Facts: Respondent Chadwick Farms Owners Association, Inc. filed suit against petitioner F.H.C., L.L.C. after defects in F.H.C.’s construction of Chadwick Farms Condominiums became evident. As F.H.C. had in the interim been dissolved for failure to pay license fees or file reports and had its certificate of formation cancelled, the trial court granted summary judgment for F.H.C., ruling that F.H.C. was a legal non-entity and denying Chadwick Farm Owners Association’s motion to amend its complaint to include individual members of the former limited liability company. Upon appeal, the Washington Court of Appeals reversed the trial court, holding that Washington Revised Code §25.15.303, which had been enacted subsequent to the initiation of the litigation, applied retroactively and permitted Chadwick Farms Owners Association’s suit against F.H.C. despite its dissolution and that the trial court should have permitted Chadwick Farms Owners Association to amend its complaint to include the individual members of F.H.C. F.H.C. appealed this decision to the Supreme Court of Washington.

Question(s): Is a limited liability company susceptible to suit after the cancellation of its certificate of formation?

May members of a limited liability company be held liable for the acts and liabilities of the company?

Conclusion: Justice Madsen’s opinion for the Court reversed the Washington Court of Appeals with regard to the question of F.H.C.’s amenability to suit, concluding that while §25.15.303 allows suits to be filed within a limited period time against limited liability companies after their dissolution, it did not alter the fact that all claims against a limited liability company abate after the company’s certificate of formation is cancelled. However, the Court also held that members of limited liability companies may be held liable for the acts and liabilities of the company if respecting the limited liability form would work injustice or if members fail to properly wind up the affairs of the company after its dissolution and that therefore the trial court should have allowed Chadwick Farms Owners Association to amend it complaint to include individual members of F.H.C.

Docket No. 80450-8 (from Court of Appeals Division I Case No. 58796-0)

Petitioner: FHC, LLC

Respondent: Chadwick Farms Owners Ass'n

Other Parties: Emily Lane Homwowners Ass'n (respondent) v. Colonial Dev., LLC (petitioners)

Briefs:

Argument: Tuesday, November 18, 2008 9:00am

[Source: TVW, http://tvw.org]

Decided: Thursday, May 14th, 2009

Prevailing Party: Chadwick Farms Owners Ass'n (Respondent)

Vote: 5-4

Citation: Pending

Alexander

Johnson

Madsen

Sanders

Chambers

Owens

Fairhurst

Johnson

Korsmo
(Pro Tem)

Opinion

Dissent