Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC v. Brewer, 2007 NCBC 14 (N.C. Super. May 8, 2007)(Jolly)

Plaintiffs left their law firm, a PLLC, to start a new firm. They sought their share of the value of contingent fee cases being handled by the old firm. The old firm first contended that the plaintiffs had no standing, since they had withdrawn from the old firm before filing their action., and the North Carolina LLC statute requires that a person be a member at the time of filing an action. The Court held that it was unable to determine, at the motion to dismiss stage, whether plaintiffs had in fact withdrawn.

Defendants further argued that they had immunity from liability pursuant to the terms of the limited liability company's operating agreement. The Court held that the terms of the statute did not extend to "acts or omissions that the manager knew at the time of the acts or omissions were clearly in conflict with the interests of the limited liability company," or "any transaction from which the manager derived an improper personal benefit."

On the merits, defendants contended the the contingent fee cases had no value at the time that plaintiffs left the law firm. The Court disagreed, holding that ethical rules did not control the determination and that plaintiffs could potentially recover fees for cases on which they had not worked.

The Court noted that the managers of an LLC had an obligation, upon dissolution of the LLC, to obtain "[a]s promptly as reasonably possible. . . the fair market value for the [LLC's] assets" and to distribute those assets to the members.

Full Opinion

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