Wisconsin Business Law Blog : Waukesha, New Berlin, Oconomowoc Corporate & Real Estate Lawyer & Attorney

One item often overlooked by parties while negotiating or deciding to enter into an Operating Agreement for a limited liability company or (“LLC”) with more than one member is what is often times referred to as a “capital call.” Buried deep in what can be voluminous pages of “legalese” contained in many LLC operating agreements, may lurk a requirement that members of the LLC contribute additional capital to the LLC - that is, more than their original investment . This can be triggered by majority vote, or, if so provided in the Agreement, by demand of a single Managing Member if he or she is given such power. 

Many investors in an LLC assume that once they make their initial capital contribution, they will not be required to contribute more, even if the underlying business is performing badly, unless they specifically agree to do so, or if “everyone” agrees to do so. Many times quite the opposite is true, and the unsuspecting investor could be facing some rather negative consequences.

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On December 17, 2010, President Obama signed into law the Tax Relief Act of 2010, PL 111-312 (known by its full name of "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010"). This law extended most of the Bush Era tax cuts for another two years. In addition, some provisions were added that are a benefit to most Americans.

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Judgment creditors in Wisconsin have the right to a supplemental examination of their judgment debtors to obtain information regarding their collectable assets.  This examination may require the debtors to produce records for inspection by the creditor.

In Crown Castle USA, Inc. v. Orion Logistics, LLC, 2009AP3029 (December 7, 2010), an opinion recommended for publication, the Court of Appeals determined that circuits had the authority to require companies related to a judgment debtor to produce records through the supplemental examination process set forth in Chapter 816 of the Wisconsin Statutes.  The claim was made that the judgment debtor in that case may have made fraudulent transfers to a company having common ownership to avoid collection of the judgment.

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A decision of the District Court for the Eastern District of Wisconsin has serious implications regarding the amount of damages payable where an insurance company breaches its duty to defend its insured from claims made against it.

Wisconsin law provides that an insurance company is obligated to defend its insured from legal action even if only one of several claims made against the insured is covered under the insurance policy.  Wisconsin state courts have not specifically addressed what damages are payable by an insurance company where only one of several claims are covered by the policy.

In Johnson Outdoors, Inc. v. General Star Indemnity Co., 2009 WL 4043194, the Eastern District Court determined that damages payable for breach of the duty to defend would be damages attributable to the covered claim only.  Therefore, where there had been a settlement of various claims made against the insured, the insurer could discover information pertinent to the question what portion of the settlement related to the covered claim.

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