Weinstein v. Colborne Foodbotics LLC

302 P.3d 263 (2013)

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Nature of the Case

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Facts

P sued D claiming that the LLC's managers authorized a distribution to the LLC's members that rendered the LLC insolvent and left it unable to pay P. P received a $225,202 arbitration award in federal court against Boulder Partnership, LLC. Ds are the only members of Boulder Partnership. Ds are also the only shareholders of Boulder Partnership's two managers, defendants Business Mechanics, Inc. and Many Majors Management, Inc. Ds authorized a distribution of Boulder Partnership's assets to the members. P alleges these distributions rendered Boulder Partnership insolvent and unable to pay the award it owed to P. Ds filed a motion to dismiss. Ds argued in part that Colorado does not recognize a common law fiduciary duty owed by managers of an LLC to an LLC's creditors. The trial court granted Ds' motion; the language of the statute allowed only an LLC and not an LLC's creditors to recover against its members and that case law allowing creditors of a corporation to recover against the corporation's shareholders did not apply to LLCs. The court of appeals reversed. The court of appeals also held that P had stated a claim for breach of fiduciary duty and grounded that holding in a panel opinion of the court of appeals holding that an insolvent LLC's managers owed the same duty to the LLC's creditors that the directors of an insolvent corporation owe to the corporation's creditors. Ds appealed.