Service of LLC and Single Member

[megabux]

What is the name of your state (only U.S. law)? OR & WA
If suing a person and his single member llc, would service on the llc be considered service on the member?
The defendant was named as an individual dba an LLC. Improper, but, I have a default jmt. where an employee of the Single Member llc was served.

 

[Some Random Guy]

You have the judgment - start your collections process.

It is upon them to try to contest the process service. They have a limited timeframe to do this and you do not need to provide them with any help along the way. The rules for service depend on the state. Was the lawsuit filed in OR or WA?

 

[megabux]

Hey Randy,
Thanks for chiming in.
This default jmt was rendered in OR, the llc was administratively dissolved 2yrs. later.
Single member is now in WA and I have not yet spent the $230 to take it there. His atty is challenging the service, saying a rep of the llc was served and his client was not.

 

[megabux]

Can anyone answer my original question?

 

[latigo]

What is the name of your state (only U.S. law)? OR & WA
If suing a person and his single member LLC, would service on the LLC be considered service on the member?
The defendant was named as an individual d.b.a. an LLC. Improper, but I have a default judgment where an employee of the Single Member LLC was served.

The short answer to your question as to whether service on the LLC would be considered service on the member is NO!

Mainly because you didn’t effect proper service upon the LLC in the first place! So how can the improper service of process upon a legal entity, result in proper service upon an individual?

You tell us that service was made upon and “employee” of the LLC. But that was not adequate under Oregon's Limited Liability Company Act.

Plus, on top of it you have other serious problems. Problems that will most likely surface when you try to enforce this default judgement under Washington’s Uniform Enforcement of Foreign Judgments Act.
___________

The long answer is that I have to seriously question whether before starting this lawsuit you took the time to read the
“Oregon Limited Liability Company Act.” [1993 c.173 §1] ORC 63.951

Because if you had, you might have realized that in order to effect legal service of process upon the LLC, that service should have been made upon either the Registered Agent of the LLC or the Secretary of State. ORC 63.121

(Although the statute reads that service MAY be made upon the Registered Agent of the LLC or the Secretary of State, there is no provision in that Act recognizing as proper any service of process upon an “employee” of the LLC, or even upon a Member of the LLC.)
________________________________

Also, before attempting to sue the Member of the LLC you might have given some consideration to the fact that the individual Members are NOT PERSONALLY LIABLE FOR THE DEBTS OF THE LLC - solely by reason of their being a Member. ORC 63.165

Here you seem to indicate that the caption to the lawsuit reads: ___(You)___, Plaintiff vs. ___(Member)____, d/b/a XYZ a Limited Liability Company, Defendant.

[Apparently you are now aware that this was an improper designation. Because a Limited Liability Company is a separate entity and an individual cannot conduct business under the name and style of a Limited Liability Company. To describe such in a pleading would amount to an ambiguous oddity.]

Or does the caption to your lawsuit actually name this member acting both as an individual and as “doing business as”?

How does your return of service read? Does it say that the member was served in his individual capacity as a named defendant in your lawsuit? Was he in fact named as an individual defendant?

And if you did name him personally, how did you get around the membership immunity of ORC 63.165. Meaning what circumstances did you plead and prove in court warranting a personal judgment against this individual member?
___________________

Lastly, have you read the Washington "Uniform Enforcement of Foreign Judgments Act."

Are you aware that when you either file or sue on your Oregon judgment in Washington that your judgment creditor has the right to raise the same procedural questions, " defenses, set-offs, counterclaims, cross-complaints, and proceedings for reopening, vacating, staying, or extending as a judgment of a superior court of that state”? RCW 6.36.025

If I were you, I wouldn’t spend the $230.

 

[megabux]

Latigo,
Thank you for taking the time to answer so thoughtfully.

Let me clarify a bit. I asked this question in this area of the forum because it had to do with prejudgment service.

The fact is, I am the postjudgment assignee and, had I been the plaintiff, I would have known better, regarding service and proper naming of defendants.

The short answer to your question as to whether service on the LLC would be considered service on the member is NO!

Mainly because you didn’t effect proper service upon the LLC in the first place! So how can the improper service of process upon a legal entity, result in proper service upon an individual?

You tell us that service was made upon and “employee” of the LLC. But that was not adequate under Oregon's Limited Liability Company Act.

Well, I was HOPING that, since it is a Single Member LLC, that service on the llc just MIGHT be considered by, at least some judges, to be service on it's only member.

