June 17, 2019

Archives for March 8, 2016

The Colorado Lawyer Book Review: Limited Liability Companies and Partnerships in Colorado

Editor’s Note: This article originally appeared in the March 2016 edition of The Colorado Lawyer. Reprinted with permission.

ZLLCAP15Limited Liability Companies and Partnerships in Colorado 

by Herrick K. Lidstone, Jr. and Allen Sparkman
687 pp., plus CD-ROM; $109 ($99 for CBA members)
CLE in Colorado, Inc., 2015
1900 Grant St., Ste. 300, Denver, CO 80203
(303) 860-0608; www.cle.cobar.org

Reviewed by Keith M. Olivia

Keith M. Olivia is a member of Roberts & Olivia, LLC in Boulder, where he represents businesses and individuals in their transactional matters. He is also an adjunct faculty member at the University of Colorado School of Law, where he co-teaches the Entrepreneurial Law Clinic—kmolivia@wrrlaw.com.

Limited Liability Companies and Partnerships in Colorado is a practitioner’s guide that is primarily focused on Colorado limited liability companies (LLCs) and Colorado partnerships, including general partnerships, limited partnerships, limited liability partnerships, and limited liability limited partnerships. A typical chapter opens with a discussion of the relevant Colorado LLC law and then compares and contrasts the various Colorado partnership laws. In addition to the primary focus on Colorado unincorporated business entities, the authors frequently compare and contrast the Colorado law with the Delaware law on unincorporated business entities, especially when the Delaware law differs from the Colorado law or the Delaware courts have addressed a matter that has not been addressed by the Colorado courts.

The first chapter provides an interesting historical perspective of the development of partnerships (which date back to ancient times), limited partnerships, and LLCs. The early chapters address choice of entity issues and then walk the reader through forming the entity, drafting the operating or partnership agreement that governs the entity, and dissolving the entity. The chapters that follow focus on the rights and duties of members, managers, and partners; derivative actions filed by members on behalf of an LLC; the transfer of membership and partnership interests and the restrictions imposed on such transfers; creditors’ rights and theories of owner liability for the debts of the entity; the merger or conversion of LLCs and partnerships into other business entities; special uses of unincorporated entities, such as single or special purpose entities, joint ventures, and regulated businesses, including the practice of law; and the “Series LLC,” which provides for the segregation of assets under a single legal entity and is permitted under Delaware law but not yet under Colorado law.

Additional chapters address the applicability of the securities laws, income tax laws, and employment tax laws to LLCs and partnerships. The final chapters address the use of LLCs and partnerships for estate planning purposes, as well as ethical considerations, such as defining “who is the client” and potential conflicts of interest when the attorney represents multiple parties and enters into business transactions with the entity client.

The three appendices to the text are (1) a form operating agreement for a manager-managed, multi-member LLC, (2) a form operating agreement for a manager-managed, single-member LLC, and (3) an LLC formation checklist that summarizes the material points that counsel should consider when forming an LLC. Each of the appendices includes cross-references to where the relevant provisions are addressed in the text and annotations to the underlying law. The accompanying CD-ROM includes Microsoft Word versions of the form documents and a searchable table of authorities and subject matter index for the text.

Limited Liability Companies and Partnerships in Colorado is a comprehensive practitioner’s guide that is suitable for seasoned transactional attorneys who routinely form unincorporated business entities and attorneys who occasionally work with discreet issues related to Colorado LLCs and partnerships. The text is compiled into coherent chapters that thoroughly address the Colorado statutes for unincorporated business entities; other substantive areas of the law related to LLCs and partnerships that attorneys routinely address, such as tax law and securities law; and practical uses of limited liability companies and partnerships to address specific client needs, such as estate planning.

Colorado attorneys who work with LLCs and partnerships and who purchase this cost-effective reference tool for their law libraries will quickly recoup the cost. Attorneys will also appreciate the well-developed forms of multi-member and single-member operating agreements and the LLC formation checklist, whether they are used as a starting point for drafting documents for a client or to supplement clauses in practitioners’ existing form documents.

