Unincorporated Business Law Prof Blog

The Ubiquity of Agency Law. Conwell v. Gray Loon Outdoor Marketing Group, Inc. (Ind. 2009)

When talking to a former student, perhaps the most frequent observation is that they regularly use agency law in their practices.  For example, consider the opinion in Conwell v. Gary Loon Outdoor Marketing Group, Inc., No. 82S04-0806-CV-00309 (Ind. May 19, 2009).  Conwellinvolved the ownership of a website designed (and hosted) by Gray Loon for Piece of America (LP) (PoA).  When PoA didn't pay Gray Loon, it took the website off its server, and refused to give the website files to PoA.  Later the files were destroyed.  PoA sued, claiming that Gray Loon had converted its property. 

At this point, you may be wondering how agency law applies.  Under copyright law, the owner of the copyright in a work is the author of the work, unless the work was a "work for hire."  Apparently, in deciding whether there was a work for hire, it makes a difference whether the work was done by an employee or by an independent contractor.  If the former, it is presumed to be work for hire, unless otherwise agreed.  If the latter, it is presumed not to be a work for hire, unless agreed in writing.  Slip Op., at 12-15.

The only other interesting aspect of the case is the way the Court analyzed the status of Gray Loon.  The Court quoted the standard used by the U.S. Supreme Court, and then concluded:

Considering these factors, it seems plain enough that Gray Loon was an independent contractor rather than POA's employee. The website was thus not a "work made for hire."

Slip Op., at 15.  That's it.  Nothing about how the facts fit into the factors.  A great example of how not to write an opinion, or an essay on an exam. 

Speaking of exams, back to grading.

Hat tip to Ben Barros, PropertyProf blog.

posted by Gary Rosin

Texas adopts 9-406/408 Carve-outs for LLC and Partnership Interests

Section 39 of Texas S.B. 1442 provides, inter alia, for 9-406 and 9-408 carve-outs for membership interests in an LLC. Specifically, it is provided that a new subsection (c) will be added to Section 101.106 of the Texas Business Organizations Code to provide:

Sections 9.406 and 9.408, Business & Commerce Code, do not apply to a membership interest in a limited liability company, including the rights, powers and interests arising under the company’s certificate of formation or company agreement or under this code. To the extent of any conflict between this subsection and Section 9.406 or 9.408, Business & Commerce Code, this subsection controls. It is the express intent of this subsection to permit the enforcement, as a contract among the members of a limited liability company, of any provision of a company agreement that would otherwise be ineffective under Section 9.406 or 9.408, Business & Commerce Code.

A similar revision appears at section 57, there addressing interests in a partnership. You may also want to take a look at sections 60 and 61 of that bill, which amend 9-406 and 9‑408 to expressly provide that they do not apply to interests in either an LLC or a partnership.

The effective date is 9/1/09.

posted by Thomas E. Rutledge

Update:  The House Bill Analysis of Section 39 describes the amendments as follows:

Provides that Sections 9.406 (Discharge of Account Debtor; Notification of Assignment; Identification and Proof of Assignment; Restrictions on Assignment of Accounts, Chattel Paper, Payment Intangibles, and Promissory Notes Ineffective) and 9.408 (Restrictions on Assignment of Promissory Notes, Health-Care-Insurance Receivables, and Certain General Intangibles Ineffective), Business & Commerce Code, do not apply to a membership interest in a limited liability company, including the rights, powers, and interests arising under the company's certificate of formation or company agreement or under this code. Provides that to the extent of any conflict between this subsection and Section 9.406 or 9.408, Business & Commerce Code, this subsection controls. Provides that it is the express intent of this subsection to permit the enforcement, as a contract among the members of a limited liability company, of any provision of a company agreement that would otherwise be ineffective under Section 9.406 or 9.408, Business & Commerce Code.

Id. at 9 (emphasis added).

posted by Gary Rosin