Also known as: LLCs · L.L.C. · limited liability company
Written by attorneys — see sources below.
A business entity formed under state law that shields its members from personal liability for the entity's debts. Members may manage the entity directly or through designated managers. The entity is treated as an unincorporated association for purposes such as citizenship in diversity jurisdiction.
Leah Lamb and Landon Long form Lighthouse Shipping LLC with members residing in Illinois and Indiana. When Lighthouse Shipping sues a defendant in federal court, the court determines that complete diversity is lacking because the LLC takes on the citizenship of every member. The action is dismissed for lack of subject-matter jurisdiction.
Linden Logistics LLC winds up after paying all creditors. The remaining surplus is first returned to persons owning transferable interests in proportion to unreturned contributions. Any leftover amount is then distributed among such persons according to their rights to share in distributions immediately before dissolution.
Luna Lang's investment fund, an LLC, purchases shares in a public company after the company and its suppliers allegedly concealed channel-stuffing practices. The LLC sues the suppliers for participating in a scheme to defraud investors. The court examines whether the suppliers' conduct gives rise to primary liability under the securities laws.
Stoneridge Investment Partners, LLC, a Delaware limited liability company, served as lead plaintiff in a class action filed in the United States District Court for the Eastern District of Missouri on behalf of purchasers of Charter Communications, Inc., common stock. The suit named as defendants Charter itself, some of its executives, its independent auditor Arthur Andersen LLP, and two other companies that had acted as both suppliers and customers of Charter. Charter, a cable operator, engaged in a variety of fraudulent accounting practices throughout 2000 so that its quarterly reports would meet Wall Street expectations for subscriber growth and operating cash flow. By late 2000 Charter executives realized that these practices would still leave the company short of projected operating cash flow by fifteen to twenty million dollars. To close the gap, Charter entered into arrangements with Scientific-Atlanta, Inc., and Motorola, Inc., under which Charter overpaid the respondents twenty dollars for each digital cable converter box it purchased through the end of the year. In return, the respondents agreed to purchase advertising time from Charter at prices higher than fair value, with the transactions documented through backdated contracts and false statements about increased production costs. The arrangements had no economic substance, yet Charter recorded the advertising purchases as revenue and capitalized its purchases of the set-top boxes, thereby inflating reported revenues and operating cash flow by approximately seventeen million dollars on financial statements filed with the Securities and Exchange Commission and disseminated to the public. Respondents had no role in preparing or disseminating Charter's financial statements, and they recorded the transactions as a wash on their own books under generally accepted accounting principles. It is alleged that respondents knew or were in reckless disregard of Charter's intention to use the transactions to mislead research analysts and investors. The District Court granted respondents' motion to dismiss for failure to state a claim. The Court of Appeals for the Eighth Circuit affirmed, holding that the allegations showed at most aiding and abetting by respondents. The Supreme Court granted certiorari to review the judgment.
View caseLinden Bank, a German entity, operates through its Delaware LLC subsidiary that sells products in California. Plaintiffs injured abroad sue Linden Bank in California federal court, arguing that the subsidiary's California sales impute contacts to the parent. The court analyzes whether the subsidiary's activities establish jurisdiction over the parent.
In 2004, twenty-two residents of Argentina filed suit in the United States District Court for the Northern District of California against DaimlerChrysler Aktiengesellschaft, a German public stock company headquartered in Stuttgart that manufactures Mercedes-Benz vehicles in Germany. The complaint alleged that Daimler's Argentinian subsidiary, Mercedes-Benz Argentina, collaborated with state security forces during Argentina's 1976–1983 Dirty War to kidnap, detain, torture, and kill MB Argentina workers, including plaintiffs or persons closely related to them. The complaint asserted claims under the Alien Tort Statute, the Torture Victim Protection Act of 1991, and California and Argentina law. Jurisdiction over Daimler was predicated on the California contacts of Mercedes-Benz USA, LLC, another Daimler subsidiary incorporated in Delaware with its principal place of business in New Jersey. MBUSA serves as Daimler's exclusive importer and distributor in the United States, purchasing vehicles from Daimler in Germany and distributing them to independent dealerships throughout the nation, including California. MBUSA maintains a regional office in Costa Mesa, a Vehicle Preparation Center in Carson, and a Classic Center in Irvine. MBUSA's California sales accounted for 2.4 percent of Daimler's worldwide sales. A General Distributor Agreement between Daimler and MBUSA established MBUSA as an independent contractor that buys and sells vehicles for its own account and has no authority to make binding obligations for Daimler. Daimler moved to dismiss the action for lack of personal jurisdiction. After allowing jurisdictional discovery on the agency allegations, the District Court granted the motion in November 2005 and reaffirmed the dismissal in February 2007, concluding that Daimler's own contacts with California were too sporadic and that MBUSA's contacts could not be attributed to Daimler. The Ninth Circuit initially affirmed but, on rehearing, reversed in 2011, holding that MBUSA was Daimler's agent for jurisdictional purposes and that its California contacts supported the exercise of general jurisdiction over Daimler. Daimler petitioned for rehearing and rehearing en banc, which the Ninth Circuit denied over the dissent of eight judges. The Supreme Court granted certiorari in 2013 to decide whether Daimler is amenable to suit in California for claims arising from events occurring entirely outside the United States and unrelated to any activity in California.
