Being Sued Personally for Services Rendered for a Now Defunct LLC

[techdeprived]

What is the name of your state (only U.S. law)? UT
Being sued in small claims.

I owned a business that was setup as a LLC with a single member, which was myself. During the operation of the business I contracted with an acquaintance that owned a small graphics design company to design a website for my company. There was no written contract, only verbal discussions about price, timeframe, etc.

The web designer designed most of the site (about 65 to 70%), but never fully completed it, but enough to be somewhat usable. I found out later that the main image on the homepage (and possibly others) was actually a copyrighted stock image that he did not pay to use- he stole it. I also found out in a subsequent conversation with him that he has thousands with illegally obtained copyrighted images that he trades with a stock photo piracy ring. I got uncomfortable with the whole situation and the site was taken down, coincidently I went out of business about the same timeframe. I'm convinced the extended timeframe (1 plus years) it took for him to finally get most of the website up contributed to the business' failure.

As mentioned the LLC expired and no business has been transacted in about 2 1/2 years. I recently received notice that I was being sued, not the out-of-business LLC, by me personally for a cost he has valued his work at, which is more that we ever discussed.

Questions:
- Can he sue me personally for the web design or am I protected by the LLC since all discussions and work was transacted on behalf of that entity?
- And since the LLC is now out of business (and has been for 2 1/2 years) and has no remaining assets is he out of luck in ever collecting against it?
- If he has no legal recourse against me personally, what do I do to get the case dismissed?

Thanks in Advance!

 

[tranquility]

- Can he sue me personally for the web design or am I protected by the LLC since all discussions and work was transacted on behalf of that entity?

Yes. It is up to you to prove the above in order to win the suit. Also, he may sue you and try to pierce the corporate veil. (Usually in such situations, the alter ego theory.)

- And since the LLC is now out of business (and has been for 2 1/2 years) and has no remaining assets is he out of luck in ever collecting against it?

It depends on if you favored some creditors over others. Say, for example, you repaid a loan you made to the company before paying him. Winding up a company requires many steps I assume you did not do based on the questions you're asking.

- If he has no legal recourse against me personally, what do I do to get the case dismissed?

I think you need to defend yourself. If he does not plead appropriate facts in his complaint to give rise to personal liability in the elements or on a piercing the corporate veil theory, you may demurrer, but the judge will give leave to amend the complaint and you won't be in any better a position.

 

[techdeprived]

Tranquility:

Thanks for the reply. Here is some followup info.

Yes. It is up to you to prove the above in order to win the suit. Also, he may sue you and try to pierce the corporate veil. (Usually in such situations, the alter ego theory.)

I guess i understand the idea that anyone can sue anyone else for any reason, but since this was LLC related shouldn't the plaintiff be suing the LLC, albeit expired? Regarding corporate veil, I've searched some sites and I'm confident the plaintiff couldn't prove that. The LLC was set up as legitamite business, there was no intent to defraud, personal and biz funds where never co-mingled, company wasn't under funded, ect. ect.

It depends on if you favored some creditors over others. Say, for example, you repaid a loan you made to the company before paying him. Winding up a company requires many steps I assume you did not do based on the questions you're asking.

The biz was closed without having occurred any other debt expect a credit card, which I provided a personal guarantee and have since paid off so it wouldn't effect my personal credit.

I think you need to defend yourself. If he does not plead appropriate facts in his complaint to give rise to personal liability in the elements or on a piercing the corporate veil theory, you may demurrer, but the judge will give leave to amend the complaint and you won't be in any better a position.

It sounds like I have one of two options since I've been served in my name and not the LLC's name. I can get an attorney to send a letter to have the case dismissed and/or I show up a prove it was an expense related to the llc and request demurrer. Then the plaintiff could attempt to sue the defunct LLC in which there are no assets? What would they have to gain by suing an entity no longer viable and without assets?

Thanks Again!

 

[tranquility]

I guess i understand the idea that anyone can sue anyone else for any reason, but since this was LLC related shouldn't the plaintiff be suing the LLC, albeit expired? Regarding corporate veil, I've searched some sites and I'm confident the plaintiff couldn't prove that. The LLC was set up as legitamite business, there was no intent to defraud, personal and biz funds where never co-mingled, company wasn't under funded, ect. ect.

What you say and what you can prove are different things, that's why the first hurdle is the pleadings. What did they claim in the portion saying you were responsible?

The biz was closed without having occurred any other debt expect a credit card, which I provided a personal guarantee and have since paid off so it wouldn't effect my personal credit.

So, it was not properly wound up. What is your point?

It sounds like I have one of two options since I've been served in my name and not the LLC's name. I can get an attorney to send a letter to have the case dismissed and/or I show up a prove it was an expense related to the llc and request demurrer. Then the plaintiff could attempt to sue the defunct LLC in which there are no assets? What would they have to gain by suing an entity no longer viable and without assets?

No. You can get an attorney and he can file a demurrer. If the plaintiff did not plead facts which indicate any reason why you should be involved, the court will approve the pleading and tell the plaintiff to re-plead. Whereupon he (if he is not brain damaged) will make a pleading which will give you personal liability or will give facts which will pierce the corporate veil. Once you get the appropriate pleading where the plaintiff show why you are responsible in a legal sense, then you either have to defend your case, or the judge will dismiss you at some point as appropriate facts are not plead. You will *not* be released by a letter. This is *not* going away easily. IF you are found not liable, you still have the hurdle of not having the corporate veil pierced OR the hurdle of not inappropriately favoring one creditor over another. Those problems result from not winding up the corporation properly.

When you are sued, you have a problem. Get an attorney. If you win and the plaintiff had no reason to include you in the suit, you may have a countersuit for malicious prosecution available. But, that is a long way from today. Don't think this is no problem. Get an attorney who can review the facts.