From: Navneet Karra
Subject: Greg vs. LLC
1) What parties Greg sued?
Greg could’ve sued many parties in this situation. First, Greg could go after the Limited Liability Corporation members for when Mike yelled at Greg after he criticized the Hunter Thompson Novels, a form of assault. In LLCs, the profits and losses are “passed through” the business to each member of the LLC. Secondly, Greg could go after Strip Mall 4 for damages resulting from the assault from Mike. Greg could also personally sue Mike for the tort he committed.
2) Shawn, Bryan, and Mike’s liability to: each other, Suppliers, Razorback, Tiger, Greg, and Strip Mall 4.
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This is typically referred to as “piercing the corporate veil”; courts will hold an LLC or corporation's owners, members, and shareholders personally liable for business debts. Similarly, if you personally guarantee an obligation of the corporation or LLC then the creditor can come after your personal assets if the business defaults on the loan; also, if you pledged personal assets like a computer for a loan, the creditor can also com after that if it’s necessary.
The LLC is facing a breach in contract with suppliers 2 and 3 after they notified them were unable to pay for the shipments from June. Under the UCC, the suppliers could utilize various remedies for the situation. A few that are relevant to the situation are recover for the loss profits or if the seller is entitled to damages, it is computed by subcontracting the contract price from the market price at the time and place the goods were to be delivered plus any incidental costs, minus expenses saved by the breach.
Razorback also suffered a loss after they intentionally sold their loan. After hearing about the lawsuit, Tiger accepted the loan for $80,000; this led to a loss of $20,000 for the venture capitalist firm. However, if you sell something like this, you are also selling away your rights. Razorback sold the loan due to unconventional reasons so Razorback has no right to collect from the LLC. When LLC designated as member-managed LLC, all members have authority to bind LLC under agency law to contracts on behalf of LLC. But at the end of the day, it is up to the court on whether they deserve those damages. Razorback intentionally put them self in a position where they were receiving a loss. Another issue here is whether Tiger can collect payments for the newly acquired loan. In this situation we have to consider whether Tiger is a holder in due course. From the requirements to be a HDC, Tiger is taking a hold of a properly negotiated negotiable instrument, Tiger gives value by accepting a previously existing debt, the loan was taken in good faith, and it didn’t appear the loan was overdue, dishonored, or that any person had a defense or claim on it. Therefore, he is a holder in due course and the LLC is liable to make payments to Tiger.
The LLC serves a huge liability towards Greg. Greg was obviously a victim of assault after Mike commited a tort. A jury may award compensatory damages -- payment for injury --to Gregg if he prevails in the lawsuit. His damages may include money from three different aspects: losses such as medical expenses, losses from lost wages, or losses from pain and suffering. Punitive damages may also be reward to Greg because what Mike did was an embracement to society. Punitive damages are typically to “punish” the defendant.
The Strip Mall 4 may be...