Monday, May 16, 2005

Dancing With Myself?

In the song Dancing With Myself, Billy Idol writes:
Well there's nothing to lose
And there's nothing to prove
I'll be dancing with myself
In Jones v. Novastar Financial, Inc., Judge Albert Matricciani should have taken the lyrics to heart and declined to address at least one question presented to him.

The case involves an LLC that was formed by a Delaware mortgage broker. The LLC had the mortgage broker and the local branch manager as its members. In addition to the operating agreement of the LLC, the mortgage broker entered into a "a branch support and administration agreement." This was presumably an agreement whereby the mortgage broker extended support services to the LLC. The Court determined that the complaint stated a valid private cause of action against the LLC under the Maryland Mortgage Lender Law, Md. Fin. Inst. Code Ann. Sections 11-501 et seq.

The Court then concluded that the mortgage broker could be a co-conspirator with the LLC. This seems to me to be wrong. The mortgage broker was a member of the LLC and, while the operating agreement was not described in any detail, it presumably had management rights with respect to the operation of the LLC. To the extent that it was exercising its rights qua LLC member, the conspiracy claim should have failed.

In any event, however, the conspiracy claim was rejected because the Court did not "find in the complaint allegations of an agreement to carry out unlawful actions outside of the [operating] agreement and the branch support and administration agreement." In other words, there was no agreement to undertake unlawful acts.

The Court should have addressed this issue first and then simply not addressed the issue of whether a party could conspire with an LLC that it was a member of since that question would have been rendered moot.

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