"O, 'tis a fault too too unpardonable!"*

Law Professors Samantha Prince and Joshua Fershee have recently completed an article on the importance of not conflating limited liability companies with corporations.  In An LLC By Any Other Name Is Still Not A Corporation, they point out that courts have used the phrase "limited liability corporation" in almost 9,000 cases.  According to these professors:

It is critically important that people, especially lawyers, recognize the difference between entities such as corporations and limited liability companies (LLCs). It is an egregious, nearly unforgivable, error in our view to call an LLC a “limited liability corporation.” In part, this is because lawyers should try to get things right, but it is also because conflating the two entity types can lead to unpredictable outcomes. Perhaps more important, it could lead to incorrect and unjust outcomes. A prime example lies within the veil piercing context.

As if on cue, U.S. District Court Judge Vince Chhabria issued the following brief order last week:

The motion for reconsideration is granted. The court clerk's decision not to enter default as to Amer Group and AB Stable Group was error. Alternative service through the Delaware Secretary of State, without a prior court order, satisfies Rule 4(e). Because the plaintiffs could not "by due diligence" serve these defendants using other specified means, service through the Delaware Secretary of State was proper. Del. Code Ann. tit. 6, § 18-105. No court order was necessary. See id.

The clerk's error was understandable; California law does require court permission before serving a California corporation through the California Secretary of State. See Cal. Corp. Code § 17701.16. But it was error all the same. Because it would be wasteful to have the plaintiffs spend more time and resources on service, the clerk is directed to enter default as to Amer Group and AB Stable Group.

Anbang Group Holdings Co. Limited v. Zhou, 2023 WL 4955119.  While Section 17701.16 is indeed part of the California Corporations Code, it governs service of process on limited liability companies.  Sections 1701-17702, which I discussed earlier this week applies to domestic corporations.

*Wm. Shakespeare, Henry VI, Act I, Sc. 4.

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