The Plight of the Bare Naked Assignee
31 Pages Posted: 13 Jan 2011
Date Written: 2009
A new and separate opportunity for oppression exists because LLC law purports to (1) recognize a species of persons holding legal rights vis-á-vis the LLC (assignees) while (2) denying those persons any remedies whatsoever in connection with those rights. This article addresses the conceptual mechanics, history, and ultimate instability of that denial. The article also considers a note of irony - namely, that the plight of the "bare naked assignee" derives from a construct, the organization as "aggregate," that LLC law has in all other respects emphatically transcended. To understand the plight of the assignee of an LLC interest, one must first understand a bit of partnership law and history. Part II provides that necessary foundation, acknowledging that assignee vulnerability is a built-in aspect of partnership law. Part III examines how partnership law and even the original Uniform Limited Liability Company Act (ULLCA) limited that vulnerability, at least theoretically, and how the notion of a partnership with a perpetual term eliminated even that theoretical limit. Part IV describes and characterizes the state of affairs for assignees under LLC law, explains the countervailing practical concerns ("freeze the deal" versus "oppression unlimited"), and shows how the drafters of the newest uniform LLC Act (Re-ULLCA) chose to "punt" to "other law." Part V provides two different conceptual approaches for use by "other law." One approach assumes that under LLC law a member''s assignment of rights constitutes an assignment of contractual rights under the operating agreement. The other approach assumes that the assignment is merely a transfer of property rights vis-á-vis the LLC. In its own way, each approach could equip courts with sufficient authority in "extreme and sufficiently harsh circumstances ... to expropriation." Part VI provides an account of an unreported trial court decision, in which the judge fashioned a remedial approach worth considering and concludes with the author''s suggestion for further refining that approach.
Keywords: Irony, LLC, Corporations, Business Law, Property Rrights
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