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Uniform Protected Series Act

(UPSA)

Caution State Law Variances!

Flaten -v- Couture (N.D., 2018)

(Interpreting Nevada's Series LLC Act)

 

Flaten v. Couture, 912 N.W.2d 330, 2018 ND 136 (2018).

 

Supreme Court of North Dakota.

 

Lynn FLATEN, Plaintiff and Appellee

 

v.

 

Edward COUTURE, individually and as Manager of A&M Structuring; and A&M Structuring, LLC, Defendants and Appellants

 

No. 20170255 - Filed 6/5/2018

 

Attorneys and Law Firms

 

Thaddeus E. Swanson, Fargo, ND, for plaintiff and appellee.

 

Ross A. Nilson (argued) and William J. Brudvik (appeared), West Fargo, ND, for defendants and appellants.

 

Opinion

 

VandeWalle, Chief Justice.

 

[Para. 1] A&M Structuring, LLC, and Edward Couture, individually and as manager of A&M Structuring, (collectively "defendants"), appealed from a judgment entered in favor of Lynn Flaten and from a post-judgment order denying their motions to amend the judgments and "regarding ownership or interest in levied property." We conclude the district court did not err in granting partial summary judgment or abuse its discretion in denying the post-judgment motions. We affirm.

 

I

 

[Para. 2] In September 2012, Flaten sued A&M Structuring, LLC, and Couture, individually and as manager of A&M Structuring, for claims of breach of contract, unjust enrichment, and fraud. Flaten alleged he agreed to sell certain real property located in Williams County ("Williston property") to the defendants for $275,000 in February 2012, the defendants paid $50,000 as a down payment, but failed to pay the remaining amounts due for the property. Flaten also alleged the defendants agreed to sell him certain real property located in McKenzie County ("Dore property"), the Dore property consisted of three individual lots, and the defendants never delivered the property.

 

[Para. 3] The defendants answered, alleging various affirmative defenses. The defendants also counterclaimed, alleging Flaten owes them for bills they incurred and services they performed on his behalf related to the properties.

 

[Para. 4] In November 2014, the defendants moved for summary judgment. They argued there were no disputed issues of material fact, Flaten agreed to purchase the Dore property at a discounted price of $75,000 for each lot, but Flaten never closed on the sale of the Dore property. The defendants also alleged the discounted price on the Dore property was negotiated to offset the discounted price they paid for the Williston property. Couture filed an affidavit in support of the defendants' motion, claiming the Dore property was worth $450,000 to $600,000 for all three lots. He also claimed the parties agreed to modify the terms of the sale of the Williston property, the defendants would pay $50,000 cash for the Williston property, the Dore property would be discounted to $75,000 for each lot, and the amount discounted on the Dore property along with the $50,000 cash were equal to the $275,000 price for the Williston property. He alleged Flaten received full consideration and value for the Williston property in the form of the cash and discounts.

 

[Para. 5] Flaten opposed the motion and also moved for summary judgment. He argued the written terms of the purchase agreements for the Williston and Dore properties govern, the purchase agreement for the Williston property states it was to be a "cash sale" of $275,000 and is silent about any "discounted price," and Couture breached the purchase agreement for the Dore property by failing to deliver the property. Flaten requested the court grant summary judgment in his favor.

 

[Para. 6] In October 2015, the district court denied the defendants' motion for summary judgment and partially granted Flaten's motion for summary judgment. Although the purchase agreements for the Williston and Dore properties were executed on the same day and are essentially the same except for the switched purchaser and seller, the property descriptions, and the purchase price, the court concluded the Dore property purchase agreement was ambiguous but the Williston property purchase agreement was not ambiguous. In ruling the purchase agreement for the Williston property was not ambiguous, the court noted that Flaten agreed to sell the property to the defendants for $275,000, the purchase agreement did not reference any other transaction or state the sale was dependent on the Dore property and the defendants paid $50,000. The court held the defendants breached the contract and owe Flaten $225,000. The court concluded there was ambiguity in the Dore purchase agreement regarding the terms for closing on the sale of the Dore property and extrinsic evidence was necessary to determine the closing terms, what was a reasonable time to close, and whether Flaten had the ability and means to close on the property. Any similar ambiguity in the purchase agreement for the Williston property was not at issue because the parties had closed on the sale of that property and a warranty deed had been issued. The court determined there were genuine issues of material fact on the claims related to the Dore property and summary judgment was not appropriate on those claims.