CLE Book: Limited Liability Companies and Partnerships in Colorado

Order this CLE book online here or call (303) 860-0608 to order.

Standard price: $109.00
CBA member price: $99.00

Tenth Circuit: IDEA Requires Exhaustion of Administrative Remedies Prior to Bringing Federal Claims

The Tenth Circuit Court of Appeals issued its opinion in Carroll v. Lawton Independent School District No. 8 on Tuesday, November 10, 2015.

AKC, a child with autism who has limited ability to communicate clearly, was in third grade when her parents discovered that her special education teacher, Vickie Cantrell, had been abusing her at school, including giving her a “wedgie” that caused AKC’s underwear to rip and placing her in a dark closet as punishment. As a result of Ms. Cantrell’s abuse, AKC lost academic abilities, refused to get out of the car at school, and developed severe behavioral problems.

AKC’s parents, Ted and Bella Carroll, filed suit, asserting numerous state law claims, including negligence, intentional infliction of emotional distress, assault, battery, conspiracy, and violation of due process under the Oklahoma Constitution. The Carrolls also brought federal claims under the ADA, § 504 of the Rehabilitation Act, and § 1983. All defendants moved to dismiss. The district court determined that the Carrolls’ ADA and Rehabilitation Act claims required exhaustion of administrative remedies for the alleged educational injuries as required by the Individuals with Disabilities Education Act (IDEA), and it dismissed those claims. The district court did not find an exhaustion requirement as to the § 1983 claims and allowed the Carrolls to amend those claims and others as against the school district and Ms. Cantrell.

The Carrolls amended their complaints to allege additional facts against the school district and Ms. Cantrell, and defendants again moved to dismiss. The district court again evaluated the Carrolls’ § 1983 claims and concluded that the complaint alleged educational harms, requiring exhaustion of administrative remedies under IDEA. The district court dismissed the Carrolls’ amended complaint alleging § 1983 claims and declined to exercise supplemental jurisdiction over the state law claims, thereby dismissing the complaint. The Carrolls appealed.

The Carrolls claimed the district court erred in dismissing their claims for failure to exhaust administrative remedies as required by IDEA. They contend their claims are not subject to IDEA’s exhaustion requirement or, alternatively, the district court abused its discretion in denying them leave to allege additional facts showing exhaustion. The Tenth Circuit disagreed. The IDEA creates a mandatory administrative framework for any complaints about the identification, evaluation, education, or placement of the child, which begins with an impartial due process hearing and continues with an appeal to the state educational agency. The Tenth Circuit noted that the focus of whether a claim requires exhaustion is on the source and nature of the injuries, not the requested remedy. The Tenth Circuit evaluated the Carrolls’ claims and found they alleged educational injuries, including that AKC suffered educational setbacks, refuses to go to school and becomes upset when she enters the school, and requires tutoring to restore her to her previous academic level. The Tenth Circuit found that these injuries were unambiguously educational in nature and therefore the IDEA’s exhaustion requirements applied.

The Tenth Circuit rejected the Carrolls’ arguement that the IDEA exhaustion requirement applies only to purely educational claims, noting that it has long recognized the close relationship between classroom discipline and instruction. The Tenth Circuit also rejected the Carrolls’ claim that they should be excused from the exhaustion requirement because it would fail to supply relief and would be futile. The Tenth Circuit characterized that argument as a restatement of their claims seeking relief from Ms. Cantrell’s conduct, and found that their request for only damages did not negate the requirement of pursuit of administrative remedies. The Tenth Circuit also noted that its resolution in favor of the district court’s conclusion also resolved the Carrolls’ claim that the district court erred in declining to exercise jurisdiction over the state law claims. The Tenth Circuit found no error in the district court’s dismissal.

