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
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 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
5/23/2023
/ Alter Ego ,
Appeals ,
Arbitration ,
Arbitration Awards ,
Breach of Contract ,
Business Ownership ,
California ,
Corporate Entities ,
Liability ,
Limited Liability Company (LLC) ,
Loans ,
Marketing ,
Reversal
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
“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
Members of an LLC are required to pitch in equally for the LLC’s expenses and debts, right?
Generally, no....more
...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
2/27/2023
/ Alter Ego ,
Appeals ,
Business Entities ,
Contamination ,
Corporate Veil ,
Government Entities ,
Infrastructure ,
Land Developers ,
Landfills ,
Liability ,
Limited Liability Company (LLC) ,
Partnerships ,
Piercing the Corporate Veil ,
Remediation ,
Site Remediation
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
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
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
1/23/2023
/ Beneficial Owner ,
Corporate Transparency Act ,
Counterfeiting ,
Drug Trafficking ,
Financial Fraud ,
Financial Institutions ,
FinCEN ,
Human Trafficking ,
Limited Liability Company (LLC) ,
National Security ,
Penalties ,
Personal Information ,
Piracy ,
Regulatory Agencies ,
Reporting Requirements ,
Securities Fraud ,
Tax Fraud ,
Terrorism Funding
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
12/29/2022
/ Appeals ,
Arbitration ,
California ,
Civil Code ,
Default ,
Fees ,
Interest Rates ,
Late Payments ,
Liquidated Damages ,
Loan Agreements ,
Penalties ,
Reversal ,
Unenforceable Contract Terms
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