In a spring post (http://thebusinesslawblog.blogspot.com/2007/04/limited-liability-companies-new-case.html) I wrote about a new case further strengthening the protection offered to limited liability companies. During that time, I was litigating a case in which a home purchaser had paid a large amount of money down to a home builder llc to build a home, only to have it fold. She sued not only the limited liability company, but also the three individual members, one of whom I represented. My client, the only financial strong member of the three, was of course an attractive target for the plaintiff. However, my client was also the least culpable. He'd never met the plaintiff, and actually was nothing more than the cliche' "silent partner"--somebody who put up his money and creditworthiness to allow the two primary members to get loans to build homes.
I'd felt comfortable going in to the case that the law seemed to be in our favor, and during its pendency, two new cases came down from the Court of Appeals further buttressing our arguments. I scheduled a motion for summary judgment (which, for those not in the legal field, is basically a motion to dismiss the Plaintiff's complaint) for mid-November. I wrote a letter to the Plaintiff's attorney giving them one more chance to dismiss their case against my client voluntarily. Normally, in such a case the Plaintiff's attorney, even if they think their case is week, will at least try to fight. However, the Plaintiff had her own risks--we'd filed a counterclaim for attorney's fees, and one North Carolina case had ruled that when a plaintiff improperly named an LLC's member in a lawsuit, the plaintiff may be liable for attorney's fees. The attorney, who was diligent for his client, nonetheless decided the right thing was to dismiss his case against my client. Therefore, though I never got a judge's ruling to reinforce my belief about LLCs, I believe the Plaintiff's dismissal bears out my theory.
