Archive for the ‘Scholarship’ Category

RUPA and Liquidation by Sale

Monday, August 24th, 2009

This student article looks ambitious:  Tiffany A. Hixon,   Note,  The Revised Uniform Partnership Act–Breaking Up (or Breaking Off) Is Hard To Do:  Why the Right to “Liquidation” Does Not Guarantee a Forced Sale upon Dissolution of the Partnership,  31 W. New Eng. L. Rev. 797-831 (2009).  Hixon argues that

… RUPA does not require a forced sale. * * * [C]ourts should consider a buyout as an alternative to a forced sale when implementing RUPA’s dissolution provision.   [The RUPA] only guarantees a partner the right to receive his interest in cash. * * * [T]he term “liquidation” as used in the statute is ambiguous at best. As a result, courts are free to defer to their equitable powers and permit a buyout.

Id. at 800. 

Gary rosin

Indian LLP law

Wednesday, August 19th, 2009

Sachin Sachdeva and Amit M. Sachveda have an article, The Indian LLP Law: Some Concerns for Lawyers and CAS, 92 SEBI & Corporate Law, No. 6 (2009) (SSRN), that discusses the LLP act enacted in India in December 2008.

Gary Rosin

Comparative Limited Liability for Law Firms

Wednesday, August 19th, 2009

Susan Saab Fortney (Texas Tech) has a new article, Tales of Two Regimes for Regulating Limited Liability Law Firms in the U.S. and Australia: Client Protection and Risk Management Lessons, 11 Legal Ethics 230 (2009) (SSRN), that compares US and Australian regimes for law firm limited liability.  She criticizes US for not adequately addressing firm management systems to ensure ethical conduct.

Gary Rosin

Sole Proprietorships as Entities?

Thursday, August 13th, 2009

In a recently published article, Unconscious Classism: Entity Equality for Sole Proprietors,11 U. Pa. J. Const. L. 215 (2009), Mitchell F. Crusto (Loyola) argues that sole proprietorships are discriminated against in that they are not afforded entity treatment.  To remedy this, he proposes a Uniform Sole Proprietorship Act (USPA) modelled on the UPA and the RUPA.   Id. at 268 app B. 

Crusto’s USPA largely follows the structure of the UPA.  For example, he would not follow RUPA sections 203 and 502 and make the sole proprietorship the owner of property.  Rather, under Section 16(a),

“A sole proprietor is the sole owner of specific sole proprietorship property holding as an “owner in sole proprietorship.”

USPA § 16(a). 

USPA section 16 differs from UPA section 25 in two major respects.   First, there is no requirement that the sole proprietor can use firm property only for firm purposes.  Second, the sole proprietor’s rights in specific property of the sole proprietorship are assignable, USPA § 16(b), but can be attached or executed against only for claims against the sole proprietorship, USPA § 16(c).

I assume the rationale is that the sole proprietor’s consent may be presumed.  Yet, in USPA Section 5 tracks UPA Section 9 in limiting the apparent authority of a sole proprietor to acts “apparently carrying on in the usual way the business of the sole proprietorship”.  USAP § 5(1) & 5(2).  Oddly, though, the USPA would give the sole proprietor authority to take the extraordinary acts listed in UPA Section 9(3).  USPA § 5(3).

More importantly, strict asset segregation is the hallmark of the modern view of an “entity.”  Without that there is little chance of limited liability for firm obligations.  Although Crusto at times argues for that, 262,  USPA Section 9 makes the sole proprietor fully liable for firm obligations.  In Crusto’s view, granting general entity status is “an essential first step toward a limited liability sole proprietorship statute (“LLSP”).  Id. at 263.  But not without strict asset segregation.

Two Articles on Lawyers

Wednesday, July 1st, 2009

I have not yet read these articles, but they caught my eye:

  1. Sande Buhai, Lawyers as Fiduciaries, 53 St. Louis U. L.J. 553 (2009); and

  2. Benjamin P. Cooper, The Lawyer’s Duty to Inform His client of His Own Malpractice, 61 Baylor L. Rev. 174 (2009).

posted by Gary Rosin

AALS Call for Papers

Friday, May 8th, 2009

The AALS Section on Agency, Partnerships. LLCs and Unincorporated Associations has issued a call for papers for the 2010 annual meeting of the AALS (2010 New Orleans) on the topic of "Vicarious, Individual and Limited Liability:  Responsibility for Wrongful Conduct and Unincorporated Firms".

Tort raise claims both theoretical and practical  questions when an individual tortfeasor is associated with an unincorporated firm.  Should the firm's organizational status shield the individual from liability, comparable to a shield against contract claims?  When does an individual's conduct constitute tortious conduct, especially when the individual works as part of a group?

And when, and to what extent, is the firm itself–or its owners–subject to liability?  The circumstances under which any firm–(whether or not incorporated–should be subject to vicarious liability are highly contested, most recently in the Exxon Valdez latigation before the United States Supreme Court.

More generally, should the law differentiate between unincorporated and incorporated firms and their owners in resolving such questions?

Drafts, abstracts or outlines should be submitted no later than September 1, 2009 to the Section's Chair, Deborah De Mott,,

     postd by Gary Rosin

Statute of Frauds and UBE Agreements

Tuesday, March 3rd, 2009

Thomas E. Rutledge has posted on SSRN The Statute of Frauds and Partnership/Operating Agreements, J. Passthrough Entities 41 (November-December 2008), in which he discusses a recent holding by Vice Chancellor Lamb in Olsen v. Halverson, C.A. No. 1884-VCL (Del. Ch. Oct. 22, 2008) that the statue of frauds applies to LLC operating agreements. This despite Section 18-101(7) of the Delaware Limited Liability Company Act, includes “written, oral or implied” (emphasis added).

While we might disagree over the importance of signed writings to resolve disputes about the agreement of the parties, how in the world did an Operating Agreement for a hedge fund go unsigned?

Note:  As noted in 2010 Amendments to Delaware LLC Act, the legislature has amended that Act to allow oral agreements.

posted by Gary Rosin

Reverse Piercing: A Single Member LLC Paradox

Wednesday, February 18th, 2009

Carter G. Bishop (Suffolk) has posted on SSRN "Reverse Piercing: A Single Member LLC Paradox," an article forthcoming in the South Dakota Law Review.  Bishop’s focus is on the rise of single member LLCs (SMLLCs) as an asset-protection vehicle, and the resulting difficulties of creditors of the single member under existing LLC law.  He suggests that, in lieu of "ad hoc equitable judicial remedies," id. at 6, the states should take the SMLLC off the table as an asset-protection vehicle:

every state would amend its SMLLC legislation to provide that upon the voluntary or involuntary transfer of the only economic interest in the SMLLC, the transferee will be admitted as a substituted member, with or without the consent of the only member.

Id. at 70.

On the Florida Asset Protection blog, Jonathan Alper notes that, in FTC v. Olmstead, the remedies of creditors of the sole member of an SMLLC are now before the Florida Supreme Court via a certified question. He has a recent post on the oral arguments in FTC v. Olmstead.

There also has been an interesting discussion of this on LNET-LLC.

Hat tip to Paul Caron.

posted by Gary Rosin