Sixth Circuit Holds that Magnuson-Moss Warranty Act Does Not Apply to Manufactured Homes

Sixth Circuit Holds that Magnuson-Moss Warranty Act

Does Not Apply to Manufactured Homes

 

Yesterday, the Sixth Circuit Court of Appeals held that the purchaser of a manufactured home could not bring a warranty claim under the Magnuson-Moss Warranty Act on the basis that the Act provides protection with respect to “consumer products,” and a manufactured home is not a consumer product.  Bennett v. CMH Homes, Inc., Nos. 13-5423/5560, ____ WL ____ (Oct. 30, 2014).

A Company Cannot Be Sued Under Its Real and Assumed Names

A Company Cannot Be Sued Under Its Real and Assumed Names

 

In a recent decision of the North Carolina business law court, it considered a complaint in which a party to an agreement was sued under both its real name and it's assumed name. The defendant alleged this to be improper, asserting that the entity was subject to suit under only its real name, and that the additional claims under the assumed name were duplicative. The North Carolina business law court granted that relief.  LA Familia Cosmovision, Inc. v. The Inspiration Networks, 2014 NCBC 51, 2014 WL 5342583 (Sup. Ct. N.C. Oct. 20, 2014). 

 

In this case, “The Inspiration Networks” was named as a defendant in the action.  Inspirational, Inc., had filed a certificate of assumed name for “The Inspiration Networks.”  The suit named both Inspirational, Inc. and The Inspiration Networks as defendants; Inspirational, Inc. sought to have the reference to The Inspiration Networks removed as a defendant.

 

Defendants argue that the use of an assumed name does not create a separate legal entity, and therefore there remains only one entity that may be sued.  Defendants essentially asked this Court to hold that although one may sue a corporation under it's assumed name, one cannot maintain an action against both a corporation and it's assumed name.  Slip op at ¶ 28 (emphasis in original).

 

Accepting this argument, the North Carolina business law court held:

 

This appears to be an issue of first impression in North Carolina. The rule posited by Defendants is logically sound. For the same reason that it would be nonsensical to name the same entity or individual twice as a party to an action, a plaintiff cannot maintain an action against both a legal entity and it's assumed name.  Slip op at ¶ 29.

Saint Crispin's Day

Saint Crispin’s Day

      Today is the anniversary of the Battle of Agincourt, taking place in 1415 between the forces of France and her various allies and the invading English forces under the command of King Henry V. Shakespeare, by having his character Henry V repeatedly refer to the day of the battle as St. Crispin’s Day, otherwise saved this obscure saint from being lost, save for experts in hagiography, to the mist of history.

      The English forces, likely numbering in the range of 7,000, were compelled to do battle with a far superior French force likely numbering in excess of 20,000. All else being equal, the English force should have expected to be annihilated. As is typical in the case of significant historical events, however, all things were not equal. The terrain favored the English, requiring the French forces to attack uphill over a recently plowed field that, consequent to the recent rain, was more mud than dirt. The French knights and men at arms, slogging their way uphill, were a “target rich environment” for the rain of arrows let loose by the English longbows; assuming Henry’s forces numbered 7,000, likely 5,800 were longbowmen, each releasing four to six arrows a minute.

      Another factor was that the very size of the French force worked to its disadvantage in that those behind continued pressing forward, hoping for their moment of glory, even while those at the front were being slaughtered. It was not quite the situation suffered by the Romans at the hands of Hannibal at Cannae, but then likely it was not hugely better.

      While comparative casualty figures are effectively impossible to ascertain, it is clear that the French were badly mauled with significantly more casualties than the English. Further, a significant number of French nobles fell in contrast to only two English nobles.

       For an excellent review of the battle, see Juliet Barker's Agincourt.

      Today is also the anniversary of the storied “charge of the light brigade” in the Crimean War. That particular engagement was, for the English forces, significantly less successful.

A Bridge Too Far In Shareholder Oppression ?

A Bridge Too Far In Shareholder Oppression ?

 

            A recent decision of a New York trial court discusses, but does not resolve, a interesting “second-tier” allegation that a corporate shareholder has been oppressed.  In the Matter of the Application of Gail Kaplan for the Dissolution of Dart Mechanical Corp., Index No. 14-62654 (Sup. Ct. N.Y. Suffolk County (Oct. 8, 2014).

