New Connecticut Law Adds Additional Grounds to Kick Out Member of an LLC

Here’s a common scenario I see as an attorney handling business disputes:  Four members start an LLC to engage in business together.  They all get along as friends, colleagues, or business associates.  Lets call the hypothetical business Harmony LLC. When they start Harmony, each person has an assigned role with ownership of 25% of the company.  Harmony has two members with management experience, another member has the sales experience, and the fourth member has the technical expertise.  They all verbally agree that each member will work full-time to make the business work. They put a budget together to get started.  Someone in the group brings up legal expenses for a partnership or membership agreement.  In Connecticut, this governance document is referred to as an operating agreement.  The four partners are tight on funds and springing for the legal expenses for a comprehensive operating agreement is not high on the list of priorities.  One of the members brings up that in Connecticut, LLCs are not required to have an operating agreement and there are online sources for cheap, inexpensive form agreements.   Plus, they figure they all get along so why do they need a comprehensive agreement?  As a result, Harmony starts operating in business with either no operating agreement or a bad form agreement.

What happens if Harmony struggles at first, or more than anticipated, or circumstances change for some members?  For example, what if the business potential in the long run is very strong, but Harmony is not generating enough income in the early stages for all four members to survive financially.  As a result, some of the members feel financial pressure.   Lets say the sales or technical member pursues another job offer somewhere and one of them leaves Harmony.  All of the sudden Harmony has 25% of its work force leave the company.  Then, maybe the second member leaves for another job.  Now only two members are left working with Harmony.  However, both of the departing members say they will not give up their collective 50% ownership interest.  Even more problematic, the departing members start competing for clients or customers.  What do you do? Do the two remaining members keep working full time only to have to turn over 50% of the profits to the non-working members?

The two remaining members decide to go to an attorney.  They find out that without an operating agreement, Connecticut LLC’s are governed by Connecticut General Statutes.  Similarly, if you have a poorly drafted operating agreement and the agreement does not address specific issues, then Connecticut’s LLC statute will govern.  Many times this has unintended consequences that might favor some members over others.  A comprehensive operating agreement might cover the Harmony scenario.  It might have provisions that address what happens when a member stops working for the LLC or factually withdraws.  In the absence of such an agreement, however, the members of Harmony may have limited options.  You can be faced with a situation where members of an LLC are forced to go to court to judicially dissolve the entire LLC because they are otherwise locked in with non-performing members.

One the many new changes to the LLC law in Connecticut (effective July 1, 2017) relates to what is known as disassociation of a member.  This is legal jargon for when a member leaves or is kicked out of an LLC.   The new changes to the LLC law provide some potential relief to the remaining members of LLC’s in the same situation as the members of Harmony.  Section 34-263a of Connecticut’s General Statutes addresses “Events causing disassociation.”  One of the provisions states, in pertinent part:

On application by the company or a member in a direct action under section 34-271, the person is expelled as a member by judicial order because the person: (A) Has engaged or is engaging in wrongful conduct that has affected adversely and materially, or will affect adversely and materially, the company’s activities and affairs; (B) has committed wilfully or persistently, or is committing wilfully or persistently, a material breach of the operating agreement or a duty or obligation under section 34-255h; or (C) has engaged or is engaging in conduct relating to the company’s activities and affairs which makes it not reasonably practicable to carry on the activities and affairs with the person as a member

There could be many reasons why the remaining members of Harmony do want to ask the court to dissolve the entire LLC.  Instead, the remaining members may prefer to try to “disassociate” or kick out the members who left.  Section 34-263(a)(5) provides some new grounds to potentially get a court order to judicially remove the members.  The statute permits either the LLC itself or a member to proceed with an application to the court to seek disassociation for the grounds listed, including when it is “not reasonably practicable to carry on the activities and affairs with the person as a member.”    This option was not available prior to July 1, 2017 and provides some useful potential relief for feuding members of an LLC.

Although there are now additional options for disassociation of LLC members, business owners are well advised to address the situation in an operating agreement.  This might avoid the time and expense of going to court with or the last option of judicial disassociation of a member or dissolution of the LLC itself.  Moreover, as I will address in future posts, there are other new changes to the LLC laws in Connecticut that will govern in the absence of an operating agreement.

