Washington Court of Appeals Clarifies the Pro Se exception for LLC’s

Every litigator has debated this question with his/her partners:  My opponent is acting pro se, and is not an attorney.  Can he represent his LLC against my client?  The arguments went both ways.  In a single member LLC, which in some ways is like a partnership, the member is essentially representing himself.  This is the same as representing oneself in court, which is allowed.  But if a corporate entity is treated as a separate person from its members/shareholders, isn’t that practicing law on behalf of another?

For years, trial judges have gone both ways on this issue, until now.  The Washington Court of Appeals, in Cottinger v. Employment Security Department, 162 Wn. App. 782 (2011), held that a single member LLC needs an attorney; its sole member cannot represent it under Washington State’s pro se exception to the unauthorized practice of law (the pro se exception is what allows non-lawyers to represent themselves in court).   The appellate court reasoned that if one enjoys the benefits of the corporate form, he must also bear the burden, including the requirement of having an attorney in court.  Id. at 790 (“Kirby chose to incorporate and enjoy the benefits of the corporate form.   He must also, however, bear the burdens of that choice.”)

A bright line rule.  We like it.

Hines v. Wolf: File Your Creditor’s Claim Now, Argue Later

Must a landlord file a creditor’s claim against a lease guarantor’s estate in order to be able to later enforce it, even when there is no default in the underlying lease at the time of death?

Answer:  Yes if you want to later enforce it.  According to the Washington Court of Appeals in Hines REIT Seattle Design Center, LLC v. Wolf, __ Wn. App. __ (Oct. 24, 2011), failure to file a creditor’s claim will void ALL the decedent’s obligations, including those “not yet due.”

Here’s what happened:  Hines REIT Seattle Design Center, LLC leased commercial space to Stephen Earls Corporation.  The company’s president, Stephen Earl, guarantied the lease.  Stephen Earl died.  His estate published a notice to creditors, and sent Hines the notice.  Hines ignored it.  After all, the tenant corporation was not in default on its lease, so why file a creditor’s claim for an obligation that is not due? Continue reading

Asset Protection the Mastro Way: Catch-22

Forbes.com recently posted this article detailing the bankruptcy trustee’s fraudulent conveyance claims in the Michael Mastro bankruptcy.  The takeaway from the article is this:  There is no magic pill once you’re in trouble with creditors.

Who is Mike Mastro?  Michael R. Mastro was a Seattle-based real estate developer and hard money lender.  After real estate dried up in 2008, so did Mastro’s cash flow.  He could not make payments to his lenders (who were in essence fronting the money that he lent to his borrowers), and they forced him into bankruptcy.  Just before things got bad, Mastro and his wife madly moved assets around, trying to hide them from creditors.  Continue reading

The Enumclaw Project has begun!

FLGWelcome to the Enumclaw Project.  This is your destination for everything new in Wills | Trusts | Estates.  You might wonder, why the “Enumclaw Project?”  And “what does that have to do with estate planning?”  Well, nothing, except this:  TEP is maintained by Farr Law Group, that law firm in Enumclaw on your way to Crystal Mountain and Mt. Rainier.  Our practice focuses exclusively on estate planning and probates.  Subscribe, check back, drop us a line or even stop by.