View caseLily Lopez, a member of Lotus Pharmaceuticals LLC, challenges a merger approved by the managers. The managers conditioned the deal on approval by a majority of disinterested members after full disclosure. The court applies the business judgment rule because the informed member vote cleanses the transaction.
KKR Financial Holdings LLC was structured from its inception with a management agreement under which KKR Financial Advisors, an affiliate of KKR & Co. L.P., managed its day-to-day operations. The agreement could be terminated only upon payment of a termination fee by Financial Holdings. KKR owned less than 1 percent of Financial Holdings stock and had no right to appoint directors or veto board decisions. These structural features were known to investors when they purchased shares in Financial Holdings. KKR acquired each share of Financial Holdings stock for 0.51 of a share of KKR stock, a 35% premium to the unaffected market price. The defendants moved to dismiss the complaint. The Court of Chancery dismissed the plaintiffs‘ complaint. The appeal was submitted on September 16, 2015, and the Supreme Court issued its decision on October 2, 2015.
View caseLance Lee owns a closely held LLC that operates retail stores and objects on religious grounds to providing certain employee benefits. The LLC seeks an exemption from a federal mandate requiring those benefits. The court considers whether the entity's religious beliefs qualify for protection under the Religious Freedom Restoration Act.
In 2012 and 2013, three closely held for-profit corporations—Hobby Lobby Stores, Inc., Mardel, Inc., and Conestoga Wood Specialties Corp.—along with their owners, the Green and Hahn families, filed suits against the Secretary of Health and Human Services and other federal officials. Hobby Lobby operates over 500 stores with more than 13,000 employees. Mardel runs 35 Christian bookstores with nearly 400 employees. Conestoga employs about 950 people in its woodworking business. The Green family owns and operates Hobby Lobby and Mardel. The Hahn family owns and operates Conestoga. Both families hold sincere Christian religious beliefs that life begins at conception. Under the Patient Protection and Affordable Care Act of 2010, employers with 50 or more full-time employees must provide group health insurance covering certain preventive services for women, including 20 FDA-approved contraceptive methods, without cost sharing. The Department of Health and Human Services issued regulations requiring coverage of all 20 methods. The Greens and Hahns object specifically to four methods because they believe these may prevent implantation of a fertilized egg, which they view as destroying an embryo in violation of their faith. If the companies fail to provide the required coverage, they face penalties of $100 per day per affected employee, potentially reaching $475 million annually for Hobby Lobby, $33 million for Conestoga, and $15 million for Mardel. Alternatively, dropping coverage entirely could trigger penalties of $2,000 per employee per year. The companies and owners sued under the Religious Freedom Restoration Act of 1993, seeking to enjoin the mandate as applied to the four objected-to methods. The District Court for the Western District of Oklahoma denied a preliminary injunction to the Greens and their companies. The Tenth Circuit reversed, holding that the corporations could assert RFRA claims. In the Eastern District of Pennsylvania, the District Court denied a preliminary injunction to the Hahns and Conestoga. The Third Circuit affirmed, concluding that for-profit corporations cannot exercise religion under RFRA. The Supreme Court granted certiorari and consolidated the cases.
View caseAn LLC is treated as an unincorporated association. Its citizenship is determined by the citizenship of each of its members rather than by a state of formation or principal place of business.
After paying creditors, any surplus is first returned to holders of transferable interests for unreturned contributions. Remaining surplus is then distributed in proportion to the members' rights to distributions immediately before dissolution.
Yes. The UCC expressly includes a limited liability company within the definition of person, along with other legal or commercial entities.
One or more persons may form an LLC by filing a certificate of organization with the secretary of state. Two or more persons may also enter an agreement that becomes the operating agreement upon formation.
…the United States, where its subsidiary, Mercedes-Benz USA, LLC (MBUSA), distributes Daimler vehicles. MBUSA is a Delaware limited liability company and has its principal place of business in New Jersey. MBUSA’s marketing and sales efforts in California are undertaken by a regional office in Costa Mesa and a network of independent…