Articles Posted in Limited Liability Companies

In this appeal, the defendant Michael Maschmeyer’s conduct as a member of the plaintiff, Chicago Roof, Deck and Garden LLC (CRDG), led to an appeal regarding the claimed interest owed CRDG. Plaintiffs Darren Flynn and Tomasz Bartosiewicz owned the rest of the membership interest.

After a bench trial, the trial judge found that Maschmeyer breached his fiduciary duty as a member of CRDG by taking business opportunities that should have been first offered to CRDG. The trial court entered judgment in favor of CRDG and against Maschmeyer as follows: (1) $1,768,927 in compensatory damages, (2) $236,350 in prejudgment interest, and (3) $651,104 in punitive damages. The total judgment in favor of CRDG and against Maschmeyer was $2,656,381.

However, the trial judge also found that CRDG was required to compensate Maschmeyer for the fair value of his membership interest upon his disassociation from CRDG, which the court found occurred on June 16, 2014. The trial court determined that the fair value of Maschmeyer’s membership interest was $2,867,376 and entered judgment in favor of Maschmeyer and against CRDG in that amount. After setting off the amount of the judgment against Maschmeyer, the trial court’s judgments resulted in a net judgment in favor of Maschmeyer and against CRDG in the amount of $210,995.

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In a case involving a default judgment in the amount of $421,582 against an Illinois corporation, Mama Gramm’s Bakery requested that a Cook County judge pierce the corporate veil of Silver Fox Pastry and put the liability on Haitham Abuzir. Abuzir was never a director, officer, shareholder or employee of the corporation, Silver Fox.

In the attempt to pierce the veil, Mama Gramm’s alleged that Abuzir funded Silver Fox, “made all business decisions” and “exercised ownership control over the corporation to such a degree that separate personalities of the corporation and defendant did not exist.” The trial judge dismissed the complaint for failing to state a cause of action against Abuzir. The Illinois Appellate court reversed that decision and provided an opinion on the issue of “whether the veil may be pierced to reach non-shareholders.”

The underlying case that resulted in a default judgment was a trade secret case. The appellate court discussed the ways to create and organize a sham corporation. “In some instances, the wrongdoer neither holds stock nor serves in an official capacity. Making officer, director or shareholder status a pre-requisite to veil-piercing elevates form over substance and is therefore contrary to veil-piercing’s equitable nature.”

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TABFG is a limited liability corporation.  It brought a lawsuit against Richard Pfeil, claiming that among other things that Pfeil had tortuously interfered with a contract.  After a bench trial, the district judge entered judgment in favor of TABFG in the amount of $957,659.68, comprised of a principal of $674,121.87 plus prejudgment interest of $279,530.36 and costs of $4,007.45.  Pfeil appealed that judgment.

In April 2003, a joint venture was formed between the limited liability companies TABFG and NT Prop Trading (NT Prop).  The purpose of the joint venture was trading securities for financial gain. 

TABFG was made up of three individual members and managers whose responsibilities were all of the securities trading for the joint venture.  NT Prop was tasked with funding the joint venture and included two members who were also limited liability corporations.  The sole member, manager and owner of one of the limited liability corporations of NT Prop were Pfeil Commodity Fund, in which Richard Pfeil was known as the “money man” for the joint venture.

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Craig Yale was a limited liability member of Wolcott LLC, a real estate development operation.  The two plaintiffs, Dr.Biplob Dass and Brett Garry, brought a lawsuit against Wolcott LLC, claiming they were duped when purchasing a garden condominium unit from Wolcott.

In the complaint it was alleged that the unit flooded several times;   they also discovered that the promised inspection and repair work that would have eliminated the water hazard had not been done by Wolcott.  At first, Dass and Garry did not know that Craig Yale was a member of the limited liability company. 

When Wolcott filed for bankruptcy protection and its debts were discharged, Dass and Garry sued Yale. The trial judge in the case dismissed the fraud claim against Yale based on §10-10 of the Illinois Limited Liability Company Act.  On appeal, the Illinois Appellate Court affirmed by stating that Dass and Garry “do not argue that Yale defrauded them in his individual capacity and do not argue that Yale should be liable through the doctrine of piercing the corporate veil.”

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