Weinstein v. Colborne Foodbotics, LLC
302 P.3d 263
Colo.2013Background
- Colborne Foodbotics, LLC sued Boulder Partnership, LLC to recover an arbitration award of $225,202.
- Boulder Partnership was owned by two members, Weinstein and Major, who also controlled two managers (Business Mechanics, Inc. and ManyMajors Management, Inc.).
- The managers allegedly authorized distributions to the members that left the LLC insolvent and unable to pay the plaintiff.
- Plaintiff asserted a statutory unlawful-distribution claim under 7-80-606 against the LLC’s members and a common-law fiduciary-duty claim against the managers.
- The trial court dismissed both claims; the court of appeals reversed.
- This Court holds that (i) under 7-80-606, members are liable to the LLC, not the LLC’s creditors, and (ii) managers owe no fiduciary duty to creditors absent statutory authority, overruling Sheffield and remanding to reinstate dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can LLC creditors sue members for unlawful distributions under 7-80-606? | Colborne argues creditors have standing under Ficor/Paratransit. | Weinstein/Major contend only the LLC, not creditors, may sue. | No; creditors lack standing under 7-80-606. |
| Do LLC managers owe the same fiduciary duty to creditors as insolvent corporations’ directors? | Managers owe a fiduciary duty to creditors. | LLC managers have no such duty unless statute states so. | No; absent statutory authority, managers do not owe fiduciary duties to creditors. |
Key Cases Cited
- Ficor, Inc. v. McHugh, 639 P.2d 385 (Colo. 1982) (creditors standing to sue directors for unlawful distributions; purposes to protect creditors)
- Paratransit Risk Retention Grp. Ins. Co. v. Kamins, 160 P.3d 307 (Colo.App. 2007) (creditor standing under former corp. statute for insolvent corporations)
- Sheffield Servs. Co. v. Trowbridge, 211 P.3d 714 (Colo.App. 2009) (extended corporate fiduciary duties to LLC managers; overruled)
- Alexander v. Anstine, 152 P.3d 497 (Colo. 2007) (insolvent corporation directors owe creditors a limited fiduciary duty)
- Vaughan v. McMinn, 945 P.2d 404 (Colo. 1997) (presumption of adopting prior judicial construction when reenacting statute)
- Pierson v. Black Canyon Aggregates, Inc., 48 P.3d 1215 (Colo. 2002) (statutory interpretation guiding construction of 7-80-606 and related provisions)