Unauthorized Practice of Law – LLC claim assigned to member dismissed

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Unauthorized Practice of Law – LLC claim assigned to member dismissed

The Nebraska Supreme Court continued its precedent preventing non-attorneys from representing entities in Zapata v. McHugh, 296 Neb. 216, 898 N.W.2d 720 (2017). The case involved a suit brought by an individual as the assignee of a claim of limited liability company (“LLC”) for unpaid rent and damages sustained by the LLC. The suit was filed by an assignee of the LLC who was not a lawyer. The trial court raised the unauthorized practice of law issue on its own and ultimately dismissed the case due to the failure to have a licensed lawyer represent the LLC and the Supreme Court affirmed.

Nebraska cases have required that estates, corporations and now LLCs have attorneys representing them in order to maintain any action in Nebraska. An important feature of the court’s opinion is that any pleading filed by a non-attorney on behalf of a fictional entity (such as a corporation or LLC) should be disregarded. The holding has significant effect on claims prosecuted by entities. For every claim in Nebraska there is a statute of limitations that requires that a suit to asset the claim be brought within some time period specified in Nebraska statutes. For example, a suit on a written contract has to be brought within five years of the breach giving rise to the claim. If an LLC and a second LLC enter into a contract, such as a lease, and the tenant/LLC fails to pay rent or perform some other obligation, the landlord/LLC has five years from the date that the rental payment or other performance is due to file a breach of contract claim against the tenant. There may be actions that extend the statute of limitations, but for our purposes here let’s assume that the tenant moved out and did not pay several months’ rent. If the Landlord/LLC waits until the statute of limitations has almost run on the first missed rent installment, and then a non-attorney member files a breach of contract claim against the tenant, the filing of the case is a non-event which means that even if the landlord/LLC gets an attorney the statute of limitations may have run on each installment of rent that has passed until the attorney files a complaint against the tenant.

The statute of limitations issues are a significant risk that unrepresented LLCs take when they do not hire a lawyer to represent them. The defendant’s attorney will most likely wait until the statute of limitations expires before raising the unauthorized practice of law issue and then the case will have to be dismissed and the statute of limitations will have expired.

Personal representatives, trustees, LLCs and corporations should hire an attorney to represent the entity in any pending matter or risk that the defendant or the court will raise the unauthorized practice of law issue and dismiss the case or prevent the non-attorney from representing the entity.

Trev E. Peterson

November 9th, 2017|Uncategorized|