Opinion
G062610
09-20-2024
LABRYO INC., Plaintiff and Appellant, v. AMERICAN IVF CENTER LLC, Defendant and Respondent.
Adams & Pham, Joseph M. Adams and Julie A. Goerlinger for Plaintiff and Appellant. L.A. Commercial Attorney and Christopher D. Lee for Defendant and Respondent.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, No. 30-202201242842 Deborah C. Servino, Judge. Affirmed.
Adams & Pham, Joseph M. Adams and Julie A. Goerlinger for Plaintiff and Appellant.
L.A. Commercial Attorney and Christopher D. Lee for Defendant and Respondent.
OPINION
GOODING, J.
The trial court denied the petition for writ of mandate filed by plaintiff and appellant Labryo Inc. (Labryo). Labryo, a member of American IVF Center LLC (American IVF or AIVF) sought copies of American IVF's tax documents and sought to compel American IVF to prepare and provide to its members tax documents, specifically a 2021 schedule K-1. The court found American IVF was only required to provide existing tax documents. Tax returns and other tax documents for calendar year 2021 for American IVF did not exist because the single company in which American IVF invested had not made its financial records available to American IVF. For this reason, the court found American IVF was excused from its statutory obligation to provide Labryo (and the other members) with 2021 tax documents. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
American IVF is a limited liability company with three members: Baoyu Wang, Fushun Zhang, and Labryo. Molly Chu controls Labryo. American IVF describes itself as "an investment and management company" of Artistry IVF Center (Artistry), an in vitro fertilization clinic partially owned and operated by Chu.
In August 2021, Labryo sent an inspection demand to American IVF pursuant to Corporations Code section 17704.10 and section 8.01 of American IVF's operating agreement. American IVF provided some documents, but Labryo contended the response was incomplete. Labryo therefore filed a petition for writ of mandate to compel a further response from American IVF.
The operating agreement was not provided to the trial court and does not appear in the appellate record. We therefore decide the matter based solely on the requirements of the Corporations Code.
In both March and April 2022, Labryo requested a 2021 schedule K-1 from American IVF. Having received no response, Labryo amended the petition for writ of mandate to add a request to compel production of the tax information. In its response to the amended petition, American IVF admitted it had not prepared or filed a federal tax return or issued a schedule K-1.
Labryo filed a motion to issue a writ of mandate directing American IVF to produce documents or, in the alternative, to permit Labryo to inspect and copy documents. American IVF filed an opposition, and the trial court conducted a hearing on the motion. The court denied the motion and the petition. Judgment was entered, and a timely notice of appeal was filed.
DISCUSSION
The amended petition for writ of mandate requested that American IVF be ordered to make available for inspection and copying "all corporate books, records, and documents" and to "produce the information necessary to complete federal and state income tax or information returns and . . . a copy of [American IVF]'s federal, state, and local income tax or information returns for 2021." On appeal, Labryo challenges only the portion of the trial court's order denying its request that American IVF be ordered to produce its tax returns for 2021 and the information necessary to complete those returns.
"A writ of mandate may be issued by any court to any . . . corporation . . . to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust, or station ...." (Code Civ. Proc., § 1085, subd. (a).) "The writ must be issued in all cases where there is not a plain, speedy, and adequate remedy, in the ordinary course of law. It must be issued upon the verified petition of the party beneficially interested." (Id., § 1086.)
In reviewing the trial court's ruling, we consider whether substantial evidence supports the court's factual findings, and we review its interpretations of statutes de novo. (Kelly v. County of Los Angeles (2006) 141 Cal.App.4th 910, 918-919.)
The California Revised Uniform Limited Liability Company Act (Corp. Code, § 17701.01 et seq.) sets forth the obligations of a limited liability company, its members, and its manager. Among them are the obligation to maintain and provide copies of tax-related materials. A limited liability company must maintain "[c]opies of the limited liability company's federal, state, and local income tax or information returns and reports, if any, for the six most recent fiscal years." (Corp. Code, § 17701.13, subd. (d)(4), italics added.)
