Thursday, August 22, 2019

A Horse, a Horse, My Kingdom for a Horse

A Horse, a Horse, My Kingdom for a Horse


      Today is the anniversary of the Battle of Bosworth, the final major battle of that English civil war titled The War of the Roses (this conflict was at the time sometimes referred to as the Cousin’s War).  It was at this battle that King Richard III, variously identified as the last King from the House of Plantagenet or the House of York, was killed. He was the last English King to die in battle.  Henry Tudor, the victor at Bosworth, then became King Henry VII.

      Henry’s victory in battle was if anything surprising.  Richard’s forces outnumbered those of Henry.  Meanwhile, Lord Stanley (William Stanley) held back his own force; if combined with that of Henry, that of Richard would have been out-numbered.  Conversely, if Stanley joined with Richard, the weight of the forces arrayed against Henry would have been overwhelming.  Richard held Stanley’s son as a hostage.  As battle was about to commence, Richard sent word to Stanley that if Stanley did not join with him, he would execute Stanley’s son.  Stanley replied, “I have other sons.”  Stanley’s brother Thomas was married to Margaret Beaufort, mother of Henry Tudor.

       To provide but a taste as to why this conflict was referred to as the Cousins War, consider that William Stanley was the brother of Thomas Stanley, husband of Margaret Beaufort, she being the mother of Henry Tudor.  Ergo, William Stanley was the brother-in-law to Henry’s mother.  Thomas Stanley had previously been married to Eleanor Neville, sister to Warwick the Kingmaker and aunt to Richard III’s recently deceased wife Anne Neville. That wife was a daughter of Warwick.

      Richard’s attack upon Henry’s position nearly succeeded;  Henry’s standard-bearer William Brandon was killed at Henry’s side.  Polydore Virgil, a contemporary historian/chronicler, recorded that Richard fought well.  However, Richard’s fate was sealed when the William Stanley and his troops, having until then not committed to either side, rode against Richard’s infantry as his cavalry was separately moving against Henry. Thomas Stanley would place the coronet (crown) of Richard III on Henry Tudor’s head.

      William Brandon’s son Charles, ultimately Duke of Suffolk, would become the best friend of Henry VIII.

       In 2012, Richard’s remains were located in the course of excavations under a parking lot that now covers part of what was the Blackfriars (Dominican) Church in Leicester, England; early 2013 saw the announcement that testing had confirmed the remains were those of Richard.  In sad testimony to the modern age, litigation ensued as to whether Richard should be re-buried in Leicester Cathedral, apparently consistent with the terms of the agreement by which the archaeological work was performed and other British law, or in York where certain claimed descendants of Richard assert he would want to have been buried.  That question was resolved in favor of Leicester, and in 2016 Richard III was laid to rest in Leicester Cathedral.

       Notwithstanding Polydore Virgil’s positive comments as to Richard III, in proof of the adage that the winners write the history, his reputation was besmirched by various Tudor affiliates such as St. Thomas More and William Shakespeare.   He is currently being reassessed by historians who are not so indebted to supporting the legitimacy of the House of Tudor.

Tuesday, August 20, 2019

Attorney for LLC Not Attorney for its Members

Attorney for LLC Not Attorney for its Members

In a recent decision from Kansas, there was considered and rejected the suggestion that the attorney for an LLC was as well an attorney for each of its members. Green v. Blake, 2019 WL 3776009 (D. Kan. Aug. 12, 2019).

Green, Blake and Leonard were all members in an LLC organized in Oregon, 63rd St., Enterprises, LLC. Green filed suit against the Blake and Leonard asserting claims including fraudulent misrepresentation with respect to his having joined the LLC as a member. Green, in bringing that suit, utilized the services of Laner, an attorney who it was asserted had previously advised Blake and Leonard with respect to the LLC. On that basis, they sought his disqualification from the matter.

