Source: https://www.nybusinessdivorce.com/2015/03/articles/llcs/llc-formalities-that-matter-guest-post-by-professor-daniel-kleinberger/
Timestamp: 2019-04-22 02:37:09+00:00

Document:
How many law professors do you know whose bibliography includes titles like, “Agents of the Good, Servants of Evil: Harry Potter and the Law of Agency,” or “Eliminating Fiduciary Duty within Closely Held Businesses — Cardozo is Dead: We Have Killed Him”? I only know of one, and that’s Daniel S. Kleinberger (pictured), Emeritus Professor of Law at William Mitchell College of Law in St. Paul, Minnesota.
Amidst a spectacular career as teacher, prolific author and business law scholar, Professor Kleinberger also has played a leading role in state and national legislative drafting projects, writing the statutes that govern unincorporated business entities, including his service as co-reporter for and a principal drafter of the Revised Uniform Limited Liability Company Act (“ULLCA (2006)”) which has been enacted in ten states and currently is pending in the legislatures of four others.
In 1994, Professor Kleinberger and co-author Carter G. Bishop published their treatise, Limited Liability Companies: Tax and Business Law (Warren, Gorham & Lamont) which has become one of the bibles of LLC law. Among the many developing areas of the law of LLCs addressed in the treatise is the application of “veil piercing” principles, originally developed as part of the common law of business corporations, to enable creditors of LLCs, under certain circumstances involving abuse of the LLC form, to satisfy LLC obligations with the personal assets of the LLC owners.
According to Professor Kleinberger, a number of LLC statutes have eliminated disregarding “corporate” formalities as a ground for piercing the LLC veil, and some courts applying the law of other jurisdictions have discarded or at least discounted formalities. In an excerpt, printed below, from the forthcoming supplement to the Bishop & Kleinberger LLC treatise, Professor Kleinberger writes about the types of formalities that still matter even in jurisdictions that by statute or case law have done away with governance formalities as a piercing factor.
1. LNET-LLC is the preeminent internet discussion group concerning limited liability companies and partnerships. https://groups.yahoo.com/neo/groups/lnet-llc/info (last visited February 24, 2015).
2. Posted by Jay Adkisson, RISER ADKISSON LLP, Tue 2/24/2015 3:33 PM (RE: [lnet] Re: Schlossberg v Bell Builders Remodeling [MD Ct Appeals 2/20/15] – advisory opinion to Bankruptcy Court on standards for Veil [Piercing]).
3. Connecticut Light & Power Co. v. Westview Carlton Grp., LLC, 950 A2d 522, 527 Conn. App. 2008) (statutory citations omitted). See also Last Time Beverage Corp. v. F & V Distribution Co., LLC, 98 A.D.3d 947, 951, 951 N.Y.S.2d 77, 81 (2012) (stating that “the companies failed to observe certain formalities such as keeping certain records“) (emphasis added); Hesni v. Williams & Boshea, L.L.C., No. CIV.A. 01-3745, 2002 WL 373273, at *4 (E.D. La. Mar. 7, 2002) (piercing the veil of a limited liability company and finding that the plaintiff “present[ed] evidence of both commingling of funds and a failure to follow statutory formalities for incorporation [sic]”); Contrast Breen v. Judge, 124 Conn. App. 147, 154, 4 A.3d 326, 332 (2010) (affirming the trial court’s decision to pierce the veil of a limited liability company and noting that the limited liability company “followed certain corporate formalities, such as maintaining separate books, filing company tax returns and, subsequently, filing the appropriate dissolution documents with the secretary of the state.”).
4. Minn. Stat. § 322C.0304, subd. 2 (2014) (emphasis added). The emphasized language is non-uniform and was drafted to respond to the state attorney general’s concerns.
5. McCarthy v. Wani Venture, A.S., 251 S.W.3d 573, 591 (Tex. App. 2007). However, other records existed, however, and they showed that the various transfers had left one of the companies undercapitalized. “Triple M Supply was then loaded with debt and subsequent creditors, including Norgips, were not paid back. McCarthy, however, was paid. This was the case even though significant deposits were made to Triple M Supply from customer payments from the sale of Norgips’s wallboard. As a result of these acts, Triple M Supply was left undercapitalized and without sufficient funding to pay its debts.” Id.
6. Kosanovich v. 80 Worcester St. Associates, LLC, 2014 Mass. App. Div. 93 (Dist. Ct. 2014) (citation omitted).

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