In Brodsky v. Blake, Case No. 17-cv-5222, 2018 WL 1138539 (N.D. Ill. March 2, 2018), the Northern District of Illinois rejected Plaintiff Gregory Brodsky’s argument that fellow limited liability company (LLC) member Anthony Blake was automatically dissociated from the LLC because of his health problems and his wife’s domination of his affairs.
Brodsky alleged that he and Mr. Blake agreed that Brodsky would buy 50% of two separate LLCs owned by Mr. Blake associated with a Kia car dealership. Through the agreements, Brodsky became the general manager of the dealership.
In 2014, Mr. Blake suffered significant health issues. Thereafter, his wife, Defendant Deborah Blake, contacted Brodsky to inform him about those issues and Mr. Blake’s alleged infidelities. Ms. Blake informed Brodsky that Mr. Blake would be “stepping down” from the dealership and that she would be Brodsky’s new partner. Ms. Blake also forced Mr. Blake to give up one of his cell phones, and prohibited him from using a cellphone unmonitored, traveling alone or handling the dealership’s cash. Brodsky alleged that from that point on, he rarely interacted alone with Mr. Blake, who had become a mouthpiece for Ms. Blake. Eventually, Ms. Blake began to force Brodsky out of the dealership and ultimately terminated him.
Brodsky filed a four count complaint against Ms. Blake including an exceedingly rare count claiming unauthorized prosecution in the name of another. Brodsky alleged that one of his and Mr. Blake’s LLCs was improperly prosecuting a state court case against him at Ms. Blake’s direction. The court granted the motion to dismiss that count.
According to the court, in Safeway Ins. Co. v. Spinak, the Illinois appellate court recognized a cause of action based on an unauthorized filing of a lawsuit. See 267 Ill. App. 3d 513, 516 (1st Dist. 1994), discussing Merriman v. Merriman, 290 Ill. App. 139 (3rd Dist. 1937). Such a claim seeks “redress against those who set our judicial system in motion when there is no litigant seeking to enforce a right.” Brodsky, 2018 WL 1138539, at *8 (quoting Safeway). A party states a claim by alleging that the defendant “filed suit on behalf of a putative plaintiff without the knowledge or consent of the putative plaintiff.” Id. (quoting Eul v. Transworld Sys., No. 15 C 7755, 2017 WL 1178537, at *21 (N.D. Ill. Mar. 30, 2017)).
One of Brodsky’s theories for his unauthorized-filing claim was that Mr. Blake was not authorized to prosecute the state court action on behalf of the LLC because he was automatically dissociated from the LLC under the Illinois Limited Liability Company Act. The court disagreed.
“Under the LLC Act, a member is ‘disassociated’ upon the ‘seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of the member or all or substantially all of the member’s property.’” Brodsky, 2018 WL 1138539, at *8 (quoting 805 ILCS 180/35-45(7)(C)). The court held that Ms. Blake’s domination of Mr. Blake’s affairs did not meet this standard. While the complaint alleged that Ms. Blake took over Mr. Blake’s work responsibilities, prohibited him from traveling alone and controlled his cell phone use, those acts did not make Ms. Blake a “trustee, receiver, or liquidator” under the LLC Act. Brodsky, 2018 WL 1138539, at *8.
Indeed, although the LLC Act does not define those titles, the court held that they are associated with those who are “appointed,” but Brodsky did not allege any such appointment. Id. Further, the LLC Act provides that an individual member is also dissociated “upon death, ‘appointment of a guardian,’ or ‘judicial determination’ of incapability” — none of which Brodsky alleged either. Id. (quoting 805 ILCS 180/35-45(8)). Accordingly, the Complaint did not adequately allege that Mr. Blake was automatically dissociated under the LLC Act, so Mr. Blake was authorized to pursue the state court action for the LLC and Brodsky’s unauthorized prosecution claim failed.
At Novack and Macey, we have extensive experience advising shareholders involved in closely held company disputes, as well as advising companies on how to avoid disputes in the first place. For more information about our services, please contact John Haarlow at 312.419.6900 or email@example.com.