Posted on 11/10/2006 7:53:47 PM PST by lmr
I withdrew as a member of an LLC over 3 months ago. I have asked the other members to buy me out, but all I am getting are very low offers that aren't in line with the reality of the value of my interest. I am compelled to litigate, but I have run out of funds and cannot afford an attorney any longer. I need to sell this asset to pay some debts. Our Operating Agreement has a buy-sell clause in it with a way to determine the value of my interest, but the remaining members (partners) have so far given me offers which were only pennies on the dollar of what it was really worth.
I am considering filing the complaint myself, I need to know which court to go to. I don't know if the correct court in the State District Court or the Federal District court. I live in Kansas. Any advice from freepers is appreciated.
First, how are you computing its worth? Is it your impression of a future cash flow or the reality of the current situation?
If you're in this deep, and don't know how and where to file, how on earth do you expect to prevail?
You need an attorney.
Can't afford one? Just walk away and save yourself the aggrevation of fighting a losing fight.
I already have an idea on how to file. The guidebook I am using is from a U.S. District Court. I am not stupid, I will figure it out as I go along. I just need to get started. I have a case, I just can't afford an Attorney. One way or another, the asset will be sold. If I default on my debts, my creditors will take it. I have nothing to lose by doing this, you see?
How did you walk away? You still own the interest in the LLC. Why did you walk away? Who is the managing member? Are you friends with this person?
We need more information.
I walked away because I was having problems with another member. It could not be resolved peacefully, I tried. I cannot divulge more than that. It doesn't matter anyway, I followed the law perfectly when I withdrew as I had an attorney at that time who basically did it for me. I was not in any breach of contract as the operating agreement was adhered to completely for this situation.
My husband has been approached asking if he would become a business partner with someone else - he always says "no". Sell out, maybe, but never take on a partner.
The only thing to settle is the purchase of my interest by the remaining members of the LLC. What I need to know is which court do I file the complaint in? That's it. That was my only question.
Would you accept a value determined by an arbitration panel ?
If so, would your former partners also agree ?
Arbitration would be a low cost solution and binding.
I don't have issues but with one of the members. The remaining members have their own reasons for not wanting to pay me what it's worth, but other than that, they loved operating the business with me in the capacity I was in.
I have a different job, already. The job market here stinks. It doesn't pay me as much or even what I worth when I'm doing it. The job market is a very difficult place to be in. People who have been in their jobs for awhile, don't understand or have forgotten what it's like because their lives are comfortable now.
It's not an issue of being stupid. I've dealt with a lot of legal matters over the years, and I can assure you that the law is absolutely designed to prevent people from doing it themselves.
If you've got a good case, you can find an attorney who will work for a piece of what you get.
I would urge you to find a lawyer. If you don't know what court to file in, you've got an uphill battle that you will likely lose.
That said, your LLC was likely created through your state secretary of state's office ... it's a state issue, not a federal issue, I would suspect.
How does that work, and if it is binding, how so? I would be open to anything right now. Thanks.
Food for though, definitely. Thanks. Nice post, I appreciate it.
Not sure what city your in but, there are arbitration groups all over the place.
Generally, they pull together 3 people, two that are in a similar industry and the third from outside. They have the authority, because you agree ahead of time, to make their ruling final and binding.
They doing a search on the net. If that doesn't work I'd start calling attorneys and ask them.
BTW, what type of business is this ?
I am not a lawyer, but .... you might look for an attorney who'd be willing to review the case and, if s/he found it a meritorious claim, agree to take it on a contingency basis ... if you win s/he gets 1/3 (or whatever you agree to), as in personal injury cases. Or, there are a few statutes that require the losing party to pay the winning party's legal fees and costs. I doubt that would apply here from the little info provided.
However, even in contingency cases, the client usually has to pay expenses ... regular administrative things like copies and postage/messengers, etc., don't come to that much, but depositions and expert witness fees are steep. You will need economic experts to determine the market value of your share of the LLC.
