We've been mining Keith Paul Bishop's report on the Curci Investments, LLC v. Baldwin, Cal. Ct. App. Case No. G052764 (Aug. 10, 2017), decision. lastly, we note his complaint that:
... under the category of “hopelessly confused”, I happened across the following description of Curci:
Reverse veil piercing may be available when the only shareholders of a limited liability corporation are both liable for a debt to a judgment creditor.
However, the case involved members of an LLC, not shareholders, and the entity was an LLC, not a limited liability corporation (whatever that might be).
This will doubtless set off friend of the blog Joshua Fershee, whose blogging career has included any number of complaints about this sort of lazy, mindless, stupid terminology use. As he recently noted:
Regular readers know that I monitor courts and other legal outlets for improper references to LLCs as "limited liability corporations" when the writer means "limited liability companies." I get a Westlaw update every day. Really. Every day. So while it may seem that I write about examples a lot, I tend to think I am showing great restraint.
Some might suggest that Joshua's developed an idée fixe verging on the Ahabian. But I must confess to sharing his annoyance. You see, misusing terminology leads to misapplied doctrine.
LLCs are not corporations. They should not be treated as such. Investors are heterogeneous and the best approach therefore is to offer them standard form contracts—off the rack rules—that provide significant choice. Courts will maximize investor welfare by letting investors choose the form best suited to their business. If courts and legislatures treat LLCs and corporations the same, they reduce the differences between the two forms and thus reduce the social welfare that comes from having different forms among which investors can choose.
Calling LLCs corporations leads to a mindset that treats them the same rather than that emphasizes their differences.