 

[Para. 7] In April 2017, the defendants moved to dismiss the action under N.D.R.Civ.P. 12 and for the court to grant them relief from the order for partial summary judgment under N.D.R.Civ.P. 60(b)(6). They argued the court did not have subject matter jurisdiction because Flaten was the only named plaintiff, he was not named in the purchase agreements as the purchaser or seller of the properties, and there were genuine issues of material fact about who entered into the purchase agreement for the Williston property and whether the agreement was enforceable. The district court denied the motion.

 

[Para. 8] A jury trial was held on the remaining issues in April 2017. A special verdict form was used. The jury found the parties had agreed upon terms for the sale of the Dore property that were different from the purchase agreement and the defendants breached the agreed upon terms for the sale of the property. The jury awarded Flaten $10,000 plus interest for the defendants' breach of the Dore property purchase agreement and $4,500 plus interest for work Flaten performed on the Dore property. Neither party has challenged the special verdict form on appeal and, as a result, we do not consider whether or not the questions contained therein were proper for the jury to answer. In May 2017, judgments were entered in favor of Flaten for $289,208.22 for the claims related to the Williston property and $17,303.88 for the claims related to the Dore property.

 

[Para. 9] In July 2017, the defendants moved for relief from the judgments under N.D.R.Civ.P. 59(j) and 60(b)(1) and (6). The defendants argued Couture should be removed from the judgments and should not be held personally liable because Flaten failed to pierce the corporate veil. Flaten opposed the motion.

 

[Para. 10] In August 2017, the defendants filed a "Motion Regarding Ownership or Interest in Levied Property," requesting funds be returned that they alleged were removed from bank accounts for business entities who were not parties to the case. They claimed the purchase agreements only listed A&M Structuring 7, LLC as the buyer or seller, A&M Structuring 7 is part of a Nevada series limited liability company, there are 13 total A&M Structuring series limited liability companies, the other A&M Structuring series limited liability companies were not parties to the action, and any funds from their accounts should be returned. Flaten opposed the motion.

 

[Para. 11] After a hearing, the district court denied both motions.

 

II

 

[ Discussion of contractual issues omitted for brevity. ]

 

III

 

[ Discussion of Motion to Amend or Alter omitted for brevity. ]

 

IV

 

[21][Para. 36] The defendants argue the district court abused its discretion by denying their motion regarding ownership or interest in levied property.

 

[Para. 37] The defendants filed a post-judgment motion entitled "Motion Regarding Ownership or Interest in Levied Property." They argued A&M Structuring 7 is part of a Nevada series LLC, other A&M Structuring LLCs exist as part of the series and are numbered A&M Structuring 1–13. They claimed under Nevada law each series LLC is considered a separate LLC from the other LLCs in the series, A&M Structuring 7 was the only LLC in the series that was a party to the purchase agreements in this case, and therefore only property from A&M Structuring 7 can be levied to satisfy the judgments. They argued any property levied from the other A&M Structuring series LLCs should be returned.

 

[Para. 38] The district court denied the defendants' motion in its order also denying the defendants' motion to alter or amend the judgments and for relief from the judgments. The court applied N.D.R.Civ.P. 60(b) analysis in denying the motion. The court concluded the defendants never raised an issue about A&M Structuring, LLC being a party to the action at any point in the case, A&M Structuring was listed as a defendant from the beginning and the defendants never made a distinction about entity liability, and it was not a mistake for A&M Structuring to be subject to the judgments because it was named a defendant in every single pleading and it participated in the jury trial. The court further concluded North Dakota law does not recognize "series LLCs," A&M Structuring, LLC was the only entity registered to do business in North Dakota, and the defendants did not raise an issue about A&M Structuring 7 until after judgments had been entered.

 

[Para. 39] Although the defendants did not file their motion as a N.D.R.Civ.P. 60(b) motion, the district court could treat the defendants' motion as a motion for relief from the judgment. See K.L.B. v. S.B., 2003 ND 88, para. 9, 662 N.W.2d 277 (holding letter from a party could be treated as a motion for relief from judgment under N.D.R.Civ.P. 60(b) ); Dvorak v. Dvorak, 2001 ND 178, para. 9, 635 N.W.2d 135 (holding motion asking court to vacate a domestic violence protection order would be treated as a motion for relief from judgment or order under N.D.R.Civ.P. 60(b) ). The defendants' motion argued only A&M Structuring 7 was liable for the judgments and any funds levied from other A&M Structuring LLCs must be returned. The judgments were entered against A&M Structuring, LLC and the court interpreted the defendants' motion as a request for relief from the judgments against A&M Structuring, LLC and to order that A&M Structuring 7 was the only LLC that was liable. We will therefore review the court's decision on the defendants' motion under N.D.R.Civ.P. 60(b) standards. A court's decision under N.D.R.Civ.P. 60(b) will not be reversed on appeal unless the court abused its discretion. Werven, 2016 ND 60, para. 24, 877 N.W.2d 9.

