In re Reinz Wisconsin Gasket, LLC, a cancelled Delaware limited liability company (197, 2023)

Ruling

In the case of In re Reinz Wisconsin Gasket, LLC, the Delaware Court of Chancery ruled that a canceled limited liability company (LLC) could not be represented by counsel in a legal proceeding unless a receiver was first appointed. The court dismissed arguments against the appointment of a receiver and against the nullification of the LLC’s certificate of cancellation.

Summary

Reinz Wisconsin Gasket, LLC (RWG), a Delaware LLC, was a defendant in a tort action in the U.S. District Court for the District of Massachusetts. After the commencement of the case, RWG was canceled under Delaware law. Consequently, the District of Massachusetts concluded that RWG no longer existed and allowed its counsel’s withdrawal from the case. Linda A. Cook, an opposing party in the federal litigation, moved for default judgment against RWG as it was unrepresented by counsel and couldn’t represent itself. Additionally, Cook petitioned the Delaware Court of Chancery to appoint a receiver and nullify RWG’s certificate of cancellation. The Chancery Court explained that under Delaware’s Limited Liability Company Act, an LLC’s existence as a separate legal entity continues until the cancellation of its certificate of formation. Post cancellation, the entity’s legal existence ceases, and it may only operate through a receiver for managing litigation or other business. It dismissed arguments by RWG’s counsel that defunct entities had been represented by counsel in previous cases, stating that past occurrences didn’t make it legally correct. The decision underscores that once an LLC is canceled, its existence as a separate legal entity ends, and it’s incapable of performing actions like opposing the appointment of a receiver or retaining counsel.