Can You Seek Damages if You Lose Business Based on an Opponent’s Conduct During Litigation?

Ordinarily, if someone acts in bad faith, or with malice, and interferes with a contract causing lost profits, a party can potentially bring a claim in court for tortious interference with contractual relations. However, the claim is likely unavailable if the basis for the claim arises from a pending litigation case. For example, assume you have a valuable business contract, and the contract gets cancelled because of something an opponent claimed during a litigation proceeding?  A recent appellate court case case confirms that immunity applies to bar claims of interference with contractual relations when the actionable conduct arises out of a litigation case.  Litigation can be very disruptive to ongoing business relationships.  There could be situations where a party in a litigation case loses business because of something someone does or says during a proceeding in litigation, such as a court hearing.  Unfortunately, some litigants might do this intentionally as a way to gain advantage in a case.   In contrast, some other litigants might seek to raise a claim of interference or infliction of emotional distress even if the conduct in question was fair game in the course of the case.  The courts in Connecticut essentially come down on the side of barring subsequent claims of this type that are based on conduct during a litigation proceeding.  The reason is policy based, in part, because the courts do not want witnesses and litigants to fear reprisals for raising legitimate facts and arguments in court. Essentially, although there is a risk of litigants unfairly seeking to harm an opponent through deliberate efforts, the risk is outweighed by the importance of candor and truth seeking in court proceedings. There are other ways to address improper, baseless or unethical conduct by opponents during a litigation proceeding.  However, if an opponent resorts to filing a separate lawsuit for interfering with a business relationship or for infliction of emotion distress, the case likely will be opposed by a motion to dismiss based on immunity.


Have You Received a Copyright Infringement Letter form a Connecticut Internet Provider?

What To Do If You Receive a Copyright Infringement Letter From Your Internet Service Provider (ISP)

If you’ve recently received a copyright infringement letter from your Internet service provider, you’re not alone.  Recently, there’s been a rise in the number of copyright infringement lawsuits filed across the country involving alleged copyright infringement or “piracy of content” via peer-to-peer (P2P) and file sharing services such as BitTorrent and The Pirate Bay.  A recent report has identified over 220,000 individuals as having been sued since mid-2010 in mass BitTorrent lawsuits, many of them based upon alleged downloading of copyrighted works. 

Typically, plaintiffs involved in these cases file suit against a series of “John Does” alleging the illegal downloading of images, blockbuster movies and oftentimes, adult-themed videos.  In their complaints, plaintiffs will often include a list of Internet protocol (IP) addresses that were used to engage in the illegal transfer of copyrighted materials.   

How will a plaintiff get my name and contact information?

Through the use of court-ordered subpoenas, plaintiffs will request the Internet Service Providers (ISPs) (i.e., Comcast, Verizon, Cox, Time Warner) to turn over the individual names and contact information of the Internet account holders associated with the IP addresses that were identified in their complaint.  Oftentimes, the ISPs will file motions to quash the subpoenas (motions asking the court to relieve them from having to turn over the requested information).  If an ISP does not file a motion to quash, or the court rules in favor of the plaintiff, the ISP is then ordered to produce the requested information.    Before it turns this information over to the plaintiff, the ISP will send a letter to the account holder that unless such individual takes legal action, the ISP will provide the plaintiff with their name and contact information.

What should you do if you receive a letter from your ISP?

1)      Don’t panic, but don’t ignore the letter either.  More likely than not, you have a few weeks to make a decision.  Use this time to learn more about your options and your situation.  Learning more about the facts of the case will shed more light on the types of options that you have.  Ignoring the letter won’t make it go away and could limit your chances of success.

2)      Don’t reach out to the plaintiff or its attorney.  You should not contact the plaintiff or plaintiff’s counsel without assistance of a copyright attorney to help you.    Plaintiffs’ counsel often will harass and threaten Internet subscribers who reach out and identify themselves in an attempt to plead their case as to why they were wrongly targeted.  I compare this situation to the well-known carnival game: Whac-A-Mole.  Plaintiffs’’ counsel is likely to make an example out of you in order to coerce the others if you come forward and identify yourself.  