I have heard from a colleague that this was his experience. This was in GA and, in addition to their prescribed methods of service, their statutes also state:

(c) This Code section does not prescribe the only means, or necessarily the required means, of serving a corporation.

Couldn't find verbiage specific to LLCs.

I wish OR statues were substantially the same. What we have, though is, if not more vague, at least, less favorable to this scenario:

(6) Nothing contained in this section shall limit or affect the right to serve any process, notice or demand required or permitted by law to be served upon a limited liability company in any other manner now or hereafter permitted by law, or enlarge the purposes for which service on the Secretary of State is permitted where such purposes are limited by other provisions of law. [1993 c.173 §27]

Plus, on top of it you have other serious problems. Problems that will most likely surface when you try to enforce this default judgement under Washington’s Uniform Enforcement of Foreign Judgments Act.
___________

The long answer is that I have to seriously question whether before starting this lawsuit you took the time to read the
“Oregon Limited Liability Company Act.” [1993 c.173 §1] ORC 63.951\

Because if you had, you might have realized that in order to effect legal service of process upon the LLC, that service should have been made upon either the Registered Agent of the LLC or the Secretary of State. ORC 63.121

I'm sure the plaintiff did not read it.

(Although the statute reads that service MAY be made upon the Registered Agent of the LLC or the Secretary of State, there is no provision in that Act recognizing as proper any service of process upon an “employee” of the LLC, or even upon a Member of the LLC.)

Yes, MAY is a key word here. It does not say MUST, WILL or SHALL, and given that statutes are written more often for informing one of what he cannot do, rather than what he can, it leaves me to investigate others experiences (case law, if I can get it) and see if there is any hope in salvaging this judgment rendered by a small claims judge that, through ignorance or apathy, in my opinion, has done a disservice to the plaintiff.
________________________________

Also, before attempting to sue the Member of the LLC you might have given some consideration to the fact that the individual Members are NOT PERSONALLY LIABLE FOR THE DEBTS OF THE LLC - solely by reason of their being a Member. ORC 63.165



Here you seem to indicate that the caption to the lawsuit reads: ___(You)___, Plaintiff vs. ___(Member)____, d/b/a XYZ a Limited Liability Company, Defendant.

[Apparently you are now aware that this was an improper designation. Because a Limited Liability Company is a separate entity and an individual cannot conduct business under the name and style of a Limited Liability Company. To describe such in a pleading would amount to an ambiguous oddity.]

Yep, knew that.

Or does the caption to your lawsuit actually name this member acting both as an individual and as “doing business as”?

Larry West dba Canuck, LLC

How does your return of service read? Does it say that the member was served in his individual capacity as a named defendant in your lawsuit? Was he in fact named as an individual defendant?

And if you did name him personally, how did you get around the membership immunity of ORC 63.165. Meaning what circumstances did you plead and prove in court warranting a personal judgment against this individual member?
I don't believe the plaintiff had to prove anything. Hence, my comment on the judge. I know that it makes absolutely no sense to style a judgment in this fashion. I have however, enforced them...with better service.
___________________

Lastly, have you read the Washington "Uniform Enforcement of Foreign Judgments Act."
Yes.

Are you aware that when you either file or sue on your Oregon judgment in Washington that your judgment creditor has the right to raise the same procedural questions, " defenses, set-offs, counterclaims, cross-complaints, and proceedings for reopening, vacating, staying, or extending as a judgment of a superior court of that state”? RCW 6.36.025
I am.
Yep, that's why I haven't spent the money to domesticate.

If I were you, I wouldn’t spend the $230.
And I won't, unless I find, as I often do, evidence that, in the administrative dissolution, he gave me ammo, with which to pierce the veil and have him added separately, before domestication...and, of course, he would be properly served with the motion.

I'm wondering, if I move for amendment of jmt, adding him as JD, would OR have specific jurisdiction over him, since it involves an OR LLC, of which, he is the sole member?

Again, I very much appreciate your time and your opinion.

 

[latigo]

The problem in trying to find any meaning in the ORS/LLC/service of process wording, as I see it, is because the language has no particular meaning or purpose. It is nothing but “boilerplate” or re-worked “boilerplate” verbiage.

I don’t know which state copied which, but the same loose, vague and indeterminate wording appears in Washington’s LLC Act and that of my state. With Georgia Code Section 14-11-1108 (3) being no less ambiguous.

