Uniform Protected Series Act (UPSA)
Caution State Law Variances!
SECTION 204. SERVICE OF PROCESS, NOTICE, DEMAND, OR OTHER RECORD.
(a) A protected series of a series limited liability company may be served with a process, notice, demand, or other record required or permitted by law by:
(1) serving the company;
JayNote: The reference to "company" here is to the series organization, not the protected series. Service will not be good if the service is made directly on the protected series, other than by serving the registered agent of the protected series (which under § 203(a) is also the same registered agent of the series organization).
(2) serving the registered agent of the protected series; or
JayNote: Under § 203(a), the registered agent for every protected series is whoever is serving as the registered agent for the series organization, so this could have read "serving the registered agent of the series organization" and it would be about as correct.
(3) other means authorized by law of this state other than [cite this state's limited liability company act].
Reporter's Comment to Subsection (a) – Under this provision, serving a protected series of a series limited liability company by serving the company has the same effect as serving the protected series' registered agent. Except as otherwise provided in subsections (c) through (g), effective service requires that the protected series being served be adequately identified.
However effected, service of a record on a protected series does not affect the protected series if the record is inapposite. For example, serving a summons to a deposition on a series limited liability company has no effect on a protected series of the company unless the summons names the protected series as the deponent. Likewise, serving a protected series with a charging order pertaining to a judgment debtor has no effect if the debtor is neither an associated member of the protected series nor a protected-series transferee.
This provision does not directly provide how to serve a protected series of a series limited liability company if the protected series ceases to have a registered agent, or its registered agent cannot with reasonable diligence be served, because such a provision is unnecessary.
A protected series of a series limited liability company may be served by serving the company. Subsection (a)(1). If the company ceases to have a registered agent, or its registered agent cannot with reasonable diligence be served, a protected series of the company may be served by serving the company under the relevant law for making substituted service.
(b) Service of a summons and complaint on a series limited liability company is notice to each protected series of the company of service of the summons and complaint and the contents of the complaint.
JayNote: Issues involving service of process for a lawsuit took up many hours of the Drafting Committee's work. Ultimately, it was decided that, because of the potential for confusion between the series organization and probably numerous protected series, it made more sense to allow the plaintiff to serve the series organization and that would be "good service" on all of the protected series. The idea here is that even if the plaintiff doesn't know the right defendant, the series organization most likely will, and then the summons and complaint can be directed by the series organization to the target protected series to respond.
An additional consideration here was that this method of service also allowed the series organization to keep an eye on what was going on in its protected series, and not later be surprised by litigation or a judgment, etc., involving one of its protected series which had failed to advise (culpably or negligently) the series organization of its financial distress.
It is anticipated that if the plaintiff for whatever reason doesn't know which protected series is the one liable on a particular claim (such as is most likely to occur with a tort plaintiff), the plaintiff will likely "carpet bomb" both the series organization and each and every protected series other than the affected one may have to seek dismissal of the claims on the grounds that it was not the correct entity responsible.
(c) Service of a summons and complaint on a protected series of a series limited liability company is notice to the company and any other protected series of the company of service of the summons and complaint and the contents of the complaint.
Likewise, service made upon one protected series operates as service upon all protected series and the series organization, which is why requiring in § 203(c) that all of the protected series must use the same registered agent as the series organization makes such wonderfully good sense.
(d) Service of a summons and complaint on a foreign series limited liability company is notice to each foreign protected series of the foreign company of service of the summons and complaint and the contents of the complaint.
(e) Service of a summons and complaint on a foreign protected series of a foreign series limited liability company is notice to the foreign company and any other foreign protected series of the company of service of the summons and complaint and the contents of the complaint.
JayNote: Recall that in this context "foreign" means another U.S. state or jurisdiction (a series LLC formed outside of the U.S. would be an "alien" series LLC).
Subsections (d) and (3) largely, but not entirely, presumes that a foreign series LLC will qualify to do business in-state and thus will be required to appoint an in-state registered agent.
