Opinion
15-P-56
02-11-2016
ROYAL EQUIPMENT LEASING, LLC v. ROBERT WILLIS.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
A judge of the Superior Court denied defendant Robert Willis's motion for summary judgment as to the plaintiff's nonstatutory reach and apply claim. On a motion for reconsideration the judge concluded, however, that the action was barred by Del. Code Ann. tit. 6, § 18-607(c) (2014 ed.). The full text of § 18-607, Limitations on distribution, is reproduced in the margin.
"(a) A limited liability company shall not make a distribution to a member to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited liability company, other than liabilities to members on account of their limited liability company interests and liabilities for which the recourse of creditors is limited to specified property of the limited liability company, exceed the fair value of the assets of the limited liability company, except that the fair value of property that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the limited liability company only to the extent that the fair value of that property exceeds that liability. For purposes of this subsection (a), the term 'distribution' shall not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business pursuant to a bona fide retirement plan or other benefits program. "(b) A member who receives a distribution in violation of subsection (a) of this section, and who knew at the time of the distribution that the distribution violated subsection (a) of this section, shall be liable to a limited liability company for the amount of the distribution. A member who receives a distribution in violation of subsection (a) of this section, and who did not know at the time of the distribution that the distribution violated subsection (a) of this section, shall not be liable for the amount of the distribution. Subject to subsection (c) of this section, this subsection shall not affect any obligation or liability of a member under an agreement or other applicable law for the amount of a distribution. "(c) Unless otherwise agreed, a member who receives a distribution from a limited liability company shall have no liability under this chapter or other applicable law for the amount of the distribution after the expiration of 3 years from the date of the distribution unless an action to recover the distribution from such member is commenced prior to the expiration of the said 3-year period and an adjudication of liability against such member is made in the said action."
We may assume without deciding that Delaware law would apply in this circumstance, and that the Delaware statute is best read as a statute of repose, as the defendant argues. There are very few cases interpreting the Delaware statute. Its first two subsections address actions by a limited liability company (LLC) against its members, rather than actions like this one by a creditor against a member. The third subsection, subsection (c), provides "a member who receives a distribution from a limited liability company shall have no liability under this chapter or other applicable law for the amount of the distribution after the expiration of 3 years from the date of the distribution unless an action to recover the distribution from such member is commenced prior to the expiration of the said 3-year period and an adjudication of liability against such member is made in the said action."
We agree with the construction of this subsection provided by the court in A Communication Co. v. Bonutti, 55 F. Supp. 3d 1119, 1126-1127 (S.D. Ill. 2014), that it, too, relates only to LLC actions against a member. We reach this conclusion not only because of the structure of the statute, but because it refers to actions "to recover" distributions from "a limited liability company" to "a member." The only party that can "recover" a distribution is the one that had possession of the funds prior to the defendant, in this context, the LLC itself. Id. at 1126. It thus does not bar this action.
The portion of the judgment entered on October 22, 2014, dismissing count VII of the plaintiff's complaint (nonstatutory reach and apply) is vacated, the order allowing the motion for reconsideration is reversed, and the case is remanded to the Superior Court for further proceedings on this count consistent with this memorandum and order. In all remaining respects the judgment is affirmed.
So ordered.
By the Court (Cypher, Trainor & Rubin, JJ.),
The panelists are listed in order of seniority. --------
/s/
Clerk Entered: February 11, 2016.