But why are you dwelling on whether or not there was an effective service on the fictitious and now defunct entity when it’s the pockets of the individual member you are after?

The determinative issue in Washington will be whether the Oregon court had acquired personal jurisdiction to enter a default judgment against that member. And if that member was not effectively served with process, it did not have that jurisdiction.

 

[megabux]

Thanks for the response.

The problem in trying to find any meaning in the ORS/LLC/service of process wording, as I see it, is because the language has no particular meaning or purpose. It is nothing but “boilerplate” or re-worked “boilerplate” verbiage.

I don’t know which state copied which, but the same loose, vague and indeterminate wording appears in Washington’s LLC Act and that of my state. With Georgia Code Section 14-11-1108 (3) being no less ambiguous.

But why are you dwelling on whether or not there was an effective service on the fictitious and now defunct entity when it’s the pockets of the individual member you are after?
Well, you're right. I have a valid judgment against an entity that no longer exists, and therefore, can't challenge the service.

I propose a motion to amend the judgment to add the sole member to the judgment, in this jurisdiction, on grounds that by allowing administrative dissolution, and never filing articles of dissolution, he had abandoned the responsibilities that afforded him a corporate veil.
I am assuming, perhaps errantly, that since this is a Small Claims case, he can't have representation in this matter and he'd have to come 600 mi. for a hearing.

The determinative issue in Washington will be whether the Oregon court had acquired personal jurisdiction to enter a default judgment against that member. And if that member was not effectively served with process, it did not have that jurisdiction.
I'm thinking (creatively) that if he's properly served notice of the motion, specific personal jurisdiction may be achieved, as far as adding him to the jmt.
Am I making sense here?

Oh, BTW, what is your state?
Hmm...latigo...a southwestern state?

 

[latigo]

“I propose a motion to amend the judgment to add the sole member to the judgment, in this jurisdiction, on grounds that by allowing administrative dissolution, and never filing articles of dissolution, he had abandoned the responsibilities that afforded him a corporate veil.

I am assuming, perhaps errantly, that since this is a Small Claims case, he can't have representation in this matter and he'd have to come 600 mi. for a hearing. “
_____________________

Pardon me for saying so, but you seem to have some bizarre notions as to the workings of the court system.

That small claims case is done and over with! It is res adjudicata. Kaput!

All causes of action, defenses and counterclaims that existed at the time and could have been litigated, but were not, are now merged in that judgment.

Yet you apparently believe that by purchasing or taking an assignment of the judgment that you can step into the judgment creditor’s shoes, reopen and rework the case. Well you can’t. Not you nor the original judgment creditor.

Moreover, if it were so, it would work both ways and put you out of the business of discounting and buying up outstanding judgments.

As an analogy say you were to purchase a series of mortgage loans. According to the approach you are taking here, you could then call the borrowers in and renegotiate those loans on terms more favorable to you.

Well, you couldn’t do that either.

Sometimes having a little knowledge is worse than having none at all. And that is what I’m reading here.

Sax

 

[megabux]

"Pardon me for saying so, but you seem to have some bizarre notions as to the workings of the court system."

I'll pardon you...and inform you that, for the last four years, all of the courts I've dealt with, and Hon. James J. Brown, author of "Judgment Enforcement", have shared my "bizarre notions".

"That small claims case is done and over with! It is res adjudicata [sic]. Kaput!
All causes of action, defenses and counterclaims that existed at the time and could have been litigated, but were not, are now merged in that judgment."

I agree with you on this point.

"...by purchasing or taking an assignment of the judgment...you...step into the judgment creditor’s shoes..."

Wow, that's just the way a judge explained it to a judgment debtor!

..."and reopen and rework the case. Well you can’t. Not you nor the original judgment creditor."

You are confusing prejudgment and postjudgment litigation. Amending a judgment to add judgment debtors is not reopening and reworking a case. It is common practice. Need I cite case law?

"Moreover, if it were so, it would work both ways and put you out of the business of discounting and buying up outstanding judgments.

As an analogy say you were to purchase a series of mortgage loans. According to the approach you are taking here, you could then call the borrowers in and renegotiate those loans on terms more favorable to you.

Well, you couldn’t do that either."

Well, in this economic climate, it wouldn't surprise me if you were wrong about that, too.

"Sometimes having a little knowledge is worse than having none at all."