Your former partners would likewise have to hire an attorney or attorneys and face all the court costs and expert fees ... so it would be in their best interest to discuss buying you out at a reasonable, mutually agreeable cost. Litigation can take years and just wears out everyone's resources. It should be avoided if at all possible.
I would be hesitant to proceed pro se, but if that's your only option, you can find the Rules of any US District Court online. Same for most local courts.
I think US courts require a minimum value to the case of $75K. The filing fee is steeper than most local courts, around $350 or $450 (can't remember.
Think long and hard about this (within your statute of limitations) because you might be better off taking this loss and just getting on with your life. If you are young, especially, you can rebuild your life and credit in time. Probably in less time than it would take to litigate.
Good luck.
Waste Disposal Company.
Thank you.
I will start out by saying I don't know anything about this.
But...
It would seem to me you can't force your "partners" to buy you out unless they want to. It would also seem that it would be your obligation to find a third party to buy you out and replace you in the LLC - not your partners.
I think what needs to happen is to force the other members to abide by the LLC buyout and valuation clause that has already been established.
I do believe an arbitration panel can do this.
The problem may be that the other members simply do not have the cash. If this is the case you should be able to negotiate some payment terms.
You are probably correct about this.
Actually, the court can force them to honor the buy-sell agreement portion of the Operating Agreement. That is my only intention and they are not doing that.
ping
It's a contract case. It can be initiated in the appropriate state court in Kansas, or possibly in Federal District Court but ONLY if all your defendants live in a different state from you. If not, you're in state court. And the determination of which state court has jurisdiction probably depends on the amount in controversy.
They cannot be forced to buy you out. If you can substantiate a loss you might be able to sue.
My non-lawyer, but very experienced pro se advice --
It doesn't much matter which court you file in, and in any event you should pay your lawyer for one or two more hours to help you develop a pro se strategy that you can implement on your own.
Remember that your focus should not be on actually winning the lawsuit, because that will only happen (or not happen) after getting to a judgment. And if it gets to the point of a judgment, the length of thatq process would likely have depleted any value you might have recovered from your asset. Whatever debts you have to pay off would probably be hopelessly delinquent by then, I'm guessing. And that's assuming, of course, that you actually win the judgment, and that the defendants have any assets available to collect.
The key to litigating in this matter is to use the process to cause as much pain for the other side as possible, so that at some point they decide that its cheaper to pay you off than to keep going.
As a plaintiff fighting pro se defendants, and also as a pro se defendant myself in two multi-million dollar, litigations, I leaned that the pro se party has a number of procedural advantages that are not available to lawyers.
Pro see parties are generally given more latitude in court, although as a pro se plaintiff you will need to be more careful about not pushing the judge to the point where he's pissed off at you.
Example: In my state, when one party in a litigation files a motion, the rules say his attorney has to send a copy of it to opposing counsel, who then has 13 days to write a response and send it to the motioning party. Then that party has to file both the motion and the opposing response at the same time.
As a pro se defendent, I learned that I could write a short motion, send it to the other attorney, who would then have to write a lengthy response and send it back to me. Then I would never file the motion with the court. But opposing counsel was still billing his client for the time to write the response.
I never got called on this practice, and even if I did, I knew I could just go into court and say: "Well, you honor, not being a lawyer, I wrote this motion in good faith. But when I read opposing counsel's response, I decided that I would be unlikely to prevail on the motion so I just never filed it."
The idea is to make the process as expensive and time-consuming as possible for the other side. You have to be careful about this, because there is a line that you can't cross without running afoul of the judge. But you can put your toes right up to that line enough to drive opposing counsel crazy and his clients to want to get rid of your claim.
I learned and practiced a number of successful pro se strategies designed not to win the case, but to tie up the opposing side procedurally and make them spend money on process.
Of course, it was cheaper for me than for them, because I didn't have any lawyers to pay.
