LLC Treated Like Corporation, Not Partnership, for Privilege Purposes — Case Split

A former principal in an LLC (Montgomery) sued the entity (eTreppid) and another principal (Treppid), inter alia, for misappropriation of intellectual property in Montgomery v. eTreppid Techs., 2008 U.S. Dist. LEXIS 35561 (D. Nev. April 18, 2008). In seeking access to attorney-client privileged communications between eTreppid and its counsel, Montgomery claimed that he was a joint client as a principal of the LLC, citing partnership cases. The magistrate judge found no caselaw directly addressing the question whether an LLC should be treated as a corporation or a partnership for purposes of applying the attorney-client privilege. After analyzing a series of cases and the facts before the Court, it concluded that

while none of the cases the court reviewed is exactly on point, taken together with eTreppid's Operating Agreement, they are instructive. Federal and state courts have consistently applied the law of corporations to LLCs, including for the purposes of piercing the corporate veil, the "alter ego" doctrine, determining standing, the "business judgment rule," and derivative actions. Federal courts have also treated partnerships and limited partnerships as corporations for the purposes of determining the attorney-client privilege. Montgomery has not called to the court's attention any cases applying partnership law to an LLC. Therefore, the court concludes that eTreppid should be treated as a corporation pursuant to federal common law.

Held, the LLC was the sole client and alone could assert or deny the privilege. Note that there is a split in the case law as to whether or when a corporation can assert the privilege against former officers and directors. See our post of February 26, 2008.

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