 

[Para. 40] The district court did not abuse its discretion by denying the defendants' motion regarding ownership of levied property. A&M Structuring, LLC is registered as a limited liability company in Nevada and is the parent entity of the separate series LLCs, including A&M Structuring 7. See Nev. Rev. Stat. secs. 86.1255 (defining "series") and 86.296 (authorizing a limited liability company to create a series limited liability company). A&M Structuring, LLC is registered in North Dakota as a foreign limited liability company and none of the individual series LLCs, including A&M Structuring 7, are individually registered in this state. Flaten sued A&M Structuring, LLC and did not name A&M Structuring 7 as a defendant. A&M Structuring, LLC was named as a defendant in every pleading, and the defendants did not move to join A&M Structuring 7 as a defendant. The defendants did not raise an issue about A&M Structuring, LLC being named a party or argue that A&M Structuring 7 was a separate entity and the only party to the purchase agreements and that it was the only party that could be held liable until after the judgments were entered. The judgments were entered against A&M Structuring, LLC and the sheriff levied on its bank accounts. The district court's decision was not arbitrary or unreasonable, and we conclude the court did not abuse its discretion.

 

[Para. 41] The defendants also claim A&M Structuring 7's separate entity status as a series LLC under Nevada law must be recognized by North Dakota courts pursuant to the Full Faith and Credit Clause of the United States Constitution. Because the judgments were entered against A&M Structuring, LLC and not A&M Structuring 7, it is unnecessary for us to address the defendants' arguments about the Full Faith and Credit Clause.

 

V

 

[Para. 42] We affirm the judgment and post-judgment order.

 

[Para. 43] Gerald W. VandeWalle, C.J.

 

Jon J. Jensen

 

Lisa Fair McEvers

 

Daniel J. Crothers

 

Jerod E. Tufte

 

Jensen, Justice, concurring specially.

 

[ Concurrance relating to the jury instructions omitted for brevity. ]

 

[Para. 53] Jon J. Jensen

 

Daniel J. Crothers

 

 

 

 

UPSA AND WEBSITE CONTENTS

 

ARTICLE 1. GENERAL PROVISIONS

SECTION 101. SHORT TITLE.     SECTION 102. DEFINITIONS.     SECTION 103. NATURE OF PROTECTED SERIES.    SECTION 104. POWERS AND DURATION OF PROTECTED SERIES.     SECTION 105. GOVERNING LAW.     SECTION 106. RELATION OF OPERATING AGREEMENT, THIS ACT, AND LIMITED LIABILITY COMPANY ACT.     SECTION 107. ADDITIONAL LIMITATIONS ON OPERATING AGREEMENT.     SECTION 108. RULES FOR APPLYING LIMITED LIABILITY COMPANY ACT TO SPECIFIED PROVISIONS OF ACT.

 

ARTICLE 2. ESTABLISHING PROTECTED SERIES

SECTION 201. PROTECTED SERIES DESIGNATION; AMENDMENT.     SECTION 202. NAME.     SECTION 203. REGISTERED AGENT.     SECTION 204. SERVICE OF PROCESS, NOTICE, DEMAND, OR OTHER RECORD.     SECTION 205. CERTIFICATE OF GOOD STANDING FOR PROTECTED SERIES.     SECTION 206. INFORMATION REQUIRED IN ANNUAL BIENNIAL REPORT; EFFECT OF FAILURE TO PROVIDE.

 

ARTICLE 3. ASSOCIATED ASSET; ASSOCIATED MEMBER; PROTECTED-SERIES TRANSFERABLE INTEREST; MANAGEMENT; RIGHT OF INFORMATION

SECTION 301. ASSOCIATED ASSET.     SECTION 302. ASSOCIATED MEMBER.     SECTION 303. PROTECTED-SERIES TRANSFERABLE INTEREST.     SECTION 304. MANAGEMENT.     SECTION 305. RIGHT OF PERSON NOT ASSOCIATED MEMBER OF PROTECTED SERIES TO INFORMATION CONCERNING PROTECTED SERIES.

