Opinion ID: 2195500
Heading Depth: 3
Heading Rank: 1

Heading: Gregory's derivative claim

Text: ¶ 46. Gregory sued Julie and Paul in the name of New Jersey LLC, as well as in his own name. As an affirmative defense to that claim of the complaint, Julie and Paul asserted that Gregory had no statutory authority and no standing to sue on behalf of New Jersey LLC. ¶ 47. Not every member of a limited liability company has the right to bring an action in the name of the limited liability company. Wis. Stat. § 183.0305. The requisite qualifications to do so are set out in Wis. Stat. § 183.1101. Therefore, Gregory must meet those statutory parameters in order to sue in the name of New Jersey LLC. Neither the circuit court nor the court of appeals decided whether Gregory had statutory authority to bring an action on behalf of New Jersey LLC. The majority opinion also does not address the issue, possibly because the parties focused their briefs on whether the sale of the Sheboygan warehouse was valid without Gregory's consent. Because it may be an issue on remand, I point out that it has not been decided whether Gregory has met the statutory prerequisites to bring a derivative claim. [4] ¶ 48. The requirements that must be satisfied before a member can bring a derivative claim on behalf of a Wisconsin limited liability company are set out in Wis. Stat. § 183.1101 and § 183.0404(1)(a). Section 183.1101 requires in relevant part: (1) Unless otherwise provided in an operating agreement, an action on behalf of a limited liability company may be brought in the name of the limited liability company by one or more members of the limited liability company, . . . if the members are authorized to sue by the affirmative vote as described in s. 183.0404(1)(a), except that the vote of any member who has an interest in the outcome of the action that is adverse to the interest of the limited liability company shall be excluded. Section 183.0404(1)(a) provides in relevant part: (1) Unless otherwise provided in an operating agreement . . . an affirmative vote, approval or consent as follows shall be required to decide any matter connected with the business of a limited liability company: (a) If management of a limited liability company is reserved to the members, an affirmative vote, approval or consent by members whose interests in the limited liability company represent contributions to the limited liability company of more than 50% of the value, as stated in the records required to be kept under s. 183.0405(1), of the total contributions made to the limited liability company. ¶ 49. It is undisputed that Gregory's member interest does not comprise more than 50% of the value . . . of the total contributions made to New Jersey LLC, as Wis. Stat. § 183.0404(1)(a) requires. However, no Wisconsin appellate decision has decided the meaning of adverse to the interest of the limited liability company stated in Wis. Stat. § 183.1101(1). Perhaps it depends on what the operating agreement says; however, there is no operating agreement here. Additionally, the purpose of New Jersey LLC is not stated in its Articles of Organization or in the Member's Agreement. [5] Furthermore, Wisconsin's limited liability company law was created to afford a flexible and informal form of doing business. See Joseph W. Boucher, et al., Next Economy Legislation: Allowing Complex Business Reorganizations, Wisconsin Lawyer, Aug. 2002, at 19. And finally, a limited liability company that was formed before October 1, 2002 can be dissolved if a member dissociates from the limited liability company. Wis. Stat. § 183.0901(4). New Jersey LLC was formed before October 1, 2002. Therefore, it had no expectation of perpetual operation. Those are some of the questions that a derivative claim presents. However, I leave this issue undecided, as does the majority opinion, but I note that the parties are not free to do so on remand, if Gregory continues to sue in the name of New Jersey LLC, as well as on his own behalf.