Every member of a limited liability company has a right to obtain a copy of the company's federal, state, and local tax returns "promptly after becoming available." (Corp. Code, § 17704.10, subd. (b)(2).) The company must send each member "within 90 days after the end of each taxable year the information necessary to complete federal and state income tax or information returns." (Id., subd. (e).) A company of American IVF's size also must send its members a copy of the company's tax returns within that 90-day period. (Ibid.)
It is undisputed that American IVF did not provide its members a schedule K-1 or tax returns for 2020 or 2021. American IVF offered the following evidence in opposition to Labryo's petition and motion explaining why it failed to do so:
American IVF issued a schedule K-1 for the year 2019 on August 17, 2021. As of March 2023, American IVF had not filed its 2020 tax return because it had not received the necessary financial documents from Artistry. Artistry's financial records are necessary for American IVF to determine its own financials. "AIVF was not able to complete AIVF's book[s] and tax return for 2020. Essentially, in order for AIVF to ascertain its profit &loss position in Artistry, AIVF requires records from Artistry[] showing its incomes, gains, losses, expenses and costs. These records have to be made available to AIVF such that the company may prepare and reconcile its book[s] (profit/loss statement &balance sheet), and to prepare tax returns."
American IVF offered a declaration explaining why it needed the documents from Artistry that had not been produced in order to comply with Labryo's requests:
"a. As to bank records, Ms. Chu provided one-month of Artistry business credit card statement for May 2020. The other bank statements provided are checking account statements which do not contain any record of ATM/Debit card withdrawals or cancelled checks that were supposed to be part of the statements.
"b. As to records concerning equipment purchase, while utilizing AIVF's money to finance medical equipment for Artistry, Ms. Chu did not provide any supporting document (i.e., contract) that specify [sic] loan term, outstanding balance, and applicable interests (paid and/or incurring).
"c. As to records concerning business expenses in connection with company's leased vehicle, Ms. Chu provided record[s] that shows the vehicle lease was placed under her own name, not AIVF or Artistry. This practice is not appropriate for a business leased vehicle, but Ms. Chu did not provide AIVF with any explanation or justification.
"d. More importantly, Ms. Chu did not provide AIVF with a complete ledger showing Artistry's incomes, gains, losses, expenses and costs, let alone documents sufficient for the company to keep track of its investment in Artistry."
Labryo did not object to any of the evidence submitted by American IVF in opposition to the motion, and it did not offer any contradictory evidence with its reply.
Based on the foregoing, the trial court found substantial justification for American IVF's failure to provide a schedule K-1 or other tax documents to Labryo. We conclude substantial evidence, as set forth above, supports that finding.
If American IVF does not possess the documents necessary to prepare a tax return, there can be no basis for issuing a writ of mandate compelling it to do so. Labryo correctly notes that the language of Corporations Code section 17704.10, subdivision (a) is mandatory: "Upon the request of a member . . . for purposes reasonably related to the interest of that person as a member . . . a manager . . . shall promptly deliver, in writing, to the member . . ., at the expense of the limited liability company, a copy of the information required to be maintained by paragraphs (1), (2), and (4) of subdivision (d) of Section 17701.13, and any written operating agreement of the limited liability company." (Ibid., italics added.) Subdivision (d)(4) of section 17701.13 requires American IVF to maintain "[c]opies of the limited liability company's federal, state, and local income tax or information returns and reports, if any, for the six most recent fiscal years." (Italics added.) The very language of the statute assumes such documents may, at times, be unavailable. Additionally, section 17704.10, subdivision (b)(2) only requires an LLC to provide its members with the LLC's tax returns "promptly after becoming available." American IVF is not in breach of this statute because the tax returns for 2020 are not yet available. The law does not require a limited liability company to provide to its members copies of documents that do not exist. "The law does not require a futile act." (Crawford v. JPMorgan Chase Bank, N.A. (2015) 242 Cal.App.4th 1265, 1274.)
We conclude substantial evidence supports the trial court's findings. Our review of the relevant statutory authority does not change our analysis.
DISPOSITION
The judgment is affirmed. Respondent to recover costs on appeal.
WE CONCUR: BEDSWORTH, ACTING P. J., MOORE, J.