 3)      Educate yourself. More likely than not, the letter you received from your ISP came from their legal department.  The letter is likely to provide some basic facts about the case, including the title of the litigation, the name of the plaintiff and the location of the federal court that the case is being in.  Sometimes, the  letter isn’t entirely accurate as to your specific situation – these are typically form letters and may incorrectly identify you as a defendant when you aren’t an actual party to the lawsuit.  This is an important fact to find out because it will determine what judicial rights and options you have to prevent your information from being disclosed.  


4)      Prepare a list of valid reasons why you’re not at fault.    By educating yourself about the specific facts of the case, importantly, the facts concerning what the copyrighted material was, when it was downloaded and by what means, you are likely to be in a better position to provide evidence to your attorney as to why you may have been mistakenly targeted.  Reasons such as using an unprotected wireless network, having multiple tenants in an apartment building share a single IP address, or being out of town on the day and time of the alleged infringement have been determined to be valid reasons in various jurisdictions for not being liable.         

5)      Speak to an experienced attorney.  In addition to the shock of receiving a letter from the ISP, you may be faced with the fear or worry of being publicly harassed or exposed due to the sensitive or adult-themed nature of the illegally downloaded material.  These factors can significantly interfere with your ability to objectively assess your options and plan the most effective course of action.  You should consider working with a copyright infringement attorney that has experience counseling clients in similar situations.  An experienced attorney can help you decide what your best options are and develop a game plan that will increase the odds of a favorable result.  

Will The “It Was Just A Tweet” Defense Work In The First Twitter Defamation Trial?

As mentioned before on this blog, Courtney Love was sued for defamation arising out of
her notorious Twitter posts. As the case heads to trial on February 6th, she has taken down her Twitter page. Recall that Love was sued by fashion designer Dawn Simorangkir for a series of allegedly defamatory tweets. (She called her a drug-pushing prostitute for starters). THR, Esq Bloggers Matt Belloni and Eriq Gardner have a good summary of what’s expected at the upcoming trial.  Simorangkir’s lawyer claims it is the first case of its kind, and he may be right.

Legal observers are paying attention to whether the court or jury gives more leeway to someone posting on Twitter because tweets by their very nature are opinionated posts. According to legal blog watch, the case is also likely to feature another first, a social media expert.   Jessie Stricchiola is the expert.  Apparently, as a social media expert, she will testify as to the nature of Twitter posts, number of readers, and credibility.

My own opinion is that there should not be any special consideration for commentary on Twitter.  The posts or tweets should be judged under the same standard as any other potentially defamatory statement.   Twitter is now part of the mainstream media. Take for example the recent Hayes trial in Connecticut. There were numerous reporters “live tweeting” from the courtroom. Most media personalities and journalists have twitter accounts where they regularly report and tweet facts. The reverse is also true. Journalists are now reading Twitter posts to get news stories.

The statements at issue here appear to be defamatory (assuming she is not a drug pushing prostitute) and stated as fact.  I think the “forgive me, it was just a tweet” defense is not going to work.  The idea that statements posted on Twitter are somehow less defamatory ignores the reality of the Internet.  Perhaps Love’s lawyer is banking on the jury not understanding Twitter.  The counter to that defense was the social media expert.  If the expert is able to help the jury understand Twitter, and assuming there is no truth to these statements, I suspect the bigger issue will be whether any damages can be established. We will have to wait and see. I will do another post about this case once the trial finishes.

Twitter Defamation Case Gets Tossed – But Concerns Remain

In a previous post, I linked to a story about a tenant who was sued for libel after posting an allegedly disparaging comment on Twitter about her apartment. The Twitter lawsuit was a hot topic on the internet for some time.   Many commentators believed it was only a matter of time before Twitter resulted in a damage award for libel.  Not so in this case.   A Chicago judge has tossed out the lawsuit.  Reports indicate that the Judge made a specific finding that the "tweet was nonactionable as a matter of law."   

In this case,  the tenant made a Twitter post that her apartment was moldy.  Before bringing the suit, the landlord might have considered how many people actually read the Tweet.  My guess is probably a few hundred at best.  After the lawsuit was filed, millions read about it.  At the time of the lawsuit, the landlord company issued a statement saying "we’re a sue first, ask questions later kind of organization."   That is not a wise strategy in general, but in particular when it comes to an Internet defamation case.   Anything involving a lawsuit and social networking has a good chance of being picked up in the media and in various places on the Internet. 

