Legal Question in Personal Injury in Connecticut

Is a claim for fraud supported when an LLC member induces a co-member to contribute their intellectual property assets to the company, only to eventually attempt to unilaterally dissolve the company and maintain these assets herself?

My partner in the LLC offered financial backing to the company in exchange for 60% of profits and I tentatively agreed to 40% in exchange for contributing recipes, artwork, graphic design and marketing materials. Shortly after this tentative agreement, my partner began unilaterally having her husband make small purchases for the company and proceeded to take the small amount of profits we made and use them to repay her husband.

Over time, my partner made minor financial expenses for fees, etc., but things got ugly when I stated I did not want her making a self-dealing arrangement with her husband to loan us the money required for an initial product manufacturing run. The relationship rapidly deteriorated to the point where, last week, she informed me that we had to dissolve because her husband now refused to pay for any further costs. This was news to me, as her initial inducement made no reference to it being her non-member husband who would be providing the funding.

I accepted her suggestion that we simply split the "assets" whereby she would take the name and I would take back the rights to my recipes. Two days later, her husband began a strong-arming approach to attempt to coerce me into signing an agreement signing away all rights and giving them full rights to all intellectual property and the right to sell the products for a period of six months in order to "recover expenses". As I want them out of my life at this point, I offered to review any agreement despite its lack of resemblance to the original agreement between me and my partner. I simply requested that it provide me with the adequate protection to ensure they would not continue using the products at the end of the designated time period. I also made it clear that, if I was to sign away my rights, I was doing so with the understanding that they were not hiding an expectation of significant profits while attempting to get rid of me. This request was summarily rejected and replaced by a suggestion that we simple both run different companies in distinct geographic markets - with her keeping the entirety of the recipes, company, contacts and related intellectual property, and giving me the "right" to use my recipes again in an area they are not interested in.

It was at this point that I notified them that I was consulting an attorney and, until further notice, I remain a full member of the company. During the past couple months, I have been blocked out of company email and information accounts. I have been threatened with personal liability for not filing company taxes while actively having the necessary financial information withheld from me. And I have been threatened with the alternative to accepting their "offer" being the dissolution of the company. I welcome this dissolution, but I now have reason to fear my partner is looking to unilaterally dissolve and assign all assets of the company to her husband in a self-dealing "repayment" of minimal debts she imposed on the company.

As of late, it has become increasingly clear that these two are happy to play games with me because they know they are in a superior financial situation and can afford to push the limits because litigation is an unaffordable alternative.

I guess my real question is whether this fact pattern even begins to suggest the possibility of fraudulent activity and whether there is any point in pursuing legal action unless and until their self-interested dealings reap them benefits worth pursuing.


Asked on 2/01/12, 6:07 pm

1 Answer from Attorneys

Christopher Hite Rosenberg, Whewell & Hite, LLC

Fraud is very complex and almost impossible to prove. Realistically, you want to retain an attorney who understands business law to represent your interests and help negotiate a liquidation and wind up of the LLC.

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Answered on 2/07/12, 2:47 pm


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