 

The New York Corporation Code provides for remedies, including dissolution, for shareholders who have been “oppressed,” a term which includes that the shareholders "reasonable expectations" as a shareholder have been thwarted. As an aside, I have considered  (and rejected) the notion of “reasonable expectations” in articles including The Problem Is Not With the Answer But Rather With the Question (click on that title to access that article), a piece that was reviewed by Peter Mahler, the dean of New York shareholder oppression law, in his blog posting they can be accessed HERE.  That said, one “reasonable expectation” that is often asserted is a “right” to continued employment by the corporation, salary and benefits being a means by which the economic fruits of ownership are derived.

 

In this instance, Gail Kaplan owned one-third of the shares of Dart Mechanical Corp. She sought its judicial dissolution on the basis that she was being oppressed in that the corporation had terminated her husband's employment, she claiming that it was through the salary and benefits he received as an employee that she realized the benefit of being a shareholder in the corporation.

 

            At this juncture there is not been a ruling on the merits, but simply the denial of an application for a receiver. That said, it is illustrative of the abuse of the notion of "reasonable expectations" that the employment of a non-shareholder could somehow be the basis for a claim for oppression.

 

            My thanks to Peter Mahler for forwarding this decision.

The 2014 LLC Institute

The 2014 LLC Institute

 

       I need to post a thanks to all the speakers who spent so much time and energy on their respective presentations, all of which have added up to make the 2014 LLC Institute such a success.

 

       By way of example of the excellent programs, Thursday morning there was a program on USACafes, collectively a  trio of 1991 Chancery decisions by then Chancellor Allen. Why are we talking about a 1991 decision? Because it has application in numerous situations in modern structures, including when an LLC is organized with a corporation or another business entity as the manager.

 

      A review of the facts of the case was presented by Professor Doug Moll. John Small, who had been counsel in the cases, provided an “inside baseball” review of the facts and circumstances. Professor Colin Marks reported on the approach is he taking in a forthcoming article in assessing and applying USACafes in Delaware and other jurisdictions, including its rejection in Illinois.  Professor Michelle Harner addressed the means by which some have sought to address the two-hat problem by clarifying to whom the fiduciary duty is in multi-tier situations.

 

        I think everyone who attended the program (and I  know I will be ) will be giving additional thought to the fiduciary duty and indemnification/advancement provisions of operating agreements.

 

The Battle of Dyrrhechium – Don’t I Know You From Somewhere?

The Battle of Dyrrhechium – Don’t I Know You From Somewhere?

 

     While the story of the Battle of Hastings (October 14) usually continues with a discussion of the Norman-French political and to a certain extent cultural conquest of England, it is interesting to consider the fate of certain of the losers. 

 

     The core of Harold’s army was a corps of household troops named the housecarls.  They fought with the Norwegian battle ax, often with a shaft of four feet in length.  While it is true that in the Middle Ages it would not be surprising for a person to be born, live and die within a few miles of the same spot, all too often it is assumed that such limited travel was typical.  Likely it was not. 

 

     After Hastings, some of Harold’s housecarls traveled to Byzantium and there joined the Byzantine Emperor’s Varangian Guard.  According to some sources, some of those housecarls, now as members of the Varangian Guard, fought at the Battle of Dyrrhachium on October 18, 1081, a battle which took place in modern day Albania.  Who were they opposing but Norman invaders?  According to those same sources, certain of the troops who had fought as mercenaries for William (now the Conqueror) in England in 1066 now faced off against the now Varangian  former housecarls of Harold. 

 

     Normans versus Saxons, this time in Albania.  Not everyone stayed close to home.

The Destruction of the Holy Sepulchre

The Destruction of the Holy Sepulchre

       Today marks the anniversary of the destruction, in 1009, of the Holy Sepelchre in Jerusalem, done under the orders of the the Fatimid Caliph Al- Hakim bi-Amr Allah. 

The site of the  Sepulchre had been venerated since the early Fourth Century, its location having been determined by St. Helen, mother of Roman emperor Constantine I.  A church constructed upon the site had became a popular pilgrimage destination.  Al-Hakim's order of destruction was carried out to the point that the church was eliminated down to and including its foundations.

       The destruction of the Holy Sepulchre, along with later attacks upon pilgrims, was at the end of the 11th Century cited as the basis for the Crusades.  After the capture of Jerusalem the current Church of the Holy Sepulchre (the so called “Crusader Church”) was constructed; it remains in place today although it has been rebuilt in various parts in response to collapses occassioned by fires or earthquakes.  

