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CALIFORNIA CORPORATE & SECURITIES LAW

The Limited Liability Company Agreement That Has No Name

Practitioners under California’s Revised Uniform Limited Liability Company Act will be familiar with the concept of an “operating agreement” (Cal. Corp. Code § 17701.02(s)).  Indeed, I expect that nearly every LLC formed under the CARULLCA has, or will have, some form of operating agreement.  Practitioners, however, may be unaware that the CARULLCA also contemplates the existence of another, very crucial foundational agreement.  This agreement’s lack of notoriety may be due to the fact that it will most often be oral and it has no name.

This anonymous agreement can be found in Corporations Code Section 17704.o1(b) which provides that if an LLC is to have multiple members on formation, then the members are determined “as agreed by the persons before the formation of the limited liability company”.  This provision is a somewhat feeble attempt to address the fact that the CARULLCA doesn’t require any connection between the person or persons who sign the articles of organization and the initial members.  To those who would condemn this criticism as idle speculation, I commend the case of Hullinger v. Anand, 2015 U.S. Dist. LEXIS 187188 (C.D. Cal. Dec. 22, 2015) in which the plaintiffs alleged that although they had agreed with the defendant to form an LLC in which they would be members, the defendant failed to recognize them as members after forming the LLC.  I expect to see more of these cases in the future.

No Names in Film and Literature

Some readers may recall the film, Captain Phillips, which tells the story of the takeover of the MV Maersk by Somali pirates.  When the Navy uses a Somali speaker to communicate with the pirates, one of the pirates asks “Who’s this?”.  The translator answers “nemo”, the Latin word for “no one”.

This is a modern retelling of the famous encounter between the great teller of tales Odysseus and the powerful Cyclops, Polyphemus:

Κύκλωψ, εἰρωτᾷς μ᾽ ὄνομα κλυτόν, αὐτὰρ ἐγώ τοι ἐξερέω: σὺ δέ μοι δὸς ξείνιον, ὥς περ ὑπέστης. Οὖτις ἐμοί γ᾽ ὄνομα: Οὖτιν δέ με κικλήσκουσι μήτηρ ἠδὲ πατὴρ ἠδ᾽ ἄλλοι πάντες ἑταῖροι . Cyclops, you are asking my renowned name, nevertheless I will declare: “Give to me the hospitality, you were promising.  My name is no one: no one is what my mother, father and all my comrades call me.”

Homer, Odyssey, Book 9, lines 364 -367 (my translation). Matters went downhill from there for both Polyphemus and the pirates.

Fans of Jules Verne will also recognize Captain Nemo in the science fiction class, Twenty Thousand Leagues Under the Sea.

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