The Chicago court’s ruling that the statement on Twitter failed to meet the standard for defamation seems correct if you consider Connecticut’s defamation standard, which is similar.  The takeaway here is that not every negative statement qualifies as a defamatory statement.  This does not mean a post on Twitter cannot constitute defamation.  In fact, Twitter postings remain fair game for defamation suits, and we are likely to see more of these claims. 



Are Settlement Agreements Enforceable In Connecticut

The short answer is that it depends.  Settlement agreements are generally enforceable if the terms of the agreement are clear and authorized by the litigants or parties to the litigation.  In Gengaro v. City of New Haven (to be officially released December 29th), the Appellate Court had another opportunity to comment on the long standing law in Connecticut that "a compromise agreement . . . if free from fraud, mistake or undue influence . . . is conclusive between the parties." 

In Gengaro, a trial court granted summary judgment in favor of the City concerning employment claims because Gengaro had signed a confidential settlement agreement prior to the lawsuit.  Gengaro claimed he was forced to so sign the agreement because of threats of losing his job.  He claimed undue influence to attempt to invalidate the settlement agreement.   Gengaro claimed that he had serious financial and medical problems.  Coupled with the threat  of job loss, he claimed that he had no reasonable alternative but to agree to the settlement.  

The trial court granted summary judgment finding insufficient issues of fact concerning undue influence.  Essentially, the court concluded that the threat of losing his job was not sufficient for the exercise of undue influence.  The Appellate Court agreed.  For a good analysis of what employers should to to avoid these type of claims check of the Connecticut Employment Law Blog post on the case.

To establish undue influence in Connecticut, four elements must be established:

  • a person is who is subject to influence
  • an opportunity to exert undue influence
  • a disposition to exert undue influence; and
  • a result indicating undue influence

Relevant factors in the inquiry include age, physical and mental condition, whether the person had disinterested or legal advice, the consideration of value of the contracted for exchange, and active solicitations and persuasions by the other party.

In summary, undue influence is the exercise of control by one person over another in an attempt to destroy the person’s free agency and "constrain him to do something other than he would do under normal control…"  Undue influence, if demonstrated, may invalidate a contract because the free assent of one party to the contract is lacking.

Settlements agreements are enforceable in court if the terms are clear and authorized by the parties.  Attempting to invalidate the agreement by showing undue influence, fraud, or mistake are difficult claims to make.  The take away here is to carefully review your settlement agreements with counsel because once you sign an agreement, it is likely to be enforced absent special factors.



Connecticut Guaranty Fund Offers Some Recovery For Homeowners Harmed By Construction Contractors

Recently,the Attorney General’s office announced another criminal conviction against a home improvement contractor responsible for many failed home improvement contracts. The report also indicated that the homeowner consumers were going to get some financial relief from the Home Improvement Guaranty Fund (HIGF).  The HIGF offers up to $15,000 in relief to consumers who meet certain conditions including:

  • failed contract with a register contractor
  • contract was for residential dwelling
  • you must first obtain a court judgment against the contractor
  • you must take reasonable steps to enforce the judgment without success

Any consumer who meets this criteria can file an application that is posted online.  This applies to home improvements, not new construction.  Consumers of new home construction in Connecticut can apply to the New Home Guaranty Fund (NHGF) for  up to $30,000 in relief.  The same basic criteria apply here, but the fund involves new home construction contracts.

 Many times, when a contractor goes bankrupt or has no assets, the HIGF and NHGF are the only source of recovery for consumers that were victim of defective or negligent construction for new construction and home improvements.  When a consumer decides to bring a lawsuit against a contractor, the first questions asked should be whether the contractor has assets to pay any judgment.  If not, the funds may be the only realistic option for recovery

Of course, the goal is for homeowners to find their way to the many reputable contractors in Connecticut to avoid this type of problem.  Reputable contractors will urge consumers to look up a contractor’s history of complaints with the Department of Consumer Protection before signing a contract.  Consumers should also ask for references and follow up on them before signing any contract.  A reputable contractor will have no problem providing several references and examples of work product. 

It is also critical that a consumer check to see if a contractor is properly registered before signing the contract.  Although failing to properly register may be criminal, the lack of registration could prevent a consumer from recovering even the limited amounts under the guaranty funds.