The Drop in Law School Applications

The Drop in Law School Applications

       There is a story in today's Courier-Journal about the drop in students applying to law schools, a topic on which Dean Susan Duncan of U of L Law School was speaking at SKO just yesterday.  In the article she highlights that different law schools are different value propositions, and that U of L Law is a good value considering actual costs and placements after graduation.

 

      The article can be  accessed by clicking HERE.

It's Too Long

It's Too Long

     This is a common lament of LLC operating agreements; that they are "too long."

      This lament has no legitimacy.

       The LLC is an organizational form of almost unlimited flexibility in which the agreement of the parties is paramount.

       In light of the primacy of the parties' agreement, LLC acts are typically skeletal as to default rules that apply absent the parties coming to agreement as to that point.  Furthermore, there are an almost unlimited number of matters upon which the LLC act provides no default rule.  For example, the Kentucky LLC act does not tell you:

·         The minimum notice for a meeting of the members;

·         What is a quorum of the members; or

·         What is required in the notice of a meeting of the members.

      If you want to know what are those rules they have to be written out in the operating agreement.  Don't write them out and you have both a shorter operating agreement and no clarity as to these three points.

      Most LLC's are taxed as partnerships.  That tax treatment requires that the operating agreement recite a significant number of rules. 

      Operating agreements embody the rules that govern that particular LLC.  Essentially they resolve certain disputes before they have a chance to arise.

      In the movie Amadeus, the Emperor Joseph II objects to a Mozart opera on the basis of "too many notes." As if he was in the position to judge the composition of a Mozart opera.

      A properly written operating agreement is as long as it needs to be.

The Battle of Hastings

The Battle of Hastings

 

      Today marks the 948th anniversary of the Battle of Hastings.

 

      1066 has already been a tumultuous year in England. On January 5, Edward the Confessor died, leaving the English throne to Harold Gowinson. William of Normandy, also known as William the Bastard, claimed that he had been designated as Edward’s successor and that Harold had once promised him that he, Harold, disclaimed any claim on the throne, leaving it instead to William. In addition, Harold Hardrada asserted a claim to the English throne.

 

      Sometime in September, Harold Hardrada had landed his troops in the north of England. After fast marching his troops north, the invading army of Harold Gowinson met the army of Harold Hardrada at the Battle of Stamford Bridge (See myposting). The invading army was defeated. Learning of William’s invasion in the south, Harold had to turn his army around and fast march it south in order to respond to this new threat. That forced march was some 240 miles each way.

 

 

      The Battle of Hastings was largely a stalemate with the trend in favor of the English defenders when, perhaps apocryphally, Harold was struck in the eye with an arrow. Regardless, it is clear that Harold fell, that the battle went to William, and that by Christmas William was accepting the homage of various English nobles.

 

 

      The famous arrow in the eye may be a later invention. It is not mentioned in the earliest accounts of the battle. In addition, in medieval iconography, an arrow in the eye is the punishment afforded a perjurer. Having gone against his oath to leave the throne to William, some might have felt it poetic justice, even if not based in reality.

The Arrest of the Knights Templar

The Arrest of the Knights Templar

 

     Today marks the widespread arrest in 1307 throughout France of the members of the Order of  Poor Fellow-Soldiers of Christ and Temple of Solomon, better known as the Knights Templar.

 

     Founded shortly after the First Crusade as a monastic order, the mission of the Templars was to provide protection to pilgrims coming to the Holy Land and otherwise protect the Latin Kingdom.  Eventually, the Order developed a rather sophisticated banking organization.  For example, one proposing to travel from England to the Holy Land could contribute funds with the Templars in England, receiving in return what was essentially a letter of credit against which the individual could make withdrawals as they travelled through Europe and ultimately to the Holy Lands.  The military component of the Order, although not high in actual numbers, was considered highly effective – after the Battle of Hattin, Saladin ordered the execution of all captured Templars.

     With the eventual loss of the Holy Land territories by the turn of the 14th century, the Templars were without a reason for existence.  At the same time, Philip IV of France, anxious to expropriate Templar property and as well exterminate his substantial debts to the Order, fabricated numerous salacious allegations against the Templars, leading to their mass arrest on October 13, 1307.  Ultimately Pope Clement V, then resident in Avignon, issued a bull directing that Templars, wherever located, should be arrested.  The remnants of the Order, other than those executed on spurious charges of heresy, were eventually either pensioned or absorbed into other military orders such as the Knights Hospitaller or the Teutonic Knights.

