Archive: July 2008

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Contracts Cancelled Because of Illegal Actions May be Unenforceable
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K&L Gates Arbitration World, Summer 2008
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Washington’s Limited Liability Company Act is Applicable Retroactively and Permits Liability for Individual LLC Members or Managers

Contracts Cancelled Because of Illegal Actions May be Unenforceable

FCI Group, Inc. v. City of New York, 2008 WL 2796591 (N.Y. App. Div. July 22, 2008)

In this case, plaintiff contractor sued to recover the outstanding balance for work already completed on a construction project after the city cancelled the contract because of plaintiff’s attempted bribery of two city officials.  The Appellate Division, First Department, granted defendants’ motion for summary judgment, holding that:  (i) “plaintiff agreed to conduct itself ethically…and consented to the imposition of penalties for violating the contractual prohibition against dispensing monetary inducements to City workers;” and (ii) the illegal conduct at issue was central to plaintiff’s performance under the contract.

The court rejected defendants’ alternative argument that the contract’s alternative dispute resolution clause required dismissal in favor of arbitration.  The court held that the narrow ADR provision only applied to specified disputes in accordance with the intent of the parties and could not be interpreted so as to render the language limiting its scope mere surplusage.

K&L Gates Arbitration World, Summer 2008

By K&L Gates attorneys Ian Meredith, John L. Boos and others.

Arbitration World is an update for clients and contacts on recent development in international arbitration law and practice.

Welcome to the Sixth Edition of Arbitration World, a publication from K&L Gates’ Arbitration Group which aims to highlight significant developments and issues in international arbitration for executives and in-house counsel with responsibility for dispute resolution.

In this edition, our review of key case law includes reports on the keenly awaited U.S. Supreme Court decision in Hall Street v. Mattel, a U.S. appellate decision excluding class actions, and a recent case from the Court of Arbitration for Sport with potentially wide-ranging implications.

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

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. Read More

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