Dass v. Yale Is No More

Dass v. Yale Is No More

      Dass v. Yale, 2013 IL App. (1^st) 122520, is a rather famous (infamous?) decision from Illinois holding that, because members and managers of an LLC enjoy limited liability, the manager of an LLC who knowingly misrepresented the status of a condo that he was selling could not be held liable for his misrepresentations.  Reviews of the decision include Steven G. Frost, Jeff Close and Joe Lombardo, Dass v. Yale: Members and Managers of an Illinois LLC Are Not Liable for Their Tortious Conduct, J. Passthrough Entities, May-June 2014, 31.

      This decision has been roundly criticized as an over-broad application of the rule of limited liability, it being argued it was never intended to protect persons from liability for their own tortious conduct.  Subsequent decisions including Fifth Third Mortgage Company v. Kaufman, 934 F.3d 585 (6^th Cir. 2019) ((attorney and owner of title company organized as LLC personally liable for participation in fraudulent mortgage scheme, rejecting defense of Dass v. Yale), affirming Fifth Third Mortgage Co. v. Kaufman, 2017 WL 4021230 (N.D. Ill. July 25, 2017)), have sought to avoid applying its rule. 

      Stepping into the void, the 2019 Illinois legislature, effective January 1, 2020, has amended the Illinois LLC Act to in effect overrule Dass v. Yale. Ill. Public Act 101-0553. To the limited liability provision of the Illinois LLC Act, 805 ILCS 180/10-10, there was added a new subsection that reads as follows:

Nothing in subsection (a) or subsection (d) limits the personal liability of a member or manager imposed under law other than this Act, including, but not limited to, agency, contract, and tort law. The purpose of this subsection (a-5) is to overrule the interpretation of subsections (a) and (d) set forth in Dass v. Yale, 2013 IL App (1st) 122520, and Carollo v. Irwin, 2011 IL App (1st) 102765, and clarify that under existing law a member or manager of a limited liability company may be liable under law other than this Act for its own wrongful acts or omissions, even when acting or purporting to act on behalf of a limited liability company. This subsection is therefore intended to be applicable to actions with respect to which all timely appeals have not exhausted before the effective date of this amendatory Act of the 101st General Assembly as well as to all actions commenced on or after the effective date of this amendatory Act of the 101st General Assembly.