 

     A papal finding (a/k/a the Chinon parchment) determined that the Templars were not guilty of the many charges against them including idolatry and heresy.  Their actual failing was having lost their mission while being at least perceived as being wealthy while a king needed funds. Although the Templars would be be found innocent of heresy, as a political concession the Order was dissolved in 1312, its properties turned over to the Knights Hospitaller.

 

    Notwithstanding the efforts of numerous modern authors, the Templars did not possess the Holy Grail, irrespective of whether that was a physical cup or, as suggested in one particularly fanciful book, an oblique reference to Mary Magdalene and, ultimately, the line of Merovingian kings.

 

        Philip's moniker is "the Fair"; who says history does not have a sense of irony.

Limited Liability Companies in Kentucky - Chapter Supplements

Limited Liability Companies in Kentucky

 

I have prepared and made available cumulative supplements to the following chapters of the UK/CLE treatise Limited Liability Companies in Kentucky:

 

Chapter 5        Basics of LLC Formation

Chapter 6        Foreign LLCs

Chapter 8        Statutory Transactions: Conversions, Mergers and Share Exchanges

Chapter 9        Dissolution of a Limited Liability Company

 

There has also been added a new chapter 9A, Developments on the Law of Kentucky LLCs. 

 

They can all be accessed through THIS LINK.

It’s Deja Vu All Over Again

It’s Deja Vu All Over Again

 

            In Pannell v. Shannon, 425 S.W.3d 58 at 79, 80; 2014 WL 1101472, *7 (Ky. March 20, 2014), the Kentucky Supreme Court wrote:

 

In fact, “limited liability companies are creatures of statute,” controlled by Kentucky Revised Statutes (KRS) Chapter 275, not primarily by the common law. To the extent that common law doctrines could arguably govern limited liability companies, the Kentucky Limited Liability Company Act “is in derogation of common law,” KRS 275.003(1), and the traditional rule of statutory construction that “require[s] strict construction of statutes which are in derogation of common law shall not apply to its provisions.” Thus, to the extent the statutes conflict with common law, the common law is displaced.

 

This Court must therefore first look at the controlling statutory law. (citations omitted).

 

In The Analytic Protocol for the Duty of Loyalty Under the Prototype LLC Act, 63 Arkansas Law Review 473 at 501-02 (2010), Professor Thomas Earl Geu and I observed:

 

Moreover, and as a matter of interpretive policy, the law of business associations seems to have become more “statutory” over time in ways other than through the invention or recognition of “new” entities.  Even the fiduciary provisions within states like Delaware are the subject of great statutory detail. Professor Langbein has explored this same trend toward statutes in trust law, suggesting several reasons for the “statutorification” of trust law including speed, comprehensiveness, and the ability to bring specific expertise to bear in increasingly complicated and interrelated topical areas of law. It seems those reasons could also help explain the general trend of the increase in statutory business association law.  If this supposition is correct, courts should exercise great care when analyzing or generalizing from one statute to another where the different statutory schemes vary in manner of expression, detail of regulatory method, and scope of application. (citations omitted).

Waiver of the Right to Bring a Derivative Action?

Waiver of the Right to Bring a Derivative Action?

 

In an August 15 decision, the Kentucky Court of Appeals reversed a decision of the trial court finding that a participant in the deal was not acting as an attorney for other members.  J&B Energy, Inc. v. Caldwell, 2014 WL 3973966 (Ky App. 2014)

 

My concern with the decision relates to a point not appealed, namely the trial court’s determination that certain language in the operating agreement effected a waiver by the member’s right to bring a derivative action. That language (which appears in footnote 9) is:

 

 

The Members shall have no power to participate in the management of the Company except as expressly authorized by this Agreement or the Articles of Organization and except as may be expressly required by the LLC Act. Unless expressly and duly authorized in writing to do so by a manager, no member shall have any power or authority to bind the Company in any way, to pledge its credit, to act on its behalf, or to render it liable for any purpose.

