LLC Member Disputes and the Attorney-Client Privilege
Over at the newly revived and highly recommended Unincorporated Business Law Prof Blog, there's news of a recent decision by a U.S. District Court in Nevada holding under federal law that for purposes of attorney-client privilege, a limited liability company is more akin to a corporation than a partnership and on that basis, ruling that communications between the LLC's manager and the LLC's counsel need not be disclosed to an LLC member and former manager who brought an action against the LLC. The case, Montgomery v. eTreppid Technologies, LLC, 2008 WL 1826818 (D. Nev. Apr. 18, 2008), appears to be the first published decision on this issue.
The privilege issue frequently arises in business divorce litigation where, typically, a non-controlling faction seeks access to the controlling faction's communications with attorneys who've worked for, and been paid by, the company. The issue tends to get further complicated by allegations that the legal work for the company in fact is being done for the interests of the controlling faction.
Montgomery involved a manager-managed LLC with a board-like management structure, hence an easier comparison to the corporate form. It'll be interesting to see how federal and state courts grapple with the issue in other cases, and whether courts will distinguish Montgomery in cases involving member-managed LLCs.
http://www.nybusinessdivorce.com/admin/trackback/74293
