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CALIFORNIA CORPORATE & SECURITIES LAW

Alter Ego and the Nevada LLC

California’s version of the Revised Uniform Limited Liability Company Act expressly subjects members to potential alter ego liability:  A member of a limited liability company shall be subject to liability under the common law governing alter ego liability, and shall also be personally liable under a judgment of a court or for any debt, obligation,…

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This Hobby Lobby Proposal Is Much Mistaken

Suzanne Weakley, editor-in-chief of the CEB Business Law Practitioner, recently called my attention to this letter from six professors at U.C. Berkeley (Robert P. Bartlett III, Richard Buxbaum, Stavros Gadinis, Justin McCrary, Steven Davidoff Solomon and Eric Talley).  The letter responds to a request for comment from the U.S. Department of Health & Human Services with respect to…

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Internal Affairs Doctrine May Not Control Alter Ego Liability

The internal affairs doctrine “is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs — matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders — because otherwise a corporation could be faced with conflicting demands.”…

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California’s New RULLCA Provides Ample Potential For Member Liability

Recently, I wrote about Corporations Code Section 17703.04(a) which in singularly inept fashion attempts to establish the non-liability of members of a limited liability company under the California’s new Revised Uniform Limited Liability Company Act.  Whatever principle Section 17703.04(a) may be trying to enunciate, it’s clear that the new act provides ample opportunity for member liability, including the following: Liability…

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Is LLC Veil Piercing Really “Not Required By Statute”?

Professor Stephen Bainbridge begins his abstract Abolishing LLC Veil Piercing with the following assertion: Courts are now routinely applying the corporate law doctrine of veil piercing to limited liability companies.  This extension of a seriously flawed doctrine into a new arena is not required by statute and is insupportable as a matter of policy. But is…

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Simply Getting Stiffed On A Judgment May Be An Inequitable Result

What happens when you sue someone who is judgment proof?  One solution may be to ask the trial court to amend the judgment to add additional judgment debtors.  Now, it may seem unusual to be able to add judgment debtors who were not part of the litigation.  The procedure, however, is equitable and is based…

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Alter Ego – “Easy To State But Difficult To Apply”

Yesterday, the California Court of Appeal found substantial evidence in the record to uphold a trial court’s decision to add an affiliated corporation as a judgment debtor under the “single enterprise” theory.  Toho-Towa Co., Ltd. v. Morgan Creek Productions, Cal. Ct. Appeal Case No. B242095, July 11, 2013.  Some of the factors cited were: The…

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What Doth The Alter Ego Doctrine Require Of Thee, But To “Do Justice”?

Yesterday’s post briefly discussed the internal affairs doctrine and alter ego claims.  Professor Stephen Bainbridge responded with this post which discusses the approaches of courts in New York and Delaware.  Professor Bainbridge recently wrote an article on reverse veil piercing and the free exercise rights of incorporated employees.  He describes reverse veil piercing as “a corporate law…

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Alter Ego And The Internal Affairs Doctrine

The internal affairs doctrine is a conflict of laws principle that recognizes that only one state should have the authority to regulate a corporation’s internal affairs.   Under the internal affairs doctrine, that special state is the state of incorporation.  But what exactly constitutes a corporation’s “internal affairs”?  Many lawyers, particularly those in Delaware, take a broad view of…

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Got Judgment? It May Not Be Too Late To Add A Judgment Debtor

Suppose that you sue a limited liability company to enforce a note and win your case.  You also sue the sole owner of the LLC for fraud, but the court is not persuaded.  Now, you have a judgement against the LLC but would really like to add the sole owner of the LLC as a…

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