 

The Court of Appeals wrote:

 

Based on this language in the operating agreement, the court below found that the PBP members have no authority to act on behalf of PBP without the express and duly authorized approval of the managers in writing. The court reasoned that this included derivative actions, and found that J & B had no authority to institute same because it was not a manager and did not have authorization from a manager to do so.

 

While clearly dicta, it is potentially dangerous dicta, and therefore it deserves attention.

 

The Ky LLC Act does not specifically address derivative actions, so in Ky LLCs they are brought under common law.  See section [7.24] of Limited Liability Company Operations (2014-1 supp.), Limited Liability Companies in Kentucky (UKCLE) (forthcoming).

 

I’m rather concerned that the language from the operating agreement was interpreted to preclude the members (the ultimate beneficiaries of the duties of care and loyalty owed the managers) from policing their actions through a derivative action. 

 

A derivative action is an important tool by which the participants in a venture may initiate the policing of the conduct of those in control of the venture.  Cases from around the county and in Kentucky make clear that the duties owed to the LLC may be enforced only by and for the benefit of the LLC.  See, e.g., Chow v. Chilton (reviewed HERE); Chow v. Chilton (reviewed HERE); and Turner v. Andrew (reviewed HERE).

 

Absent the ability of the members to bring a derivation action on the LLC’s behalf, conduct involving, for example, personal exploitation of company business opportunities, self-dealing transactions and personal use of company assets may go unexamined and unremedied.

 

To that end, initiating a derivation action is not participation in the LLC’s management.  Rather, a derivation action puts the court in control.  As long ago observed in Denicke v. Anglo California Nat. Bank of San Francisco, 141 F.2d 285 (9^th Cir. 1944), it was observed that the task of the shareholder initiating a derivative action is to “set in motion the judicial machinery of the court” to the effect that:

 

His position in the litigation is assimilated to that of a guardian ad litem with power in the court, not in the stockholders, to compromise the rights of the real party in interest, which is the corporation itself. Id. at 288, quoting Whitten v. Dabney, 154 P. 312, 316, it quoting 3 Pomeroy’s Equity (3^rd ed.) § 1095 (citations omitted).

Predating this decision by almost forty years is a Kentucky decision utilizing similar language.  In Louisville Bridge Co. v. Dodd, 27 Ky. L. Rep. 454, 85 S.W. 683 (Ky. 1905), the Court addressed the respective roles of the plaintiff minority shareholders and the court:

 

[The plaintiff shareholders are] always subject to the control of the court.  It is at last the judgment of the latter, in the application of principles of equity, that obtains in lieu of the discretion of the board of directors.  The minority stockholder merely sets in motion the action, and present facts upon which the court can act.

 

In only the most strained reading is insisting that those who have undertaken a fiduciary role show that they have discharged their obligations somehow managing or acting on behalf of the LLC.

 

There is as well the point of inconsistency between an agreement which defines fiduciary obligations owed and then by implication eliminates the mechanism by which the discharge of those duties may be enforced (my thanks to Prof. Hemingway for identifying this point).  As she observed:

 

Those actions exist to ensure that there is a watchdog able to engage in that enforcement, since the managers of the firm may not be willing to bring legal action against themselves for the breach of duty.  Having a right without the ability to enforce it is tantamount to having no right at all.

 

If the axiom of equity “for every wrong there is or remedy” is otherwise correct, how can it have currency if there is no mechanism through which to pursue a remedy?

 

Another path of inquiring that deserves attention is whether the parties to a contract may eliminate a court’s equitable power to investigate and as necessary remedy violations of duties that are themselves typically equitable in nature?

 

Conceptually, it may be possible for the members to waive the right to initiate a derivation action, although I would almost always counsel against doing so.  That said, any waiver of this right should be required to be clear and unambiguous.  I submit the language determined by the trial court to be a waiver of the right to initiate a derivation action does not rise to that threshold.

 

Kentucky Has Some Very Strange Laws – The Official State Dance

Kentucky Has Some Very Strange Laws – The Official State Dance

 

Did you know that Kentucky has an official state dance?  It does – clogging.  Yes, the General Assembly passed a law, KRS § 2.101, stating that clogging is the official dance of the Commonwealth of Kentucky. 

Ancient Contracts

Ancient Contracts

            People have been memorializing debts and obligations since, well, since they have had debts and obligations among themselves.  With the advent of writing, that became one way of memorizing the existence of those debts and obligations. 