 

ARTICLE 4. LIMITATION ON LIABILITY AND ENFORCEMENT OF CLAIMS

SECTION 401. LIMITATIONS ON LIABILITY.     SECTION 402. CLAIM SEEKING TO DISREGARD LIMITATION OF LIABILITY.     SECTION 403. REMEDIES OF JUDGMENT CREDITOR OF ASSOCIATED MEMBER OR PROTECTED-SERIES TRANSFEREE.     SECTION 404. ENFORCEMENT AGAINST NON-ASSOCIATED ASSET.

 

ARTICLE 5. DISSOLUTION AND WINDING UP OF PROTECTED SERIES

SECTION 501. EVENTS CAUSING DISSOLUTION OF PROTECTED SERIES.     SECTION 502. WINDING UP DISSOLVED PROTECTED SERIES.     SECTION 503. EFFECT OF REINSTATEMENT OF SERIES LIMITED LIABILITY COMPANY OR REVOCATION OF VOLUNTARY DISSOLUTION.

 

ARTICLE 6. ENTITY TRANSACTIONS RESTRICTED

SECTION 601. DEFINITIONS.     SECTION 602. PROTECTED SERIES MAY NOT BE PARTY TO ENTITY TRANSACTION.     SECTION 603. RESTRICTION ON ENTITY TRANSACTION INVOLVING PROTECTED SERIES.     SECTION 604. MERGER AUTHORIZED; PARTIES RESTRICTED.     SECTION 605. PLAN OF MERGER.     SECTION 606. STATEMENT OF MERGER.     SECTION 607. EFFECT OF MERGER.     SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.

 

ARTICLE 7. FOREIGN PROTECTED SERIES

SECTION 701. GOVERNING LAW.     SECTION 702. NO ATTRIBUTION OF ACTIVITIES CONSTITUTING DOING BUSINESS OR FOR ESTABLISHING JURISDICTION.     SECTION 703. REGISTRATION OF FOREIGN PROTECTED SERIES.     SECTION 704. DISCLOSURE REQUIRED WHEN FOREIGN SERIES LIMITED LIABILITY COMPANY OR FOREIGN PROTECTED SERIES PARTY TO PROCEEDING.

 

ARTICLE 8. MISCELLANEOUS PROVISIONS

SECTION 801. UNIFORMITY OF APPLICATION AND CONSTRUCTION.     SECTION 802. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT.     SECTION 803. TRANSITIONAL PROVISIONS.     SECTION 804. SAVINGS CLAUSE.     SECTION 805. SEVERABILITY CLAUSE.     SECTION 806. REPEALS; CONFORMING AMENDMENTS.     SECTION 807. EFFECTIVE DATE.

 

- - - - -

 

Protected Series Agreements and Forms -- A list of the "best practices" agreements and records that all protected series structures should have.

 

SERIES LLC COURT OPINIONS

 

UPSA COURT OPINIONS

 

None

 

- - - - -

 

NON-UPSA COURT OPINIONS

 

191212 ... Ohio ... Delaware Act .. MSP Recovery Claims, Series LLC v. Phoenix Ins. Co., 2019 WL 6770981 (N.D. Ohio, 2019).

 

181019 ... Florida ... Delaware Act ... MRS Recovery Claims, Series LLC v. USAA General Indemnity Co., 2018 WL 5112998 (S.D.Fla., Oct. 19, 2018).

 

180605 ... North Dakota ... Nevada Act ... Flaten v. Couture, 912 N.W.2d 330, 2018 ND 136 (2018).

 

Updated List

 

SERIES LLC ARTICLES BY JAY ADKISSON

 

2019.01.28 ... Understanding The Protected Series Act: Article 8 And Final Thoughts

2018.11.24 ... Understanding The Protected Series Act: Treating Out-Of-State Series

2018.11.18 ... Understanding The Protected Series Act: Mergers

2018.10.29 ... Understanding The Protected Series Act: Dissolution And Winding Up Of Protected Series

2018.10.21 ... Understanding The Protected Series Act: Liability Limitations And Claims

2018.08.30 ... Understanding The Protected Series Act: Assets, Members And Management

2018.08.28 ... Understanding The Protected Series Act: Creating A Protected Series And Service Of Process

2018.07.18 ... Understanding The Protected Series Act: The Framework of UPSA - Part 2 of a Series

2018.06.18 ... Understanding The Protected Series Act: What Is A Protected Series?

 

 

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  • Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused.

 

  • Charging Orders - The confusing remedy against a debtor's interest in an LLC or partnership is explained in reference to the Uniform Partnership Act, the Uniform Limited Partnership Act, and the Uniform Limited Liability Company Act.

 

  • California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues.

 

  • Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States, and special treatment of the California Anti-SLAPP Act.

 

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