In a prior LLC Jungle post — Think Carefully Before Forming an “Out of State” LLC — we reviewed a published opinion (Boschetti v. Pacific Bay Investments Inc.) holding that a claim for Judicial Dissolution of an LLC was...more
Actions taken within business entities are sometimes deemed invalid due to procedural defects. For corporations, section 119 of the Corporations Code establishes a clear procedure by which defective actions can be ratified...more
Receivership is a provisional remedy within a court’s broad equitable jurisdiction. The statute most commonly used in obtaining a receivership is Code of Civil Procedure section 564. But other statutes sometimes apply, such...more
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
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 (litigation) or...more
A foreclosure sale purchaser attempting to evict a tenant on the property can encounter pitfalls, as made clear in a series of court cases in recent years. Here is a summary, capped by an update on a recently filed...more
The distinction between direct and derivative claims is a recurring theme on The LLC Jungle.
In a nutshell, under California law, an LLC (just like a corporation) is treated as a legal entity separate and distinct from...more
A recorded lis pendens notifies prospective purchasers, encumbrancers, and transferees that there is litigation pending that affects the property. To curb abuses of the lis pendens process, the Legislature enacted amendments...more
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
In the recent case Romero v. Shih, the California Supreme Court clarified that under California law, parties to a real estate transaction may create an implied easement that effectively grants the dominant tenement exclusive...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
Two important principles governing corporate entities are: (1) the entity is legally distinct from its owners; and (2) the entity’s property and assets belong to the entity, not its owners.
These themes are...more
Obligations reduced to a promissory note are often accompanied by a written guaranty. The law treats the guaranty as an independent obligation.
A case recently decided by California’s First District Court of Appeal —...more
12/28/2023
/ Appeals ,
Cal Code of Civil Procedure ,
Deed of Trust ,
Foreclosure ,
Guarantors ,
Guaranty Claims ,
Investors ,
Lenders ,
Liability ,
Loan Servicing ,
Promissory Notes ,
Reversal ,
Settlement
When a debtor LLC receives a discharge order from a bankruptcy court, a creditor is prevented from enforcing any preexisting debts against the discharged LLC as a personal liability. This is known as the “discharge...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
In a December 2018 post, Money and Dirt covered a California Supreme Court case — Dr. Leevil, LLC v. Westlake Health Care Center — in which the Court held: “an owner that acquires title to property under a power of sale...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 two prior posts, this blog tracked the ongoing intrigue of how the various branches of the United States government interact with blockchain and cryptocurrency organizations. We discussed the Wyoming law allowing...more
9/25/2023
/ Blockchain ,
Class Action ,
Cryptocurrency ,
Decentralized Autonomous Organization (DAO) ,
General Partnerships ,
Hackers ,
International Emergency Economic Powers Act (IEEPA) ,
Money Laundering ,
North Korea ,
Office of Foreign Assets Control (OFAC) ,
SDN List ,
State Sponsors of Cyberattacks ,
Transparency ,
U.S. Treasury
In May 2021, Money and Dirt covered a case published by California’s Second Appellate District — Tsasu LLC v. U.S. Bank Trust, N.A. — holding that under Code of Civil Procedure section 764.060 (part of California’s Quiet...more
Alter ego liability is again the flavor of the day...
As previously covered, the alter ego doctrine allows a court to disregard a corporate entity (including LLCs) and hold the individual owners liable for claims against...more
8/23/2023
/ Alter Ego ,
Appeals ,
Attorney Malpractice ,
Bad Faith ,
Business Ownership ,
Corporate Entities ,
Employment Litigation ,
Insolvency ,
Labor Commissioners ,
Liability ,
Limited Liability Company (LLC) ,
Motion to Amend ,
Proof of Ownership ,
Retaliation ,
Unpaid Wages
California’s common law “business judgment rule,” as described by the courts, protects from court intervention “those management decisions which are made by directors in good faith in what the directors believe is the...more
7/31/2023
/ Appeals ,
Bad Faith ,
Board of Directors ,
Business Disputes ,
Business Judgment Rule ,
California ,
CC&Rs ,
Corporate Entities ,
Corporate Executive Boards ,
Demurrers ,
Failure to Investigate ,
Fraud ,
Good Faith ,
Homeowners Association (HOA) ,
Injunctions ,
Maintenance Fees ,
Shareholders
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
California’s Subdivision Map Act (“SMA”) governs the legal subdivision of property in California. The SMA’s approval process is familiar to most developers. The statute’s purpose is to ensure orderly and coordinated...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