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
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
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 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
In California, several classes of persons are entitled to some form of immunity protecting them from liability for activities performed in connection with judicial proceedings.
For example, “judicial immunity” bars civil...more
1/30/2023
/ Appeals ,
Breach of Contract ,
Breach of Duty ,
Brokers ,
California ,
Fiduciary Duty ,
Immunity ,
Judicial Proceedings ,
Liability ,
Motion for Summary Judgment ,
Negligence ,
Partitions ,
Quasi-Judicial Process ,
Real Estate Brokers
California’s statutes governing LLCs and general partnerships include “safe harbor” provisions making it easier for third parties to rely on the apparent authority of an LLC’s manager or a partnership’s partner. The statutes...more
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
When an LLC suffers primary harm that also indirectly harms the LLC’s members, the cause of action generally belongs to the LLC, not its members. Only if the LLC (through its duly authorized management) fails to pursue the...more
The statutory right to judicial dissolution in California comes with a hook — the defendants can avoid dissolution by exercising a “buyout” procedure. This is true in both LLCs (Corporations Code section 17703.03) and...more
LLC managers owe fiduciary duties of loyalty, care, and good faith and fair dealing to both the LLC and the LLC’s members. (Corp Code §17704.09.) One of the most common claims in LLC litigation is “breach of fiduciary duty”...more
Business divorce can be messy, as reflected by many of the cases covered here at The LLC Jungle. Two issues that frequently arise during the dissolution of an LLC are: 1. the statutory buyout procedure, and 2. claims for...more
10/25/2021
/ Appraisal ,
Breach of Duty ,
Business Divorce ,
Buyouts ,
Damages ,
Derivative Suit ,
Dissolution ,
Fiduciary Duty ,
Limited Liability Company (LLC) ,
Limited Partnerships ,
Membership Interest ,
Misappropriation ,
Standing
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
One substantial LLC membership right in California (and most other states) is the ability of members to file a “derivative” lawsuit. If the LLC has suffered harm, but the LLC fails to sue (due to managerial inaction,...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
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
A trustee in charge of administering a trust has many duties.
A trustee appointed pursuant to a deed of trust, however, is different. The duties of a deed of trust trustee are exceptionally narrow.
A recent opinion...more
8/25/2019
/ Appeals ,
Assignments ,
Construction Loans ,
Deed of Trust ,
Default ,
Demurrers ,
Dismissals ,
Duties & Responsibilities ,
Fiduciary Duty ,
Foreclosure ,
Land Developers ,
Loans ,
Reaffirmation ,
Trustees ,
Verification Requirements ,
Wrongful Foreclosures
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
It is no secret that LLC managers enjoy a lot of discretion regarding how they operate the LLC. Members of the LLC often find it difficult to challenge the manager’s decisions on key transactions, investments, and other...more
1/14/2019
/ Appeals ,
Contract Terms ,
Covenant of Good Faith and Fair Dealing ,
DE Supreme Court ,
Discretionary Functions ,
Fiduciary Duty ,
Inherent Authority ,
Limited Liability Company (LLC) ,
Managers ,
Members ,
Operating Agreements ,
Selling a Business
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