 

I recently stumbled upon a website containing a sampling of ancient contracts, including for the organization of partnerships.  CLICK HERE TO REACH THAT WEBSITE.

More on Beads and Steads; Bankruptcy Court Denies Amended Complaint Asserting Substantive Consolidation

More on Beads and Steads; Bankruptcy Court Denies Amended Complaint Asserting Substantive Consolidation

 

        In an earlier decision, the Bankruptcy Court denied an effort by the bankruptcy trustee to utilize the alternative doctrines of inside an outside reverse piercing  in order to, in effect, render the assets of one LLC liable on the debts of another.  That prior decision was reviewed CLICK HERE.  As then noted, even as the Bankruptcy Court rejected the theories based upon reverse piercing, it did afford the trustee the opportunity to file an amended complaint setting forth a theory based upon substantive consolidation.  Spradlin v. Beads and Steeds Inns, LLC (In re Howland), Case No. 12-51251, Adv. No. 14-5019 (October 2, 2014).

 

            Thereafter, the trustee did file that amended complaint asserting claims based upon substantive consolidation.  Filing is not, however, the same as acceptance.  In this instance, the Bankruptcy Court denied the motion to amend the complaint, finding it would be futile.

 

Discussing the nature of substantive consolidation, the Court wrote:

 

     Substantive consolidation is an extreme remedy that is used only where there are no other adequate remedies, “particularly where the entity sought to be consolidated is not itself already a debtor in bankruptcy.”  American Camshaft, 410 B.R. at 787.  Substantive consolidation of the Prospective Defendants requires proof that:  “(1) prepetition they disregarded separateness so significantly their creditors relied on the breakdown of entity borders and treated them as one legal entity; and (2) postpetition their assets and liabilities are so scrambled that separating them is prohibitive and hurts all creditors.”  See In re Owens Corning, 419 F.3d 195, 205 (3d Cir. 2005).  The Trustee’s Amended Complaint falls short. Slip op. at 5.

 

            Explaining why substantive consolidation would not be in this case permitted, among other basis, the Court observed:

 

The amended Complaint contains no facts regarding how the Debtors and Meadow Lake handled their financial statements or bank accounts.  Specific factual allegations about the Prospective Defendants’ financial statements and bank accounts may have supported an inference that the assets and liabilities are hopelessly scrambled.  Further, facts about how the Debtors and Meadow Lake disseminated this information to creditors, or facts regarding their specific interactions with creditors, could have led to reasonable inferences that creditors have suffered, and will suffer, harm without substantive consolidation.

 

The lack of this sort of information is more glaring considering the Trustee had two years before the Complaint was filed to review financial statements, bank account details and other proof addressing the Debtors’ and Meadow Lake’s interaction with creditors.  This is the Trustee’s second chance to state a claim for relief.  A conclusory allegation that the “assets and liabilities are so scrambled that separating them is prohibitive and hurts all creditors” is not enough to conclude the Trustee has pled a prima facie claim for such an extreme remedy. Slip op. at 7.

LLC’s Dissolution Did Not Transfer LLC’s Assets to the Member

LLC’s Dissolution Did Not Transfer LLC’s Assets to the Member

 

A June decision from a Connecticut court has (again) confirmed the rule that an LLC’s dissolution does not of itself transfer the LLC’s property to the LLC’s members. Mukon v. Gollnick, 151 Conn. App. 126, 92 A.3d 1052 (Conn. App. 2014).

 

Mukon was the managing member of Sea Pearly Marine, LLC.  In February, 2007, the LLC purchased a ship hull in Maine and paid sales tax to the State of Connecticut.  It began refurbishing the hull into a ship; sales tax was not paid on the additional items purchased pursuant to a resale certificate.

 

In 2009 Mukon asked Gollnick, a CPA, about how to avoid Connecticut’s $250 per year LLC filing fee.  Gollnich told Mukon that the fee could be avoided if the LLC were dissolved, and dissolution paperwork was then filed with the state.

 

Eventually Mukon registered the vessel in his own name.  Upon an audit he was required to pay $11,665.41 to the state.  Mukon then brought an accounting malpractice action against Gollnick.  While Mukon would prevail at trial, on appeal  Gollnick was vindicated.

 

 

The Court of Appeals wrote:

 

The thrust of the plaintiff’s argument before the trial court was that the dissolution of the company triggered an automatic transfer of the vessel from the company to the plaintiff, and that this automatic transfer triggered the tax liability.