New Laws In Connecticut Affecting Business

A whole series of new laws went into effect starting October 1, 2009.  For a full list of the laws you can find a link on Dan Schwartz’s Employment Law Blog.  For a humorous “quick and dirty” summary you can go to Ryan McKeen’s Connecticut Law Blog. If you want to know the new taxes and higher fees, read these articles by Susan Haigh of the Day and Christopher Keating of the Courant.

If you just want to know the laws affecting business, the Connecticut Office of Legislative Research puts together a nice summary.  From that summary, I offer a few highlights of the laws that went into effect October 1, 2009.


There are several changes to the Connecticut Business Corporation Act.  To most significant change is on Dissolution and is summarized in section 23.  Here are the highlights:

  • eliminates requirement that court dissolve corporation in certain situations involving deadlock in management and elections
  • permits, instead of requires, court to dissolve corporation in certain situations involving deadlock and irreparable injury is threatened because of the deadlock

Safeguarding Personal Information– PA 09-71

This is an act concerning state chartered banks and requires safeguarding of personal information, which is information that can be associated with an individual through an identifier like a Social Security number.  The act gives the Department of Banking authority to enforce the law against state chartered banks.  Any bank that adopts the security and privacy provisions that comply with the federal Gramm-Leach-Bliley Act is in compliance with the state act.

Penalty for Doing Business Without AuthorityPA09-83

This act increases the penalty on foreign businesses that conduct business without registering.  I covered this act on an earlier blog post here.

Consumer Privacy and Identify Theft — PA 09-239

Several changes were made to social security numbers and the personal identifier information.  There were also changes to the laws concerning identity theft.

Most significant to businesses are the provisions that penalize employers for failing to:

  • obtain and retain job applications securely
  • take reasonable steps to destroy applications when disposing of them
  • allows the Department of Consumer Protection and Attorney General to enforce its provisions
  • a civil penalty between $500 and $500,000 may be imposed for failure to comply. The fines will be deposited into a newly established Privacy Protection Guaranty and Enforcement Account

I intend to a more detailed blog post on this topic in the future.  Businesses should also be aware of the Act Concerning Social Security Numbers, which I wrote about in an earlier technology tip post here.

Customer Access to Restrooms – PA09-129

This act mandates that retail establishments give access to restrooms to individuals with certain medical conditions, even if the restroom is not open to the public.  The act applies to customers with proof of certain medical conditions, such as inflammatory bowel disease.  The act does not require any changes in construction for the non-public bathrooms.


This act makes changes to the ban on employer discrimination for gender in compensation to employees.  Allows the court to award back pay, compensatory, and punitive damages for claims that fall under the act.  Dan Schwartz details the provisions of this act here.

Hulk Hogan Lawsuit Serves As Reminder For Business Owners To Verify Insurance Coverages

Former Professional Wrestler Hulk Hogan has filed a lawsuit against his own attorneys for failing to advise him of the potential for insurance coverage for defense costs in an auto accident case.  The case was reported on by Curtis Krueger of the St. Petersburg Times as well as several wrestling sites including and Shawn Moniz of   

According to the reports, Hulk Hogan’s son, Nick Bollea, was in a car crash in 2007 that caused serious injuries to his friend, John Graziano.  Hulk Hogan was sued along with his son for the damages.  It appears that Hulk Hogan privately retained and paid his for private lawyers to defend him in the case.

Hulk Hogan’s suit alleges that he could have received a qualified defense attorney for free because his insurance company would have paid the bill.  As with most automobile insurance policies, unless there was some valid reason to deny Hulk Hogan a defense, his insurance company would have been obligated to provide a lawyer to be paid by the insurance company. 

If you are faced with a claim that is covered by an insurance policy, you must submit the claim to the insurance company if you want to get coverage or a defense.  Once you submit the claim to your insurance company, the company would then either deny coverage, provide limited coverage, or provide a defense attorney and coverage.  In insurance circles, it is called providing an insured with "defense and indemnity."  This means, not only providing a lawyer at no cost, but the insurance company will pay the damages up to the policy limits if there is a settlement or judgment.

It is unclear how Hulk Hogan’s suit is going to turn out, and only his allegations are known at this point.  The lawyers he sued have adamantly denyied any wrong doing.  Only time will tell what the real story is behind the decision to forgo an attorney appointed by his insurance company.