But of course, it took me an enormous amount of hours, because I had to write my own pleadings (fortunately I was able to steal a lot of boiler plate by reading what attorneys for other parties wrote).
Plus, I also had to become passingly familiar with the Rules of Civil Procedure (you'll need a copy from your court's jurisdiction), and occasionally hired a senior law student to do some caselaw research. (It was cheap.)
The whole process took a lot out of me, and took two years, but in the end I was able to get out of two simultaneous multi-million dollar lawsuits for a total of only twelve hundred dollars.
Good luck. It's a very tough task you're contemplating taking on, but I know from long experience that you can do a lot of damage to the otherside if you are a smart pro se defendent, and drive them to a settlement.
I am sorry to break this to you, but their is a buy-sell clause in the Operating Agreement that says they must.
Thank you. I have finally decided to give up, and accept bankruptcy. I hope that they like that my creditors will send their attorneys after this asset. ;-) I just don't care anymore. Thanks for for your help, once again.
The LLC isn't a fed charter, it's a state limited liability corp charter. You must file your grievance in the appropriate state court.
"I will figure it out as I go along."
You won't get the cash to pay off the debts any time soon. You need a trustworthy atty.
"my creditors will take it"
It appears you're going for bankruptcy. You'll have to pay an atty up front. They'll use the court and their attys to get it. You could lose much more that way though. Present your predicament to a couple attys for consultations first.
Bankruptcy costs a few hundred dollars... Pursuing this bullsh*t will cost thousands. I am done. I have given up. I just simply don't f*cking give a sh*t anymore. Sorry. Let the wolves come...
It will cost over a grand for the atty and there will be more costs your creditor's will want covered for their time in getting the assets. Do that consultation thing with at least 2 attys.
Add to my delight... Can't get blood from a stone.
Sorry... Good Luck.
Ultimately, corporations are enabled by the US Constitution. This could be ending up in a Federal court, especially if an issue of civil rights or campaign finance can be shown, and then the ACLU could involve themselves.
That depends on whether US citizens, or citizens of the US are involved.
That, too. Although international trade agreements extend the corporate legal horizon considerably.
I could be wrong and may be over simplifying but if your issue is Constitutional or based on federal legislation then it is a federal court.
You're on the right track, RW. "Federal question" (civil rights, fair labor standards, etc) is one way for federal courts to obtain subject matter jurisdiction, but that typically arises in employment settings, not contract settings.
The fact that a corporation or LLC is chartered by a state is irrelevant. If they fire someone, for example, for racial reasons, the complaint can be filed in state or federal court.
Contract issues (over the operating agreement, for example) are the subject matter of state courts, except that federal courts can hear contract matters on "diversity" jurisdiction - i.e., all defendants live in a different state from all the plaintiffs. Then the federal court can hear anything (except probate and divorce cases, which are only state court jurisdiction), and the federal court uses the applicable state court's laws.
And now, since our FRiend lmr has decided on bankruptcy, he will for sure be in a federal court and all matters and challenges will be decided there.
And for what its worth, lmr, I may very well have advised a client to do that after a cost-benefit-risk analysis. And possibly with decent results. Keep in mind that when you use federal exemptions in your personal bankruptcy case, you have a "wildcard" exemption of around $10,000.00 ($20,000.00 in a joint husband and wife case) so long as you didn't use it up in your exemption for your personal residence (which is up to about $40,000 for a married couple).
Then you let the creditors go after the LLC members for the rest. And no, you won't be liable for their costs in doing so except to the extent that your assets exceed your exemptions.
As long as you didn't get into debt by fraud, of course. And most taxes and child support obligations don't get discharged.
That would be the purpose of the consultation with at least 2 attys. One could walk away with more than less...
Yep, I always recommend they see someone for a second opinion. Where I wouldn't have taken the case on contingency, someone else might, changing the whole risk dynamic to the client.
Plus, there are lots of people out there smarter than me, strange as that may sound. :-)
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