The Carrolls also argued that the district court abused its discretion in not allowing them to further amend their complaint to show their exhaustion attempts. The Tenth Circuit first found that the Carrolls failed to formally request leave to amend, instead asking for leave to amend as an alternative to dismissal. The Tenth Circuit further found that the Carrolls failed to allege with specificity the additional facts that would be included in an amended complaint. Instead, the Carrolls set forth only categories of allegations that could be pleaded, not specific facts supporting the allegations. The Tenth Circuit found no abuse of discretion.

The Tenth Circuit affirmed the district court.

Tenth Circuit: Exclusionary Rule Applies to Search when Warrant Issued Illegally

The Tenth Circuit Court of Appeals issued its opinion in United States v. Krueger on Tuesday, November 10, 2015.

In 2013, Homeland Security Investigations (HSI) Agent Rick Moore learned that child pornography was being distributed over the internet by Zachary Krueger, a Kansas resident. He obtained a warrant from a U.S. District Court magistrate for the District of Kansas to search Krueger’s home for items such as computers and cell phones that may be used to display child pornography. When Agent Moore attempted to execute the warrant, Krueger’s roommate told him that Krueger was in Oklahoma and had taken his computer and cell phone with him. Agent Moore contacted another HSI agent in Oklahoma, who located Krueger. Agent Moore then went to a different Kansas magistrate and obtained a warrant to search the residence in Oklahoma, as well as Krueger’s vehicle, which was parked outside the Oklahoma residence. Agent Moore transmitted the second warrant (Warrant 2) to the Oklahoma agent immediately after it was issued, and a team of agents went to the Oklahoma residence to execute the warrant.

Shortly after entering the residence, one of the agents noticed that Warrant 2 had been issued by a magistrate in Kansas, rather than in the Western District of Oklahoma, and asked another agent if that was acceptable. After speaking with Agent Moore and an AUSA in Kansas, the agents decided to refrain from searching the computer until they had consent. A few weeks later, a Kansas police officer visited Krueger and obtained his written consent to search the computer. As a result, Krueger was charged with distribution of child pornography.

Krueger then filed a pretrial motion to suppress the evidence obtained in the search in Oklahoma as well as the statements he made to law enforcement. Krueger argued suppression was necessary because Warrant 2 violated Fed. R. Crim. P. 41, which only allows magistrate judges to issue warrants to persons and property located within their districts. Krueger argued Warrant 2 was illegal from the outset, necessitating suppression because the search was warrantless and unconstitutional. Krueger also argued that even if Warrant 2 was not void at the outset, he was prejudiced by the Rule 41 violation in the sense that he would not have cooperated with law enforcement had he known that the warrant was illegal. The district court granted Krueger’s suppression motion after a hearing. The government appealed.

On appeal, the government conceded that Warrant 2 was invalid because the magistrate judge in Kansas had no authority to issue a warrant concerning property in Oklahoma. However, the government urged the Tenth Circuit to reverse the suppression order, arguing the district court applied the wrong legal standard in determining Krueger had suffered prejudice as a result of the Rule 41 violation. The Tenth Circuit disagreed. The Tenth Circuit declined to consider an issue of first impression in the circuit—whether an out-of-district warrant issued by a magistrate who lacks authority rises to the level of a Fourth Amendment violation—because the warrant’s constitutionality would not affect the outcome of the appeal. The Tenth Circuit noted that the government abandoned all of its arguments except that Krueger failed to establish prejudice, and found that Krueger did indeed establish prejudice. Because suppression is the appropriate remedy for purposes of the exclusionary rule seeking to deter law enforcement from obtaining illegal warrants, the Tenth Circuit affirmed the district court.

Tenth Circuit: Unpublished Opinions, 3/7/2016

On Monday, March 7, 2016, the Tenth Circuit Court of Appeals issued one published opinion and one unpublished opinion.

Fernandez v. Colvin

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.