Some LLC Names Slip Past California's Statutory Ban

The California Revised Uniform Limited Liability Company Act explicitly bans a number of different words from being included in LLC names:

The name shall not include the words “bank,” “trust,” “trustee,” “incorporated,” “inc.,” “corporation,” or “corp.” and shall not include the words “insurer” or “insurance company” or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.

Cal. Corp. Code § 17701.08(e).  A similar prohibition was found in the former Beverly-Killea Limited Liability Company Act.  Cal. Corp. Code 1705(d) (repealed).  This ban extends to foreign LLCs because they  may not register to transact intrastate business under a name that does not comply with Section 17701.08.  Cal. Corp. Code § 17708.05.  No one should be surprised by this prohibition because it can be found on the Form LLC-1 and the Form LLC-5.  Unlike the General Corporation Law, there is no exception for approval by the Commissioner of Business Oversight.  Cal. Corp. Code § 201.

Thus, I was extremely surprised that the Secretary of State has permitted numerous LLCs to be organized using names that incorporate the word "trust".  It is unclear what the Secretary of State's office may be able to do about these non-complying names as it lacks any authority to order LLCs to change their names.

SEC Orders Up Briefs On Constitutionality Of Administrative Process

Last October, I wrote about a constitutional challenge to the status of SEC administrative law judges.  See SEC ALJs Face Free Enterprise Challenge.  Earlier this week, the Commissioners ordered supplemental briefing on this question in a pending appeal:

On appeal, Respondents argue that the Commission’s “administrative process is unconstitutional because SEC ALJ’s are executive officers who enjoy two-tiered tenure protection."  The Respondents dedicate only two paragraphs in their opening brief to this issue, and the Division of Enforcement responds with only one paragraph in its opposition brief.  Further briefing on this issue would benefit the Commission’s consideration of the appeal.

Accordingly, it is ORDERED that the parties file supplemental briefs regarding this issue.  The Division of Enforcement’s supplemental brief shall be due Wednesday, February 4, 2015, and the Respondent’s supplemental brief shall be due Monday, February 16, 2015.  Neither supplemental brief shall exceed fifteen double-spaced pages.

In re Timbervest LLC et al.  SEC Admin. Proc. File No. 3-15519 (Jan. 20, 2015) (footnote omitted).  It will certainly be unusual if the Commissioners conclude that the SEC's own administrative proceedings are unconstitutional.  Independent agencies (technically, the SEC may not qualify as such) are likely to be interested in any decision because the statute at issue, 5 U.S.C. § 7521, applies to federal administrative law judges generally and is not limited to administrative law judges working for the SEC.  If the SEC were a California state agency, it simply wouldn't have the power to declare a statute unenforceable.  Cal. Const. Art. III, Section 3.5.