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A Most Curious Decision

I find Judge Cynthia Bashant's recent ruling in Platypus Wear, Inc. v. Bad Boy Europe, Ltd., U.S. Dist. Case No. 16-cv-02751-BAS-BSM (Jan. 23, 2020), to be curious in in several respects.  Judge Bashant ruling was on the plaintiff's motion for summary judgment.  One issue was whether to grant the plaintiff's motion on a breach of contract claim against an individual defendant.  Because the individual was not a party to the contract (two businesses apparently were), the plaintiff sought to hold the individual liable on an alter ego liability theory.  

In ruling on the motion, Judge Bashant notes that "the members of a California limited liability company cannot be personally liable on a contract signed on behalf of the limited liability company. See Cal. Corp. Code § 17101(a)."  The most obvious problem with the statement is that Section 17101(a) was repealed seven years ago.  Stats. 2012, ch. 19 (S.B. 323) § 19. 

Judge Bashant also states that Federal courts "'apply the law of the forum state in determining whether a corporation is an alter ego' of an individual" (quoting Towe Antique Ford Found. v. IRS, 999 F.2d 1387, 1391 (9th Cir. 1993).  It is not clear, however, whether either of the businesses that were parties to the contract are (or were) California corporations.  In fact, the discussion above suggests that the they may be limited liability companies.  If the two businesses were in fact limited liability companies, it is unclear to me where they were formed.  As I noted in this post, it is less than pellucid that California's statute imposing the alter ego doctrine on California limited liability companies applies to foreign limited liability companies.

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Limited Liability Companies, Alter Ego

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