I am a member of an Colorado LLC that is part of another master LLC that acquired a commericial real estate property. The other member is an attorney and also the manager of the master LLC overseeing the transaction. There are two managers of the master LLC. As part of the Operating Agreement in which he/she is a manager, they are required to report monthly financal progress and anything else regarding the investment. This never occurred,and, in addition to that violation of the operating agreement, they went ahead on their own infusing capital in the project without any of the member's consent. The operating agreement specifically states that there needs to be a unanimous vote of all the members for anything to be approved and initiated. This created an extreme negative position for the property and now there will be additional capitals above and beyond what is currently required. The issue is that the attorney, as manager, was completely aware of the situation when it first occurred and knowingly allowed the transgretions to continuously occur without disclosing it to the other members/investors. In addition to that, he sold his financial interest in the property, yet retained himself as manager.knowingly the financial destitute and condition of the property and attempting to avoid his contributions to any future capital calls.He/she was not transparent nor did their due diligence as a part of the operating agreement. He/she knowingly mislead the other membersWhat would our remedies be under the law...civil or criminal?
Country relating to Question: United States
State (if USA): Colorado
In the beginning discovery stages...
Thank you for the post, I am happy to assist you by answering your questions. From your description you are alleging a breach of fiduciary duty insofar as the manager failed to disclose to the members his position (or rather the liquidation of his position) in the property and failed to properly act on behalf of the LLC insofar as LLC assets were pledged/contributed without due diligence or appropriate discretion. The harmed members therefore can seek recourse from the master LLC's assets to offset the loss of value the members realized as a result of the transaction involving this commercial real estate acquisition. Please let me know if you need additional guidance or have any follow up questions.
I need to know if there is a malpractice issue here....The attorney knowingly withheld pertinent financial information from the members, knowingly allowed capital infusions without any consent of the other members, sold his/her interest to avoid any personal loss and future capital calls. As a result, the negative position of the investment is so dire, no member can meet the current capital calls that are necessaty.
Thank you for the clarification Ray, no there is not a malpractice issue here as the attorney was not actually engaged in the practice of law on behalf of the LLC (i.e. he was not acting as an attorney). Therefore, there can be no claim of malpractice. Please let me know if you need additional guidance or have any follow up questions.
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