Tuesday, September 27, 2016
Louisiana Court Denies Retroactive Reinstatement of Dissolved LLC
I n a recent decision from the Louisiana Court of Appeals (Fifth Circuit), the court denied retroactive reinstatement of an LLC that had been affirmatively dissolved by its members. In denying retroactive reinstatement, in effect the court affirmed the application of an atypical Louisiana statute which provides inter alia that upon voluntary dissolution the members of the LLC are liable severally for the LLC’s debts and obligations. In re: Reinstatement of S & D Roofing, LLC, ___So.3d___, No. 16-CA-85, 2016 WL 5231860 (La. Ct. App. Fifth Cir. Sept. 22, 2016).
Shane Dufrene and David Cain organized S&D Roofing, LLC as a Louisiana limited liability company. S&D contracted to provide roofing services to 9029 Jefferson Highway, LLC. Apparently the work was never done, because Jefferson sued S&D for breach of contract. Cain received the service of process although Dufrene never did. Thereafter, a default judgment was entered against S&D for $15,000. Apparently neither Cain nor Dufrene ever received that notice of the default judgment. Some seven months after that default judgment was entered, Cain and Dufrene voluntarily dissolved S&D, and in connection therewith submitted an affidavit which provided in part that S&D owed no debts. This dissolution was pursuant to Louisiana Revised Statute 12:1335.1, which provides in part:
In addition to all other methods of dissolution, if a [LLC] is no longer doing business and owes no debts, it may be dissolved by filing an affidavit with Secretary of State executed by the members… attesting to such facts and requesting that [LLC] be dissolved. Thereafter, the members… shall be personally liable for any debts or other claims against the [LLC] in proportion to their ownership interest in the company.
When Jefferson sought to enforce its default judgment against Dufrene and Cain, they sought to reinstate the LLC pursuant to court order and as well to have that reinstatement be retroactive to the effect that they would not be personally liable on Jefferson’s claim. This reinstatement was sought pursuant to a statute that provides:
The Secretary of State shall reinstate a [LLC] that has been dissolved pursuant to this Section only upon receipt of an order issued by a court of competent jurisdiction directing him to do so.
While the court did grant reinstatement, it did not do so retroactively. When Dufrene and Cain complained that the reinstatement was not retroactive, the court referenced a number of other Louisiana LLC statutes that do provide for retroactive reinstatement. As the provision here relied upon did not provide for retroactive reinstatement, the court found that that was outside the statutory scope. In addition, the court recited a number of policy reasons why retroactive treatment was not appropriate, including the ability of third parties to rely upon the public record.