 

Those conclusions were ultimately embodied in the trial court’s decision.

 

The Court of Appeals examined the Connecticut LLC Act as to the effect of dissolution, and found that in fact it did not provide that an LLC’s dissolution effects a transfer of its property.  On that basis the conclusion relied upon by the trial court was negated.

 

The Court of Appeals also considered the statutes governing the application of an LLC’s assets upon dissolution and the requirement that its outstanding liabilities be satisfied.  Ultimately the Court found that Mukon’s obligations arose consequent to his failure to satisfy those statutory requirements.

 

This question should never arise in Kentucky as the LLC Act provides that dissolution will “not…transfer title to the [LLC’s] property.”  KRS § 275.300(3)(a).

Caesar, Vercingetorix and the Battle of Alesia

 

Caesar, Vercingetorix and the Battle of Alesia

      Today marks the anniversary of the surrender in 52 b.c. of Vercingetorix to Julius Caesar, bringing to a close the Battle of Alesia.

      The story of the battle was well documented by Caesar in The Gallic Wars.   Caesar and the legions trapped the Gaul army in Alesia.  In order to enforce the blockade they built a wall around nearly the entire town (some geography kept the walls from being complete).  Fearing the arrival of a relieving army, the Romans then built another wall around their siege lines (again nearly complete except where limited by geography).     Hence the Romans were intentionally in the space between the two walls. 

      A relieving army did arrive, and the Romans had to fight both the army on the outside of the fence as well as the forces in Alesia that were trying to break out from the inner wall.  The battles were bloody, and the outcome was a Roman victory.  Vercingetorix was brought back to Rome to be paraded at a Triumph held for Caesar.  He was then killed (likely strangled).

Reflections on the Hobby Lobby Decision

Reflections on the Hobby Lobby Decision

 

      Last June, on the last day of the Supreme Court term, it issued sits decision in Burwell v. Hobby Lobby, holding, inter alia, that a business corporation could deprive its employees of certain contraceptive benefits mandated by the Affordable Care Act based upon the religious objections thereto held by the corporation’s shareholders.  For reasons I detailed in an article published in the William and Mary Business Law Review, A Corporation Has No Soul – The Business Entity Law Response to Challenges to the PPACA Contraceptive Mandate, I entirely disagree with the Court’s reasoning in this decision. CLICK HERE TO LINK TO THAT ARTICLE.

 

One especially unsatisfactory aspect of the decision was the assertion by the majority that in fact it is a very narrow decision and would not have broad application.  This possibility  of broad application was highlighted by Justice Ginsburg in her dissent, and was the point raised in my article that was cited to the US Supreme Court in an amicus brief filed by a group of business law professors.   Essentially, if a corporation can deprive its employees of otherwise statutorily mandated contraceptive coverage, there exists no analytic basis by which the company owned by the observant Jehovah's Witness cannot require exclusion from the employee’s insurance plan of blood transfusions, that the corporation owned by a devout Muslim should not be able to refuse to cover the transplant of a pig valve into an employee’s heart or the Scientologist owned company should not be permitted to exclude from its insurance plan coverage for psychiatric care.

 

In a recent article by Jeffrey Toobin published in the New Yorker magazine, he suggest that, based upon recent reliance upon the Hobby Lobby decision by various individuals asserting they should not have to comply with an otherwise existing legal obligation because of their religious belief’s, Justice Ginsburg was right.

 

Click here to link to that article.

The Fall of Jerusalem

The Fall of Jerusalem

      October 2 marks the anniversary of the fall of Jerusalem in 1187.  Jerusalem had been captured by the Crusader forces in 1099 at the culmination of the First Crusade.

     

      For those of you who saw the movie Kingdom of Heaven, well, lets just saw the script writers did not feel themselves bound by the historic record. The movie failed to acknowledge Balian’s wife and children.  Also ignored was the fact that Balian not only fought at the Battle of Hattin but was as well captured; the movie has him staying behind in Jerusalem, coming to the battle field only after the Crusader army had been destroyed.  At least that part is true; the Crusader army was destroyed, and the Templars were especially hit; all the captive Templers were executed.  Also, the city wall fell not at a gate and not from trebuchet bombardment, but rather from being undermined.  As near as I can tell Balian never visited France.  And he should have been in his mid to late 40’s at the time of the fall of Jerusalem.