The court rejected that suggestion. Rather, it found that to the extent Laner had been involved with the LLC, it had been as counsel to the LLC and not the individual members. In addition, they could not bring forth evidence of particularized communications and representation with respect to the LLC. Falling back on the Kansas adoption of Rule 1.13 and the principle that the attorney for the organization is not as well the attorney for the constituent members, the motion to disqualify Laner as plaintiff’s counsel was denied.

Monday, August 19, 2019

An LLC’s Member is not a Party to its Contracts

An LLC’s Member is not a Party to its Contracts

A decision rendered last December in Louisiana highlights that the member of an LLC is not a party to the agreements that the LLC enters into. DeJohn v. Delta Faucet Company, Civil Action No. 18-13410, 2018 WL 6725393 (E.D. La. Dec. 21, 2018).

Woolf-Harris, LLC had a contract with Delta Faucets to serve as its representative in Louisiana, Mississippi and Western Tennessee, a relationship that dated back to 1975. DeJohn purchased Woolf-Harris in September, 2016. DeJohn would allege that, before he made that purchase, a representative of Delta “promised him, ‘outside of and in addition to any agreement Delta had with Woolf-Harris generally,’ that Delta would not terminate its contract with Woolf-Harris if DeJohn remained the owner and Woolf-Harris maintained its level of performance.” Te written agreement betweek Woolf-Harris and Delta provided that either party could terminate it at any time with or without cause and as well contained an integration clause. In September, 2018, two years after Dejohn had completed his purchase of Woolf-Harris, Delta gave notice that it was terminating the sales representative agreement effective December 31 of that year. DeJohn filed this action seeking injunctive relief precluding Delta from effecting that termination, arguing “detrimental reliance” upon Delta’s alleged agreement that the agreement would not be terminated.

In light of the court having already quoted the termination clause and the merger clause, the reader could reasonably have been expecting a discourse on the inability of a later oral statement to modify a written agreement and the relationship of merger clauses to subsequent oral statements. However, in fact the court would go in a different direction, namely that of standing.

Essentially, DeJohn could not make his claims for detrimental reliance with respect to a contract to which he was not a party. The court wrote:

DeJohn does not have standing to pursue injunctive relief relating to the dissolution of the contract. Because the personalty of a [LLC] is distinct from its members, the principle of such a company cannot assert rights on the company’s behalf.

DeJohn, in his individual capacity, seeks injunctive relief preventing Delta from terminating a contract with a third-party, Woolf-Harris. DeJohn is not a party to the contract in his individual capacity and Woolf-Harris is not a party to this litigation, which does not involve a claim for breach of the contract. DeJohn cannot bootstrap the personal harm he might face as a result of the termination into standing to seek relief that clearly belongs to Woolf-Harris. Therefore, DeJohn lacked standing to assert claims for injunctive relief that would affect the rights of the parties to the contract. Id., ** 2-3 (citations omitted).

The opinion does not explain why Woolf-Harris was not a party to this particular action. In footnote 8 to the opinion, is recited that Delta had brought a suit against Woolf-Harris in Indiana seeking a determination that it's termination of the agreement was proper.

Professor Daniel S. Kleinberger is the 2019 Recipient of the Martin I. Lubaroff Award

Professor Daniel S. Kleinberger is the 2019 Recipient of the Martin I. Lubaroff Award


            The votes have been counted, and the overwhelming view of the Committee is that the recipient of the 2019 Martin I. Lubaroff Award will be Professor Daniel S. Kleinberger.

             While it is almost inconceivable that anyone reading this message would not be already familiar with Dan’s numerous contributions to our shared field of unincorporated entity law, here are a few highlights:

  • Co-author of a multi-volume treatise on LLCs;

  • Co-reporter on the Revised Uniform Limited Liability Company Act (2006);

  • Reporter on the Revised Uniform Limited Partnership Act (2001);

  • Reporter on the Uniform Protected Series Acts

  • Author of Examples & Explanations: Agency Partnerships & LLC;

  • Author of innumerable law review articles; and

  • The source of the category “the bare naked assignee.”
            Dan has been a contributor to our Committee in numerous other ways including organizing programs and participating in our webinars.

