BIANCE v. LEMIEUX et al

Filing 32

OPINION AND ORDER ON MOTION FOR PARTIAL SUMMARY JUDGMENT denying 23 Motion for Partial Summary Judgment By JUDGE NANCY TORRESEN. (dfr)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
MICHAEL P. BIANCE,
Plaintiff,
v.
WILLIAM T. LEMIEUX, et al.,
Defendants.

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) Docket no. 2:11-cv-0429-NT
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OPINION AND ORDER ON MOTION
FOR PARTIAL SUMMARY JUDGMENT
This case comes before the Court on Plaintiff Michael P. Biance’s motion for
partial summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons discussed
below, the Plaintiff’s motion is DENIED.
FACTUAL BACKGROUND
There are two sides to every story, and this case proves no exception. What
can be stated without dispute is that, in 2007, the Defendant formed SuperPlow,
LLC, a New Hampshire limited liability company (“SuperPlow”), and SuperPlow
purchased assets of Plaintiff’s business including a rear-mounted snowplow patent,
equipment, plans, customer lists, etc. The total agreed-upon purchase price was
$475,000, of which $175,000 was paid up front. SuperPlow signed a 10-year
promissory note in favor of the Plaintiff for the remaining $300,000, (the “Note”).
The Note was secured by the patent.

Payments were to be made annually, but in 2010, after two payments,
SuperPlow made no further payment on the Note.1 In the fall of 2010, Plaintiff
brought suit against SuperPlow in New York to enforce the Note. On December 29,
2010, SuperPlow dissolved and filed a certificate of cancellation in New Hampshire.
Although Defendant was aware of the New York suit, he did not notify Plaintiff of
SuperPlow’s dissolution. On February 8, 2011, Plaintiff obtained judgment against
SuperPlow on the Note in the amount of $298,527.
From here, the parties’ factual paths diverge. Following its dissolution and
cancellation, SuperPlow’s assets were either illegally distributed to other entities
including Defendant’s other business EZ-Plow, (see Plaintiff’s Statement of Material
Facts, ¶ 9 (Doc. # 22) (hereafter “PSMF”)) or were held by Defendant for
satisfaction of Plaintiff’s judgment (see Defendant’s Opposition to Plaintiff’s
Statement of Material Facts, ¶ 9 (Doc. # 27) (hereafter “OSMF”) and Defendant’s
Statement of Additional Material Facts, ¶¶ 12-14 (Doc. # 28 (hereafter “DSMF”)).
According to the Plaintiff, Defendant continued in 2011 with the business he
purchased from the Plaintiff under the name “EZ Plow,” an unincorporated business
with a website that advertises for sale the “EZ-Plow: A rugged rear-mounted
snowplow.” PSMF, ¶ 9 and Exhibit E thereto. Plaintiff also contends that Defendant
has made no assets of the business available to satisfy the judgment, and Plaintiff
claims that, to date, the New York judgment remains entirely unsatisfied.

For further details, see this Court’s April 27, 2012 order on SuperPlow’s motion to intervene
(Doc. # 25).
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Defendant contends that he has not used any of SuperPlow’s assets, but
rather, that SuperPlow “made adequate provision for the payment of [Plaintiff’s]
judgment under the Note,” OSMF ¶ 9, in part by segregating and storing all of
SuperPlow’s tangible assets, DSMF ¶ 13, and in part by holding the original patent
available to satisfy the judgment. DSMF ¶¶ 14-17 and 21. Defendant further claims
that he designed the EZ-Plow himself, and that this rear-mounted snowplow uses
“completely different structural components than the poorly conceived rearmounted plow design SuperPlow purchased from [Plaintiff].” DSMF ¶ 25.
Defendant contends, finally, that Plaintiff has refused to accept these assets in
satisfaction of the New York judgment in favor of seeking monetary satisfaction
from Defendant himself. DSMF ¶¶ 21-22.
LEGAL STANDARD
Summary judgment is authorized “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” Fed.R.Civ.Proc. 56(c).
At summary judgment, the court’s task is not to weigh the evidence and
determine the truth of the matter but to determine whether there is a genuine issue
for trial. Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009) (internal citations
omitted). The Court reviews the record in the light most favorable to the
nonmovant, drawing reasonable inferences in his favor. See id. Factual disputes
which are irrelevant or unnecessary will not be considered. See Anderson v. Liberty

