“LLCs combine the limited personal liability of a corporation with the single-tier tax treatment of a partnership.” (Opinion). Here, the Court interpreted the Colorado Limited Liability Company Act, CRS 7-80-606 (Act), and concluded that a judgment Creditor of the LLC could not bring suit against either the Managers or the Members of the LLC. The Managers were companies owned by the Members (natural persons). Creditor obtained a judgment against the LLC. Managers then induced the LLC to distribute its assets to the Members. Creditor sued the Members under the Act for an unlawful distribution, and sued the Managers for a common law breach of fiduciary duty claim. The Court concluded that under the express terms of the Act, only an LLC can sue its members for unlawful distributions. And, Act does not extend corporation common law to an LLC in any instance except a veil-piercing claim.
Tag Archives: Corporate Veil
Michael Weinstein; Kenneth Major; Manymajors Managements, Inc.; and Business Mechanic, Inc., v. Colborne Foodbotics, LLC 2013CO33 (June 10, 2013)
In this case, attorneys clash over piercing the corporate veil. An LLC’s veil failed to shield a shareholder from being personally responsible for attorneys’ fees incurred in a veil-piercing lawsuit, following an arbitration award. Swinerton won an arbitration award against Beauvallon, an LLC owned by Nassi. Swinerton then brought a lawsuit to pierce Beauvallon’s veil to collect the arbitration award against Nassi. The trial court ruled for Swinerton, who then sought to recover attorneys’ fees incurred in the veil-piercing litigation, which the trial court denied. The Court of Appeals reversed, and held that when an LLC’s corporate veil is pierced, shareholders are liable for all the LLC’s contractual obligations. Therefore, Swinerton could enforce the contract’s attorney-fee shifting provision to recover fees against Nassi on the veil-piercing action.