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Washington’s Limited Liability Company Act is Applicable Retroactively and Permits Liability for Individual LLC Members or Managers

Posted in Washington

Emily Lane Homeowners Ass’n v. Colonial Dev., LLC, 139 Wash. App. 315, 160 P.3d 1073 (2007)

In this case, Emily Lane Homeowners Association sought damages against Colonial Development, LLC and its individual company members and managers.  Emily Lane alleged that members of Colonial failed to act in a timely manner to address warranty claims.  When Emily Lane filed suit on July 19, 2005, Colonial had already dissolved and filed a certificate of cancellation.  The trial court granted summary judgment, finding that Emily Lane’s action against Colonial could proceed even though Colonial had already dissolved.  However, the trial court also dismissed Emily Lane’s claims against the members and managers of Colonial, presumably finding that they were immune from liability as individuals.

On appeal, there were two main issues.  First, whether the 2006 amendment to Washington’s Limited Liability Company Act, RCW 25.15, could be applied retroactively to permit an action against a dissolved limited liability company (LLC).  Second, whether members and managers of a company could personally be liable under the Limited Liability Company Act if they did not properly wind up the dissolution of the LLC.

The Court of Appeals held that the 2006 amendment, which provided a three-year survival period to initiate actions against a member of a dissolved LLC, applies retroactively and against a dissolved LLC after it has cancelled itself.  The court also found that any individual who has not complied with the proper dissolution of a LLC, pursuant to RCW 25.15.060, may be found personally liable.  A member or manager may be personally liable for LLC liabilities where such member’s acts cause damages.

The Court of Appeals found that the trial court was correct in allowing Emily Lane’s claims against Colonial to go forward.  It also found that the trial court’s summary judgment dismissal of claims against individual members of Colonial was in error.