes raised by the LLC’s members relating to the LLC will be sent to arbitration (instead of the court system) for resolution.
But...more
Under California law, LLCs can either be managed by all of the members (member-managed) or by a designated manager (manager-managed). Manager-managed LLCs are more common for complex, multi-party ventures. The basic idea is...more
Under section 17707.03 of California’s Revised Uniform Limited Liability Company Act, when a member sues the other members for dissolution of the LLC, the other members can exercise a statutory buyout of the suing member’s...more
LLC managers owe fiduciary duties both to the LLC and to the LLC’s members, similar to the duties owed by a partner to other partners in a partnership. (Corp Code §17704.09.) These include the duty of loyalty, care, and...more
9/30/2021
/ Bankruptcy Court ,
Breach of Duty ,
Business Disputes ,
Business Litigation ,
Commercial Bankruptcy ,
Contract Terms ,
Exculpatory Clauses ,
Fiduciary Duty ,
Limited Liability Company (LLC) ,
Malfeasance ,
Operating Agreements ,
Personal Liability ,
Summary Judgment
Suppose your LLC’s operating agreement contains a typical clause requiring all disputes to be resolved in binding arbitration instead of the court system.
Is it then safe to assume that all disputes among the LLC’s members...more
LLC members often hold their membership interests in a family trust. The benefits of trusts are well known — they generally allow assets to be easily transferred after death without the time, hassle, and expense of court...more
Most LLC operating agreements contain a “buyout” provision allowing the LLC or its remaining members to buy the membership interest of a departing member. Buyout provisions can be structured however the LLC members see fit. ...more
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
LLC membership interests are usually straightforward and can determined by simply reviewing the LLC’s operating agreement. The operating agreement typically lists the members. Sometimes the operating agreement will impose...more
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
Limited liability companies (LLCs) are a popular modern form of business entity celebrated for their ease of implementation and informality. Despite the enactment of uniform legislation providing the “default” rules for LLC...more
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