The “Business Judgment Rule” Applies in LLCs Too
Corporate directors have long relied on the “business judgment rule,” under which their decisions are presumed to have been made “on an informed basis, in good…
LLC Members May Ratify Prior Defective Actions
Actions taken within business entities are sometimes deemed invalid due to procedural defects. For corporations, section 119 of the Corporations Code establishes a clear procedure by…
To Moot a Statutory Buyout, LLC’s Dissolution Must be Valid Under its Operating Agreement
In 2022, The LLC Jungle covered the opinion Friend of Camden, Inc. v. Brandt in a post titled LLC Dissolution Vote Defeats Statutory Buyout. In the…
LLC Member Acting for LLC Without Authority Is Not “Protected Activity” Under California’s Anti-SLAPP Statute
California’s anti-SLAPP statute (Code of Civil Procedure section 425.16) aims to protect defendants from meritless lawsuits designed to chill “protected activity” — i.e., the exercise of…
LLC Manager’s Conduct Benefits Her Side Entity at the Expense of the LLC — Are the Claims Against Her Direct or Derivative?
The distinction between direct and derivative claims is a recurring theme on The LLC Jungle. In a nutshell, under California law, an LLC (just like a…
Operating Agreement Doesn’t Excuse Breach of Fiduciary Duty
Many posts on The LLC Jungle blog have focused on the fiduciary duties owed by LLC managers to both the LLC’s members and the LLC itself.…
Derivative Claim Upheld for Estate of Deceased LLC Member
Asserting claims derivatively on behalf of an LLC, as opposed to directly on behalf of an LLC member, can be tricky business for even experienced litigators. …
Does an LLC’s Bankruptcy Discharge Apply to the LLC’s Alter Egos?
When a debtor LLC receives a discharge order from a bankruptcy court, a creditor is prevented from enforcing any preexisting debts against the discharged LLC as…
Another Case Addressing Managerial Discretion and the Implied Covenant of Good Faith and Fair Dealing
LLC managers often enjoy wide latitude and unrestricted “discretion” under the LLC’s operating agreement. At the same time, all contracts — including LLC operating agreements —…
Receiver for LLC Can be Bound by Operating Agreement’s Arbitration Provisions
Courts often appoint receivers to manage the affairs of LLCs when the internal management is conflicted or broken. General equity receivers (as opposed to more limited…