I agree here, also.

And that is what I’m reading here.

Or, so you presume...

latigo,
I do appreciate your attempt to help, but, I believe you are stepping outside your area of expertise.
Assuming you are an attorney, you go out there and get the judgments and let me know if you need help enforcing them.

I realize that this discussion turned into one more appropriate to the Collections Forum, but, does anyone else wish to opine, regarding this matter?

_____________________

 

[tranquility]

You can *add* defendants after a case is determined?

I would love the case law cite as people who are covered by a judgment usually get to have a say in the proceedings. It's kind of like a due process, constitutuional thing.

 

[megabux]

"You can *add* defendants after a case is determined?"

No, but, you can add judgment debtors through alter ego doctrine.

"I would love the case law cite as people who are covered by a judgment usually get to have a say in the proceedings. It's kind of like a due process, constitutuional thing."

Easy enough. The following is for CA:

When jurisdiction is, by the Constitution or this Code, or by
any other statute, conferred on a Court or judicial officer,
all the means necessary to carry it into effect are also given;
and in the exercise of this jurisdiction, if the course of
proceeding be not specifically pointed out by this Code or
the statute, any suitable process or mode of proceeding may
be adopted which may appear most conformable to the spirit
of this Code.

While Code of Civil Procedure section 187 does not explicitly state that a judgment may be amended to add an additional judgment debtor as an alter ego of the original judgment debtor, section 187 is frequently utilized as the vehicle for so doing.

Section 187 “[G]rants to every court the power to use all necessary means to carry its jurisdiction into effect, even if those means are not specifically pointed out in the code.” Alexander v. Abbey of the Chimes, 104 Cal. App.3d 39, 44 (1980).

In Dow Jones Co., Inc. v. Gerard Avenel and Avenel Imports, Ltd.,
151 Cal. App. 3d 144 (1984), the Court amended a judgment to add alter egos of the defendant as additional judgment debtors pursuant to Code of Civil Procedure section 187. Id. at 146-147. “A trial court has the authority to amend a judgment in order to add additional judgment debtors.
Code of Civil Procedure section 187 has often served as the basis for such an amendment of a judgment... And, the general rule is that ‘a court may amend its judgment at any time so that the judgment will properly designate the real defendants.’” Id. at 148-149, (quoting Alexander v. Abbey of the Chimes, 104 Cal. App. 3d 39, 45 (1980)).

In Hall, Goodhue, Haisley and Barker, Inc. v. Marconi Conference
Center Board, 41 Cal. App. 3d 1551, (1996), the Court found the trial
court is authorized to amend a judgment to add additional judgment debtors and held that the appellant was entitled to a hearing before the trial court on its motion to amend the judgment. Id. at 1555-1556.
“Judgments may be amended to add additional judgment debtors on the ground that a person or entity is the alter ego of the original judgment debtor.” Id. at 1555.
“Amendment of a judgment to add an alter ego is an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant, but is merely inserting the correct name of the real defendant. . .” Hall, Goodhue, Haisley and Barker, Inc. v. Marconi Conference Center Board, 41 Cal. App. 3d 1551, 1555 (1996).

 

[tranquility]

You claim a piercing and/or alter ego on a default judgment?

Uh-huh. Good luck with that motion.

 

[megabux]

"You claim a piercing and/or alter ego on a default judgment?"

I'll admit, if this were not small claims and I had to deal with half a lawyer,
I'd most probably lose, but, hey, I could end up with a judge that's not quite as sharp as you and no opposition.

Also, here's some reading you may find interesting.

Westmeyer v. Flynn, 382 Ill.App.3d 952, 889 N.E.2d 671 (Ill. App. Ct. 1st Dist. 2008)Dorie Westmeyer, the former chief marketing officer of iMatchNetwork, LLC ("iMatch"), a Delaware LLC, won a wage claim by a default judgment against her former employer. In filing a verified complaint against members and managers of iMatch, she sought to pierce the corporate veil in order to collect the amount due under the default judgment. A principle of business organization law by which a court may circumvent the limited liability status of a corporation to impose personal liability on its shareholders, officers and directors, courts have long employed veil piercing against corporations, but no Illinois court had previously held it applicable against Delaware LLCs.

