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Am I liable in a lawsuit naming my LLC and myself?
Anonymous3 views4 answers
I have recently been served a Summons in a Civil Action for online copyright infringement. I am named as defendant and so is the LLC of which I am the only officer. If I lose the lawsuit can the plaintiff come after me personally? Or are they limited solely to the assets of the LLC?
I would echo everything Mr. Chen said, and add the following: You may be able to take advantage of this situation. It is often a mistake for plaintiffs to name individuals when the only proper defendant is the corporation (or in your case the LLC). What many lawyers fail to understand is that if corporation or LLC gets a judgment against it and cannot pay it due to insolvency, the plaintiff can go into court later and get the judgment extended to the individuals on an "alter ego" theory. When a plaintiff simply dumps the individuals into a lawsuit first, without any facts in support of the alter ego theory, you can fight back with a demurrer, or a summary judgment motion. If you win at that point, you have a judgment in favor of the individual defendants, so they cannot go in later and add the individuals.
Yes. If you have been named as an individual defendant in the summons and complaint, then you can be held personally liable for the copyright infringement if you lose.
It is imperative that you hire an attorney to defend both yourself and the LLC the lawsuit. An LLC cannot defend itself in litigation.
In California, limited liability companies (LLCs) are treated the same as corporations. Both are entities which must be in good standing in order to participate in litigation in any court.
Moreover, both LLCs and corporations must be represented by counsel. California case law has held that a corporation cannot represent itself in court, either in propria persona or through an officer or agent who is not an attorney. (Merco Constr. Engineers, Inc. v. Municipal Court (1978) 21 Cal. 3d 724, 729.) See also Van Gundy v. Camelot Resorts, Inc. (1983) 152 Cal.App.3d Supp. 29, 32; Caressa Camille, Inc. v. Alcoholic Beverage Control Appeals Bd. (2002) 99 Cal.App.4th 1094, 1101; citing Merco Constr. Engineers, Inc. v. Municipal Court (1978) 21 Cal.3d 724, 727, 729 and Paradise v. Nowlin (1948) 86 Cal.App.2d 897, 898.
This rule appears to be the law throughout the United States. In Rowland v. California Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993), the U.S. Supreme Court indicated that artificial entities must appear by counsel.
If you are named as an individual defendant you may have individual liability on any judgment obtained. You should make a demand for Indemnification against the company for a legal defense and indemnification for damages. This demand should be in writing.
Rabeh M. A. SoofiBusiness AttorneyLos Angeles, CA ·
The answers to your question are yes and no. Plaintiffs will likely try to show that you ARE the corporation and vice versa (alter ego) and that there is no formal difference between you, so as to be able to go after your personal assets.
All of the advice above is correct - I would only add that you must be cautious at this point about moving assets around. If the other party feels as though you are moving assets, funds, properties, or monies to try to become "judgment proof," they may try to get you on the hook for a fraudulent transfer claim (a fraudulent transfer generally is a transfer of asset made to avoid liability or exposure for a judgment). This would permit them to seek pre-judgment seizure/attachment of assets, freezing of bank accounts, rolling-back of transfers, etc.
I would echo Frank's advice that you obtain an attorney to help you right away. If you cannot afford one and have no other choices, you may want to contact the plaintiffs' attorney and tell them you want to work out the dispute informally.
Take care and best of luck to you.
