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2008 Sunset Properties v Valentino (LLC Must Be Represented by a Lawyer)

HOUSING COURT

SUNSET PROPERTIES LLC, Plaintiff v. Elizabeth VALENTINO, Defendant

 

WESTERN DIVISION

 

Docket # DOCKET NO. 08-SP-1385

Parties: SUNSET PROPERTIES LLC, Plaintiff v. Elizabeth VALENTINO, Defendant

Judge: /s/Dina E. Fein

First Justice

Date: June 27, 2008

RULING AND ORDER ON PLAINTIFF’S MOTION TO RECONSIDER

The above-captioned case is before the court on the plaintiffs’ motion to reconsider the court’s ruling on the defendant’s motion to dismiss. For the reason set forth herein, the motion is denied.

1. Background: This summary process case came before the court for trial on May 15, 2008, at which time the defendant moved to dismiss the case, arguing that the plaintiff limited liability corporation (LLC) was not represented by counsel, and was therefore not properly before the court. I denied the motion to dismiss, conditioned upon the LLC appearing thereafter through counsel, and continued the case for that purpose. The plaintiff now moves to reconsider that ruling, arguing that an LLC need not be represented by counsel in a summary process case, but may rather appear through one of its managers.

2. Discussion: In Varney Enterprises, Inc. V. WMLF, 402 Mass. 79 (1988), the Supreme Judicial Court held that “except for small claim matters, a corporation may not be represented in

 

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judicial proceedings by a corporate officer who is not an attorney licensed to practice law in the Commonwealth.” Id. at 79. The question presented by the pending motion is whether the ruling of Varney applies to a limited liability corporation. I conclude that it does.

3. The plaintiff argues that Sunset Properties, LLC is essentially an alter ego of its two member managers, Michelle Miller and Vlad Zakashansky, such that one of the managers should be permitted to represent the LLC in this summary process case. This argument, however, overlooks the very nature of an LLC. A limited liability corporation is a separate legal entity, G.L. c. 156C, s. 12(b). A creature of statute, an LLC exists to protect its members from liability. In this regard, G.L. c. 156C, s.22 provides in pertinent part as follows:

Except as otherwise provided by this chapter, the debts,

obligations and liabilities of a limited liability company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the limited liability company; and no member or manager of a limited liability company shall be personally liable, directly or indirectly, including, without limitation, by way of indemnification, contribution, assessment or otherwise, for any such debt, obligation or liability of the limited liability company solely by

reason of being a member or acting as a manager of the

limited liability company.

4. In addition, the statutory scheme contemplates not only separate identities for an LLC and its members, but also the possibility of conflict between them. G.L. c. 156C, s. 34 provides that “…at the time a member becomes entitled to receive a distribution, he has the status of, and is entitled to all remedies available to, a creditor of the limited liability company with respect to the distribution.” The potential for conflict between an LLC and one or more of its members reinforces their distinct legal identities. In addition, it points to the fact that any attempt by a manager member to represent the interests of the LLC in a court proceeding would potentially require the court to engage in a fact-intensive inquiry, in order to rule out any conflicts between

the member and the LLC, all without the benefit of the ethical framework within which an attorney would be operating.

5. The plaintiff points to G.L. c. 156C, s.24, which provides that “[i]f a limited liability company has at least one manager then…each manager may execute documents and act for the limited liability company…” This section of the statute does not assist the plaintiff, as it creates the possibility of more than one manager taking action on the behalf of an LLC, potentially in conflict with one another, again requiring a court to scrutinize facts beyond those presented by the underlying dispute.

6. Nor has the plaintiff presented any information about this LLC in particular which would suggest that Varney should not control. Although the record has not been fully developed in this respect, counsel has indicated that the plaintiff has only two members who are also managers. These circumstances are not significantly different on their face from those in Varney, which involved a close corporation operating a small family business. Varney, 402 Mass at 79. While the number of members an LLC has might make it more or less complicated to sort out the existence of any conflict between them, it does not affect the fact that in all events the members and the LLC have separate and distinct legal identities.

7. Finally, the plaintiff’s argument that G.L. c. 221, s.48 supports its position was squarely addressed in Varney, wherein the court stated as follows:

We recognize that G. L. c. 221, Section 48 (1986 ed.), provides that `[p]arties may manage, prosecute or defend their own suits personally, or by such attorneys as they may engage.’ The word `parties’ and words of similar import in similar statutes in other jurisdictions have consistently been construed to apply only to natural

persons, not corporations, so as not to conflict with the well-established common law principle that corporations must appear and be represented in court, if at all, by attorneys. There is no injustice in allowing natural persons to appear pro se, while requiring persons who accept

 

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the advantages of incorporation to bear the burden of hiring counsel to sue or defend in court.

 

Varney, 402 Mass. at 81-82.

 

8. The parties have not cited nor is the court aware of any Massachusetts decisions directly on point. Other jurisdictions have addressed the issue, however, including the Georgia Court of Appeals, which reasoned as follows in ruling that an LLC must be represented by counsel:

Like a corporation, a limited liability company is a business entity that protects its members from personal liability for business debts. Like a corporation, a limited liability company can act only through its agents. Like a corporation, allowing a limited liability company to be represented in court by a nonattorney agent would permit the practice of law by an unlicensed layman who is not subject to the discipline of the court. n13 And like those who accept the benefits of incorporation, those who accept the benefits of a limited liability company must also accept its burdens, including the need to hire counsel.

 

Winzer v. EHCA Dunwoody, LLC, 277 Ga. App. 710, 713-714 (Ga. Ct. App. 2006); Accord, Gilley v. Shoffner, 345 FSupp.2d 563, 566-567 (M.D. N.C. 2004); Sharp v. Bivona, 304 FSupp.2d 357, 364-365 (E.D. N.Y. 2004); Kipp v. Royal & Sun Alliance & Co., 209 F.Supp.2d 962, 963 (E.D. Wisc. 2002).

 

9. Twenty years have passed since the Supreme Judicial Court ruled in Varney. Over that period, there has been an explosion of pro se litigation in our courts. In order to assure equal access to justice for all litigants, irrespective of their income and ability to afford an attorney, the courts of necessity have adapted their practices and procedures to account for this reality.[1] As a matter of public policy, it may well be that the time has come to extend the right to self-representation to a small LLC such as that presently before the court. Unless and until the legislature acts to identify an exception, however, existing statutory and case law require the conclusion that a limited liability corporation must be represented by counsel in court

 

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[1] See, e.g., Judicial Guidelines for Civil Hearings Involving Self-Represented Litigants.

Http://trialcourtweb.jud.state.ma.us/admin/ji/judguideselfrep_comment intro.html

 

 

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proceedings, other than small claims cases.

10. RULING AND ORDER: Based upon the foregoing, the plaintiff’s motion to reconsider is denied. The plaintiff is required to appear at future proceedings through counsel.[2]

 

 

 

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[2] In light of this ruling, and the basis therefore, it is not necessary to address the significance, if any., of LAS Collection Management v. Pagan, 447 Mass. 847 (2006) to the issue presented.

 

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End Of Decision