Tuesday, October 26, 2021

LLC Magically Appears, Incorrectly Called a Corporation

As I have noted previously, LLCs (also known as limited liability companies) are generally required to be represented by counsel in court proceedings.  This is unremarkable, as entities, like corporations and LLCs are deemed, by law, to be separate from their owners. They are often known as “fictional people.” Because they are not natural persons, they cannot (usually) represent themselves pro se and shareholder/member/owners cannot do so for them.

A recent case from the Eastern District of Wisconsin agrees with the well-established principal. Unfortunately, it also follows suit with a less productive prior practice, calling an LLC a limited liability corporation. An LLC, again, is a limited liability company, and it is a separate and distinct entity from a corporation, with its own statute and everything.  Here’s an excerpt:

Leszczynski is representing himself in the case, which he has a statutory right to do. 28 U.S.C. § 1654 (“In all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.”). But even though he is president of Rustic Retreats Log Homes, Inc., Leszczynski cannot represent that corporate defendant. “Corporations unlike human beings are not permitted to litigate pro se.” In re IFC Credit Corp., 663 F.3d 315, 318 (7th Cir. 2011) (citations omitted). “A corporation is not permitted to litigate in federal court unless it is represented by a lawyer licensed to practice in that court.” United States v. Hagerman, 545 F.3d 579, 581 (7th Cir. 2008) (citations omitted). That is true even if the corporation is a limited liability corporation. Id. at 582. “[T]he right to conduct business in [the form of a limited liability corporation] carries with it obligations one of which is to hire a lawyer if you want to sue or defend on behalf of the entity.” Id. at 581-82.

Leszczynski may represent himself, but he may not represent Rustic Retreat Log Homes, LLC. The corporate entity must be represented by a lawyer admitted to practice in the federal court for the Eastern District of Wisconsin. The corporation cannot file any documents in federal court—including any answer or response to the complaint—unless it does so through an attorney licensed to practice in this court.

PIONEER LOG HOMES OF BRITISH COLUMBIA, LTD., Plaintiff, v. RUSTIC RETREATS LOG HOMES, INC., & JOHN LESZCZYNSKI, Defendants., No. 21-CV-1029-PP, 2021 WL 4902169, at *3–4 (E.D. Wis. Oct. 21, 2021).

So, this is generally pretty standard fare. Wrong, but standard, though this one has a rather interesting wrinkle. The court here notes that “corporate” defendants must be represented by a lawyer.  It repeats other authority to support this, then attempts to draw a distinction between a corporation and an LLC, but incorrectly calling the LLC a limited liability corporation.  Twice.  But that, unfortunately, is not weird. It happens far to often. 

What’s weird here is that the case caption refers to Rustic Retreat Log Homes, Inc., as does the earlier part of the opinion.  Yet, down near the end, we have the vague LLC references, and an explicit reference to Rustic Retreat Log Homes, LLC.  But where does it come from? 

The “That is true even if the corporation is a limited liability corporation” language does suggest that perhaps there is another entity involved (an LLC in addition to the corporation), but this seems to be the only clue.  Clearly, this mystery needed to be solved, so I pulled the complaint.  In the complaint, it asserts, in paragraph 62, that “Leszczynski set up a successor company, Rustic Retreats WI, LLC, on June 25, 2021.”  That’s the only LLC reference in the complaint.  It seems likely, then that the court meant to say that both Rustic Retreat Log Homes, Inc. and Rustic Retreats WI, LLC needed to be represented by a lawyer in court.  But the opinion still seems kind of weird, and kind of wrong, in explaining what seems to be a rather simple (and correct) proposition.  Sigh.    

https://lawprofessors.typepad.com/business_law/2021/10/llc-magically-appears-incorrectly-called-a-corporation.html

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

Comments

It is disappointing to see the court do this. And she used to be a bankruptcy judge too.

But, I'm not sure about the theory of it being the stray LLC mention in the complaint. For an order like this dealing with a really minor issue about service, I don't see why one would even need to consult the complaint at all--let alone study it so closely as to pick up on a single reference buried among 26 pages.

Instead, given that it wasn't exactly something important like an SJ opinion, or even a ruling on a discovery motion, the clerk drafting the order probably just got careless at the very end and slipped up on the entity form. And one can imagine the judge didn't spend much or any time reviewing it either. Or, possibly the clerk was trying to spice up what was otherwise a tedious assignment by showing off with some gratuitous discussion of corporations vs. LLCs. Except in the process the clerk goofed both on the substantive discussion and the name of the party.

The ironic thing is, as alluded to both in the complaint and the order, the company president has retained sophisticated counsel (Husch Blackwell) to litigate for his company before. Surely that's given him at least some familiarity with these service issues and the requirement for a legal entity to be represented by counsel?

OK, here's a final theory that's not so serious. Maybe LLC is just an abbreviation for Leszczynski Log Cabins? You could get so many great lumber puns from this case if it ends up going on for a while. For example, in an eventual appeal to CA7, Judge Wood should definitely write the opinion.

But seriously though, I checked out Leszczynski's website and the log cabins do look pretty darn impressive.

Posted by: kotodama | Oct 26, 2021 10:33:58 PM

Post a comment