Nevertheless, the lesson from Hulk Hogan’s lawsuit is clear.  Whether you are an individual or business owner, if you are faced with a lawsuit of any kind you should:

  • Contact your insurance agent as soon as possible
  • Determine if you have any available insurance coverage
  • Provide notice of the claim to the insurance company
  • Consult with an attorney about the availability of insurance coverage

Many times, I consult with business clients who are not aware of what types of claims might be covered by an insurance policy.  Determining the availability of insurance coverage is an important first step when faced with any loss or lawsuit.  Many times, determining whether coverage exists can be complicated and consulting an attorney may be necessary.  Additionally, early notice to the insurance company is important.  If you delay notifying the insurance company, the company may seek to deny coverage based on lack of timely notice of the claim prejudicing the insurance company. 

Hulk Hogan’s case also serves as a reminder for individuals and businesses to review what insurances they have and determine if the coverages are adequate for both personal and business operations.  There are many types of insurance products on the market that business owners are not aware of or sometimes believe are too expensive.  You also need to make sure that the policies you purchase will protect the likely losses or damages claims you might face. 

Working with an insurance agent or a business attorney can help you determine potential insurance policies that might protect your company.  There are many types of insurances available for businesses, including policies that cover first and third party claims. 


  • Commercial General Liability
  • Workers’ Compensation
  • Director’s and Officer’s Liability
  • Employer’s Practices Liability
  • Products and Completed Operations
  • Umbrella and Excess Liability
  • Cyber Liability and Technology Errors
  • Property Insurance
  • Business Interruption and Indirect Loss Coverage
  • Environmental Risk
  • Intellectual Property Liability
  • Ocean Marine

Once a decision to purchase insurance is made, you should have an insurance management plan in place.  At its simplest form, this amounts to having all your insurance polices, and proof of premiums paid, organized and cataloged in one place.  Your insurance portfolio should be reviewed periodically, or at least annually, to make sure there are no gaps in coverage.  It also is a good idea to have an annual review with an insurance agent or attorney to make sure you have the most updated coverages.  

Withdrawn Negligence Defense In Rape Case Could Still Be A Problem

After making national news, Stamford Marriott Hotel & Spa has requested that its attorneys withdraw a special defense in a case involving a rape in its hotel parking garage. 

In 2006, a 40 year old woman was sexually assaulted in front of her two small children in the hotel’s garage.  The assailant admitted the crime and was sentenced to prison.  As such, the rape was not in dispute.  The woman later sued and brought a complaint against the Marriott alleging various allegations of negligence. 

As detailed by Christian Nolan of The Connecticut Law Tribune, the attorneys representing Marriott raised two special defenses to the woman’s complaint that caused a public backlash against Marriott.  Reportedly, Marriott’s defenses included contributory negligence of the rape victim and failure to mitigate damages for the children. 

Marriott quickly changed its course and withdrew the defenses.   Marriott’s withdrawal of the defenses may spare it further public relations problems, but the potential for an angry jury at trial could remain a problem. 

At least one Connecticut attorney estimated that a jury might very well award a premium for that type of defense if pursued at trial and not proved.  Although Marriott has now withdrawn the defenses, it could still become a problem at trial based on Connecticut law concerning withdrawn pleadings. 

In Connecticut, withdrawn pleadings are no longer judicial admissions by the party, but they can remain available at trial as an evidentiary admission.   If this matter goes to trial, Marriott will have various ways to argue against admissibility of the pleading, but the initial defenses could still wind up in front of a jury as an evidentiary admission.  Once in evidence, Marriott should get the chance to explain the circumstances of raising the defenses, which may help mitigate any damage done.

In high exposure cases, the decision to raise certain special defenses is not always easy or a formality as in some jurisdictions.  In Marriott’s case, although it seems difficult to understand why the defenses were raised, we should not automatically assume there was no basis for it without knowing the full details.    Nevertheless, it appears Marriott did the right thing in withdrawing the defenses.

The rule on withdrawn pleadings serves as a reminder that withdrawing a claim in a pleading will not always prevent your opponent from using it against you in court.  As such, in Connecticut, business owners will want to consider the contents of certain pleadings filed in court because the pleadings could be used against the business as an admission.