            The 2019 Martin I. Lubaroff Award will be presented to Dan at the 2019 LLC Institute. In the meantime, please feel free to send him your congratulations.



About the Martin I. Lubaroff Award

The Martin I. Lubaroff Award recognizes a nationally regarded business attorney and member of the ABA Business Law Section’s Committee on LLCs, Partnerships and Unincorporated Entities who has consistently demonstrated leadership, scholarship and outstanding service in business entity law.  The award was established in 2001 in honor of the memory of Marty Lubaroff, a well-known and highly regarded Delaware attorney who made substantial contributions to the field of partnerships and unincorporated entities.  He was a distinguished lecturer, writer and attorney.

Friday, August 16, 2019

California Board Composition Statute Challenged

California Board Composition Statute Challenged


Last year, California passed a statute requiring, for any public corporation either incorporated or having its principal place of business in California, that it have on its Board of Directors a minimum number of women. That minimum number is set on a sliding scale based upon the total number of directors. HERE IS A LINK to my earlier posting on that statute.

The legislative review of the statute indicated that there was a significant risk of litigation, Then Governor Brown, when signing the legislation, noted that “serious legal concerns have been raised” with respect to its requirements. He also noted that “I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation.”

Those observations have turned out to be prophetic; suit has been filed in California challenging are their requirements. The complaint asserts that “the legislation’s quota system for female representation on corporate boards employees express gender classifications. As a result, SP 826  is immediately suspect and presumptively invalid and triggers strict scrutiny review.“


Thursday, August 15, 2019

Oh How Times Have Changed

Oh How Times Have Changed

In Wedding v. First National Bank, Inc. of Chicago, 133 S.W.2d 931 (Ky. 1939), the Kentucky Court of Appeals (then the highest court of Kentucky), in discussing whether a promissory note was enforceable, wrote:

“The note is quite long, covering almost four single spaced pages, ….”

Oh how times have changed.

Wednesday, August 14, 2019

Delaware Chancery Court Addresses Attorney Fee Provision in LLC Operating Agreement

Delaware Chancery Court Addresses Attorney Fee Provision in
LLC Operating Agreement

In a decision rendered in June, the Delaware Court of Chancery had opportunity to apply an attorney fee provision of an operating agreement. In this instance, consequent to the provision’s expansive language and the plaintiff’s limited recovery, the plaintiff was required to cover the LLC’s attorney fees. Durham v. Grapetree, LLC, 2019 WL 2337475 (Del. Ch. June 4, 2019).

Grapetree, LLC held a single asset, a rental property on the island of St. Lucia. The LLC had five siblings as the members; four of those siblings served as well as member-managers. The plaintiff was the only member who was not as well a manager. That member sought to inspect company books and records under section 18-305 of the Delaware LLC Act. Vice Chancellor Glasscock granted in part and denied in part that request. In that order, the plaintiff was granted limited relief; six of his 32 claims for documents were granted.

In reliance upon the operating agreement, the LLC sought its attorney’s fees. Specifically, the operating agreement at issue provided in part that if any member brought an action against the company and that member “does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought, the Claiming Member [i.e., the plaintiff] shall be obligated to reimburse the Company … for all fees, costs and expense” incurred by the company. Id., *2.

On the facts, Vice Chancellor Glasscock found that the operating agreement was unambiguous and explicit as to the point. While the plaintiff had been successful on certain of his demands, most were denied “as unnecessary to a proper purpose.” Id., *4. On that basis, applying this particular operating agreement, it was held that of the LLC was entitled to its reasonable attorneys’ fees and expenses.
           The Vice Chancellor rejected the suggestion that as the plaintiff was proceeding pro se, that should militate the fee shifting. Rather, that was the plaintiff’s decision, and should not reduce his exposure for the LLC’s costs and expenses.