Tuesday, December 26, 2017

Feeling Like Charlie Brown at Christmas: More LLCs as a Corporations

No one will  be shocked that my last post of the year is about a court referring to a limited liability company (LLC) as a "limited liability corporation."  It's wrong to do so, and it's my thing to point out when it happens.  This case is especially striking (and perhaps upsetting) because of the context of the reference.  In this 2015 case that just showed up on Westlaw (or at least, in my alerts), "Plaintiff argues that because Defendants are all limited liability corporations they must identify and prove the citizenship of their various members and that they have failed to do so." Skywark v. Healthbridge Mgmt., LLC, No. 15-00058-BJR, 2015 WL 13621058, at *1 (W.D. Pa. July 22, 2015).  They mean LLCs, not corporations.  Okay, so far this is a pretty typical mistake.  But wait! 

In this case, the defendants did not allege the citizenship of the members of the defendants' LLCs in their initial Notice of Removal, so the plaintiffs claimed that a filed  amendment was more than “technically defective.” In claiming the amendment was "minor, the defendants rely cited  O'Boyle v. Braverman, No. 08-553, 2008 U.S. Dist. LEXIS 62180 (D.N.J. Aug. 12, 2008), which found that when a party mistakenly alleged the citizenship of an LLC as a corporation, the party could still amend the allegations to properly allege the citizenship of its LLC members. 2008 U.S. Dist. LEXIS 62180, at *7. O'Boyle, like the present court on Skywark found the proposed amendment to be technical in nature. 
 
On the one hand, this is probably correct in terms of justice seeking. On the other hand, if a court were to find that such a mistake was more than minor, perhaps lawyers would get this right in the first place, which they should do.
 
In assessing the situation, the court states: 
Plaintiff is correct that the citizenship of a limited liability corporation is determined by the citizenship of its members. Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010). Defendants have sought to fix any errors that may affect diversity jurisdiction by filing a declaration that identifies the members of their limited liability corporations and allegations of their citizenship. Plaintiff raises several arguments in response to Defendants' declaration and alleges that it is insufficient to prove diversity of citizenship.
Skywark v. Healthbridge Mgmt., LLC, No. 15-00058-BJR, 2015 WL 13621058, at *3 (W.D. Pa. July 22, 2015) (emphasis added). 
 
To quote Charlie Brown, AAUGH! 
 
Didn't the court just establish that the entire issue was the distinction between corporations and LLCs?  Sigh. The mistakes are frustrating, but to add to that such a clear lack of internal consistency when the issue has been identified is darn right irritating.  
 
As I often do, I feel I must acknowledge that we're all human and we make mistakes.  Goodness knows I have made (and continue to make) more than my fair share.  I don't mean to say anyone is a bad person for making such mistakes.  But I sure would appreciate it if they were a lot less common, too.  

If you celebrated, I hope you had a great Christmas. We sure did. Wishing you and yours peace, warmth, and love in this holiday season.  

http://lawprofessors.typepad.com/business_law/2017/12/feeling-like-charlie-brown-at-christmas-more-llcs-as-a-corporations.html

Corporations, Joshua P. Fershee, Litigation, LLCs | Permalink

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