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Derivative Claim Upheld for Estate of Deceased LLC Member

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

Partnership — Not Its Partners — Owns Malpractice Claim Against Partnership’s Attorney

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

Guarantor Liability: Assignment of Note Doesn’t Automatically Assign Guaranty Too

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

Does an LLC’s Bankruptcy Discharge Apply to the LLC’s Alter Egos?

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

Another Case Addressing Managerial Discretion and the Implied Covenant of Good Faith and Fair Dealing

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

A Lis Pendens Recorded Before a Trustee’s Sale is a “Cloud on Title” that Might Thwart an Unlawful Detainer Claim

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

Receiver for LLC Can be Bound by Operating Agreement’s Arbitration Provisions

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

Relying on a Void Quiet Title Judgment — Redux

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 — No Single Factor is Determinative

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

“Business Judgment Rule” Applies to HOAs

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

LLC is Not an “Indispensable Party” to Direct Claims Between LLC Members

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

Court Addresses “Presumptively Legal” Parcels Under Subdivision Map Act

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

“Equitable Buyout” as a Remedy for LLC Wrongdoing?

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

Covid-19 Pandemic And Related Closures Do Not Excuse Commercial Tenant’s Failure To Pay Rent

One of the questions in real estate law arising out of the pandemic is what impact the pandemic and related closure orders would have on commercial leases, and in particular a tenant’s obligation to pay rent. Many, if not...more

Alter Ego Liability for LLC Managers: the Facts Matter

Alter ego liability is a frequent topic covered in The LLC Jungle — see here for a list of all prior “alter ego” related posts. The alter ego doctrine allows a court to disregard a corporate entity (including LLCs) and...more

Court Intervenes to Halt HOA Election Abuse

Under California law, a homeowners association (HOA) is considered a “quasi-government entity” similar to a municipal government.  And, as courts have noted, “with power, of course, comes the potential for abuse.”...more

Sometimes, an HOA Can Sue on Behalf of its Members

“Standing” is the legal term used to describe the requirement that a lawsuit be brought by the person(s) or entity(ies) having a right to bring the claim, generally referred to as the “real party in interest.” Lawsuits fail,...more

Can an LLC Member be Forced to Contribute to the LLC’s Debts?

Members of an LLC are required to pitch in equally for the LLC’s expenses and debts, right? Generally, no....more

Local Government Agencies Can Be “Alter Egos” Too

...Normally, a court will treat a business entity and its liabilities as separate and distinct from its owners. The alter ego doctrine allows the corporate veil to be pierced, and results in holding the owners liable for the...more

No RICO Standing for Cannabis LLCs

In business litigation, a plaintiff will sometimes assert a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), a federal statute at 18 U.S.C. §1961 et seq. RICO provides that it is “unlawful for any...more

Quasi-Judicial Immunity for Court-Appointed Partition Brokers

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

LLC Members — Prepare to Identify Yourselves

The Corporate Transparency Act (31 USC §5336) goes into effect January 1, 2024. Under the Act, most LLCs (and other entities) will need to supply basic personal identification data regarding their “beneficial owners” to...more

Default Interest Based on Single Late Payment Declared Unenforceable

It is not uncommon for loan agreements to provide for fees, penalties, and default interest in the event of the borrower’s late payment. However, a case recently published by California’s First Appellate District — Honchariw...more

LLC and Partnership Authority “Safe Harbors”

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

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