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Lobby Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). To
determine whether a dispute as to a material fact is genuine, the court must decide
whether the “evidence is such that a reasonable [fact-finder] could return a verdict
for the non-moving party.” Id.
DISCUSSION
In this suit, Plaintiff has brought claims against Defendant personally and
doing business as EZ-Plow for violation of New Hampshire’s LLC statutes, unjust
enrichment, fraudulent transfer, and successor liability. In this motion for partial
summary judgment, Plaintiff focuses solely on Defendant’s failure under New
Hampshire’s LLC statutes to notify Plaintiff of SuperPlow’s dissolution and to
distribute SuperPlow’s assets to Plaintiff following dissolution. Plaintiff contends
that, as a consequence of these failures, Defendant must be held personally liable
for the entire amount of Plaintiff’s judgment against SuperPlow.
There are two provisions of New Hampshire’s LLC statutes at issue in this
claim: (1) its procedure for disposing of the claims of known creditors upon
dissolution, see N.H. Rev. Stat. §§ 304-C:60, and (2) its requirement that a dissolved
LLC distribute its assets to creditors in satisfaction of their claims prior to making
any distributions to members. See N.H. Rev. Stat. §§ 304-C:58.
With respect to the first provision, Section 304-C:60 states in part:
Upon dissolution, a limited liability company may dispose of the known
claims against it by filing a certificate of cancellation pursuant to RSA
304-C:59 and following the procedures described in this section.

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The procedures set forth thereafter involve providing written notice to known
creditors of the company’s dissolution and an opportunity to make claims against
the LLC. Id. Such claims are either barred in the first instance if not made within
120 days of notice, or barred thereafter if a creditor with a rejected claim fails to
bring suit on its claim within ninety days after the date of rejection. Id. The claims
of unknown creditors are barred five years after the company files its certificate of
cancellation and publishes notice of its dissolution. N.H. Rev. Stat. § 304-C:61.
Defendant acknowledges that he did not provide Plaintiff, a known creditor,
with notice of SuperPlow’s dissolution in accordance with Section 304-C:60.
However, he argues that this alone is no basis for imposing personal liability on him
for the full amount of the New York judgment. The Court agrees. While it appears
that Section 304-C:60 is designed to aid in the proper distribution of an LLC’s
assets, nothing in New Hampshire’s LLC statutes creates a penalty2 against LLC
members for not following its creditor notice and claim provisions. Indeed, Section
304-C:60 indicates both that it is permissive, (“a limited liability company may
dispose of the known claims against it…” (emphasis added)) and that its purpose is
principally to provide a method for protecting members of a dissolved LLC against
future claims after the LLC has been dissolved and cancelled. In particular, Section

Defendant formed SuperPlow in 2007, and it was this entity that purchased Plaintiff’s assets
and signed a promissory note to pay for them. SuperPlow’s note was not guaranteed personally by
Defendant nor was it secured by Defendant’s personal assets. Plaintiff’s recourse for non-payment
was solely to assets of the business including most significantly the snowplow patent. Plaintiff does
not contend in this motion for partial summary judgment that SuperPlow was a sham entity, which
is the generally-recognized way of asserting personal liability for what would otherwise be corporate
debts. Accordingly, by asking for the Court to transfer a corporate debt to the Defendant personally,
Plaintiff is asking the Court to impose a penalty on Defendant not otherwise contemplated by the
parties’ relationship.
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304-C:60 speaks of “disposing of known claims” and of how claims become “barred”
after the notice and claim procedures are followed.
Plaintiff’s claim that an “incentive” is required to get LLC members to comply
with this provision ignores the fact that those who fail to take advantage of Section
304-C:60 forego its protections. For example, if an LLC does not provide specific
notice of its dissolution to creditors under Section 304-C:60, it and its former
members are indefinitely exposed to outstanding creditor claims instead of limiting
the claims period to 120 days. Defendant has apparently also foregone the limited
protections afforded under Section 304-C:61, which provides a five-year statute of
limitations on claims against the LLC or its former members.3 However, the mere
fact that the Defendant did not take advantage of these statutory protections does
not translate into automatic personal liability for the entire amount of SuperPlow’s
debts, and Plaintiff has provided no authority in support of such a remedy.4