Westmeyer asserted the propriety of veil piercing in her case because (1) iMatch was undercapitalized, (2) the managers failed to observe business formalities, (3) iMatch was simply an alter ego of its members, and (4) the members operated iMatch in such a way as to perpetrate a fraud on its creditors. In the second count of her complaint, the plaintiff charged that the defendants transferred iMatch’s assets to themselves individually, in violation of the Uniform Fraudulent Transfer Act, 740 ILCS 160/1 et seq. In doing so, Westmeyer alleged that the defendants caused the LLC to become insolvent and prevented her recovery under the wage claim.

After the trial court dismissed Westmeyer’s complaint on procedural grounds, she appealed her case to the Illinois Court of Appeals. Relying on Puleo v. Topel, 368 Ill.App.3d 63, 856 N.E.2d 1152 (2006), the defendants asserted that the doctrine of piercing the corporate veil was irrelevant, as iMatch was a limited liability company. Basing her argument on persuasive authority of unreported decisions, decisions in cases of other states, and decisions not directly dealing with the veil piercing doctrine, the plaintiff convinced the Court of Appeals that sufficient authority exists to pierce the corporate veil of a Delaware LLC.

In so finding, the court noted that Puleo did not even address the matter of veil piercing, but that the key issue in that case was whether, under the Illinois Limited Liability Company Act, 805 ILCS 180/1-1 et seq. (the "Act"), a member or manager of an LLC could be held personally liable for the debts of the LLC when it was involuntarily dissolved. Further, the court in Westmeyer focused on section 10-10(c) of the Act, stating in part that “[t]he failure of a limited liability company to observe the usual company formalities…is not a ground for imposing personal liability on the members or managers for liabilities of the company.” What is not excluded by the Act are the other justifications for veil piercing, including, as the plaintiff alleged in the first count of her complaint, undercapitalization, alter ego, and fraud. In reversing and remanding the case, the court held that the veil of an LLC may be pierced when appropriate under Delaware law.

U.S. 7th Circuit Court of Appeals
Laborer's Pension Fund v. Lay-Com, Inc. 09/02/09
Case Number: 06-3711
Summary: In a case involving veil-piercing in order to collect on a default judgment, district court's judgment is affirmed in part and reversed in part where: 1) district court was correct in concluding that defendant-Lay-Com was default judgment debtor corporation's de facto principal, as Lay-Com controlled its purse strings in part to avoid its pension benefit and union dues obligations, and it was clear that judgment debtor had no equity capital at all, and thus, was unquestionably undercapitalized; 2) district court was correct in piercing the veil...

Alter Ego: Piercing the Corporate Veil

From the above link comes the following:

What does control of the litigation
mean for purposes of satisfying due
process? Courts have explained that
“[c]ontrol of the litigation sufficient to
overcome due process objections may
consist of a combination of factors, usu-
ally including the financing of the litiga-
tion, the hiring of attorneys, and control
over the course of the litigation.” (NEC
Electronics, 208 Cal. App. 3d at 781.)
Generally, some “active defense of the
underlying claim” is required (208 Cal.
App. 3d at 778.) If so, one wonders
whether a default judgment that by
definition was not actively defended
could ever be amended to add an alter
ego. On the other hand, if the decision
to take the default judgment emanated
from the alleged alter ego, perhaps the
standard could be met.
A prior judgment against a corpora-
tion “can be made individually binding
on a person associated with the cor-
poration only if the individual to be
charged … had control of the litigation
and occasion to conduct it with a dili-
gence corresponding to the risk of per-
sonal liability that was involved.” (208
Cal. App. 3d at 778–79.)
Either procedure can be an effective
means of invoking the alter ego doc-
trine. Bringing a motion under section
187 adds the additional hurdle of having
to prove control of the litigation. On the
other hand, the facts suggesting alter
ego may not be evident at the outset of
the lawsuit, and may not become appar-
ent until the plaintiff seeks to collect on
its judgment. If the facts indicating alter
ego are discovered before trial and while
there is still time to amend the complaint
to add the new defendants to the action,
a plaintiff must make a tactical decision
whether amending the complaint is
preferable to bringing a motion later to
amend the anticipated judgment.


"Uh-huh. Good luck with that motion."

Thanks!

 

[tranquility]

First, it would be better to find cases in the relevant states.

Second, you realise the case you cited had a piercing argument in the, original, verified complaint along with a naming of the managers.

Third, I hope you're tilting at this windmill for professional practice. A hard case can teach a lot. But, if you're looking for money at the end of the rainbow, I bet you will not find it.