Wednesday, December 5, 2018

Service of Process for LLCs (Which Are Still Not Corporations)

I just don't get the fascination that courts have with calling LLCs (limited liability companies) limited liability corporations. Yes, at this point, I can no longer claim to be surprised, but I can remain appalled/disappointed/frustrated/etc. Today I happened upon a U.S. District Court case from Florida that made just such an error.  This one bugs me, in part, because the court's reference immediately precedes a quotation of the related LLC statute, which repeatedly refers to the "limited liability company."  It's right there! 
 
That said, the court assesses the situation appropriately, and (I think) gets the law and outcome right.  The court explains: 
In this case, Commerce and Industry served the summons on Southern Construction by serving the wife of the manager of Southern Construction. Doc. No. 10. Because Southern Construction is a limited liability corporation, service is proper under Fla. Stat. § 48.062 . . . .
*2 (1) Process against a limited liability company, domestic or foreign, may be served on the registered agent designated by the limited liability company under chapter 605. A person attempting to serve process pursuant to this subsection may serve the process on any employee of the registered agent during the first attempt at service even if the registered agent is a natural person and is temporarily absent from his or her office.
(2) If service cannot be made on a registered agent of the limited liability company because of failure to comply with chapter 605 or because the limited liability company does not have a registered agent, or if its registered agent cannot with reasonable diligence be served, process against the limited liability company, domestic or foreign, may be served:
 
(a) On a member of a member-managed limited liability company;
(b) On a manager of a manager-managed limited liability company; or
(c) If a member or manager is not available during regular business hours to accept service on behalf of the limited liability company, he, she, or it may designate an employee of the limited liability company to accept such service. After one attempt to serve a member, manager, or designated employee has been made, process may be served on the person in charge of the limited liability company during regular business hours.
 
(3) If, after reasonable diligence, service of process cannot be completed under subsection (1) or subsection (2), service of process may be effected by service upon the Secretary of State as agent of the limited liability company as provided for in s. 48.181.
In the proof of service, the process server attests that he served Kenneth W. Jordan, the manager of Southern Construction, by serving Kimberly Jordan, Kenneth Jordan’s wife, at an address in Midway, Georgia. Doc. No. 10. Neither the process server nor counsel for Commerce and Industry provided any evidence that Southern Construction did not have a registered agent or, if it did, that service could not be made on the registered agent. There is also no evidence that Kimberly Jordan is a member, a manager or an employee of Southern Construction designated to accept service. Finally, there is no evidence regarding the address at which service was made, i.e., at the office of the registered agent, at the office of Southern Construction or at a residence. Therefore, based on the present record, the Court cannot conclude that service of process has been properly perfected.
COMMERCE & INDUSTRY INSURANCE COMPANY, Plaintiff, v. SOUTHERN CONSTRUCTION LABOR SERVICES, LLC, Defendant., No. 617CV965ORL31KRS, 2017 WL 10058577, at *1–2 (M.D. Fla. July 26, 2017) (emphasis added). 
 
The court here gets this right by both following the procedures (e.g., the presumption is to serve the LLC's agent) and the also does not make any assumptions that a spouse is a member or employee, so that's a good one.  This case led me to take a look at my home state's process rules for LLCs. 
 
West Virginia's process is less clear.  For example, West Virginia's rules for service of process do not include a mention of LLCs specifically. The rules provide for service to a "domestic private corporations" and "unincorporated associations" (among others). For a domestic private corporation, service can be completed by serving "an officer, director, or trustee thereof; or, if no such officer, director, or trustee be found, by delivering a copy thereof to any agent of the corporation . . . ." or by serving an authorized agent or attorney.  

Service of unincorporated associations is much more complicated.  Service is made 

Upon an unincorporated association which is subject to suit under a common name, by delivering a copy of the summons and complaint to any officer, director, or governor thereof, or by delivering or mailing in accordance with paragraph (1) above a copy of the summons and complaint to any agent or attorney in fact authorized by appointment or by statute to receive or accept service in its behalf; or, if no such officer, director, governor, or appointed or statutory agent or attorney in fact be found, then by delivering or mailing in accordance with paragraph (1) above a copy of the summons and complaint to any member of such association and publishing notice of the pendency of such action once a week for two successive weeks in the newspaper of general circulation in the county wherein such action is pending. Proof of publication of such notice is made by filing the publisher’s certificate of publication with the court.

Does a manager count as an officer or director? A quick look at cases did not answer that question, but it would seem to me the answer should be "no." Obviously, the easiest way to do complete service would be to serve an LLC's agent or attorney, if either can be found.  But if you have to serve a "member," one must deliver the summons and complaint to the member AND "publish[] notice of the pendency of such action once a week for two successive weeks in the newspaper of general circulation in the county wherein such action is pending." Old school. Anyway, it seems to me that it is high time for West Virginia to specifically recognize LLCs and other entity forms in the Rules of Civil Procedure.   

https://lawprofessors.typepad.com/business_law/2018/12/service-of-process-for-llcs-which-are-still-not-corporations.html

Joshua P. Fershee, Litigation, LLCs | Permalink

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