This section, too, is permissive, stating that an LLC “may” publish notice of its dissolution.
By following this section, an LLC and its former members limit future claims against both the LLC
and its members to five years following notice and filing of its certificate of cancellation.
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Plaintiff argues that J&M Lumber and Const. Co., Inc. v. Smyjunas, 20 A.3d 947 (N.H.
2011), supports his claim that an LLC member who improperly takes a distribution from a dissolved
LLC may be held liable for the entire debt owed to unpaid creditors. Plaintiff submits both the
original complaint in the Smyjunas case as well as the New Hampshire Superior Court decision from
which appeal was made. Doc. # 22-10 and 22-11. These documents reveal only that an unpaid
creditor (J&M) has a cause of action under New Hampshire’s LLC statutes against an LLC member
(Smyjunas) who distributes assets of the dissolved company to himself before satisfying debts owed
by the company. J&M sought the full amount of its judgment against Smyjunas’s former LLC and
the jury awarded the full amount of J&M’s judgment against Smyjunas personally. However, this
judgment was a general verdict in J&M’s favor based on submission to the jury of four separate
counts all requesting the same total relief, including piercing the corporate veil, improper wind-up of
the LLC, unjust enrichment, and breach of the duty of good faith and fair dealing. See Smyjunas, 20
A.3d at 952 & 959. There were thus at least two other bases for an award to J&M of the full amount
of its judgment: (1) J&M may have proven that the LLC was a sham company, making Smyjunas
personally liable for the sham company’s debts, or (2) Smyjunas may have siphoned assets from the
LLC that were equal or greater than the full amount of J&M’s judgment, making him liable to
disgorge what he took up to the amount of the judgment.
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Regarding the second provision at issue, Section 304-C:58 prohibits
distribution of the assets of a dissolved LLC to its members without first satisfying
creditor claims. To the extent Defendant distributed assets to himself out of
SuperPlow without first resolving outstanding claims against SuperPlow, he has
violated New Hampshire law. It is clear that creditors may sue members for
improper distributions during wind up, see Smyjunas, 20 A.3d at 959 (supporting
the existence of a cause of action for improper wind-up under New Hampshire’s
LLC statutes), but it is not clear what the proper remedy is.
Again, the Plaintiff’s request that automatic liability be imposed on
Defendant for the total amount of SuperPlow’s debts finds no support in New
Hampshire’s statutes or case law. Although the Defendant does not fall within the
protections of Section 304-C:61 for claims made by unknown creditors, that statute
authorizes suits against members to the extent of the assets distributed to the
member during wind up.

Thus, at a minimum, the remedy for a plaintiff who

establishes a violation of Section 304-C:58 should allow creditors to reach any assets
distributed to former members during the wind up. The New Hampshire LLC
statutes do not support any greater remedy, and this Court will not fabricate one for
a failure to follow the formalities of a corporate wind up. “A federal court sitting in
diversity cannot be expected to create new doctrines expanding state law.” Gill v.
Gulfstream Park Racing Ass’n., Inc., 399 F.3d 391, 401 (1st Cir. 2005). There are
additional common law theories, including piercing the corporate veil and

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fraudulent transfer, which may provide the Plaintiff with the additional relief he
seeks.
CONCLUSION
For the reasons stated, the Plaintiff’s motion for partial summary judgment
is DENIED.
SO ORDERED.
/s/ Nancy Torresen
United States District Judge
Dated this 2nd day of August, 2012.

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