(f) Notice to a person under subsection (b), (c), (d), or (e) is effective whether or not the summons and complaint identify the person if the summons and complaint name as a party and identify:
(1) the series limited liability company or a protected series of the company; or
(2) the foreign series limited liability company or a foreign protected series of the foreign company.
Reporter's Comment to Subsections (b)-(f) – In a world of complex, multi-tiered, multipart organizations, it is not always easy to identify which part of such an organization is legally responsible for a particular claimed harm. This difficulty enhances statute of limitations risk.
These five subsections encompass series limited liability companies, protected series, foreign series limited liability companies, and foreign protected series. The intent is to mitigate the statute of limitations risk by addressing the "relating back" issue in the context of amending a compliant.
Both federal and state courts provide criteria for amending a complaint to name a new party and having the amendment relate back to the original complaint. See, e.g., F.R.C.P. 15(c), Minn.R.Civ.P. 15(h). While "relating back" solves the statute of limitations problem, the relating back rules require inter alia that "the party to be brought in by amendment … received such notice of the action that it will not be prejudiced in defending on the merits." F.R.C.P. 15(c)(1)(C)(i)
In some jurisdictions, a plaintiff can also use "Doe" defendants to address the statute of limitations risk. See, e.g., Miss.R.C.P. 9(h) ("Fictitious Parties. When a party is ignorant of the name of an opposing party and so alleges in his [sic] pleading, the opposing party may be designated by any name, and when his [sic] true name is discovered the process and all pleadings and proceedings in the action may be amended by substituting the true name and giving proper notice to the opposing party.").
However, using "Doe" defendants raises complex issues. See N.Y. C.P.L.R. 1024 (McKinney), Vincent C. Alexander, Practice Commentaries (explaining the complexities, noting that: (i) "the defendant whose name is unknown must be described in such a way as to fairly apprise the party that he or she is an intended defendant"; (ii) [a]n inadequate description renders the action jurisdictionally defective"; and (iii) [e]ach case, of course, is fact-specific as to the sufficiency of the description of the intended defendant").
Moreover, federal and some state courts disfavor the "Doe" tactic. See, e.g., Barrow v. Wethersfield Police Dep't, 66 F.3d 466, 468 (2d Cir. 1995), modified, 74 F.3d 1366 (2d Cir. 1996) ("We have stated that it is familiar law that 'John Doe' pleadings cannot be used to circumvent statutes of limitations because replacing a 'John Doe' with a named party in effect constitutes a change in the party sued. Thus, such an amendment may only be accomplished when all of the specifications of Fed.R.Civ.P. 15(c) [relating back rule] are met.") (quoting Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1075 (2d Cir.1993); internal quotation marks and brackets in original omitted); State ex rel. Holzum, 342 S.W.3d 313, 316 (Mo. 2011) (holding that naming Doe defendants is immaterial to a motion to relate back an amendment to the complaint and stating that the applicable rule "allows a change in parties but requires that the correct party defendant receive 'notice' of the original action").
JayNote: Subsection (f) really highlights the problem with service of process, etc., in connection with a series LLC, which is that the plaintiff may not be able to figure out which protected series is the one which is responsible for the liability, and thus is given great latitude in making that service. Correspondingly, very substantial and unique duties are placed on the series organization to get the process service to the correct protected series, with the failure of those duties potentially resulting in default judgments in favor of the plaintiff against the series organization and all the protected series.
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.
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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
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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).
SERIES LLC ARTICLES BY JAY ADKISSON
2020.02.16 ... Talisman Casualty Denied Diversity Jurisdiction Of Protected Cell Series LLC In National WW II Museum Case
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?
More articles on Series LLCs by Jay Adkisson click here
THE CHARGING ORDER PRACTICE GUIDE BY JAY ADKISSON
The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association
Now available for purchase at https://goo.gl/faZzY6
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