Developer and Construction Manager Lose Pending Claims

Maple Court Seattle Condo. Assoc. v. Roosevelt, LLC 139 Wash. App. 257, 160 P.3d 1068 (2007)

In June 2007, Division One of the Court of Appeals rendered its decisions in three cases involving the issue of a dissolved limited liability company’s standing to maintain claims.  Maple Court illustrates the adverse impact that administrative dissolution can have on the pending claims of a developer and general contractor.

On September 23, 2002, condominium developer Roosevelt, LLC allowed itself to be administratively dissolved by the Secretary of State.  Fifteen months later, Roosevelt was sued by the condominium homeowners’ association.  In response, Roosevelt filed third party complaints against its construction manager and subcontractors.  During the pending litigation, on September 23, 2004, Roosevelt was administratively "cancelled" pursuant to RCW 25.15.270(6) because it did not reinstate itself following the prior administrative dissolution.

In March 2005, Roosevelt and the construction manager settled the homeowners’ suit but continued pursuing their indemnity claims against the subcontractors.  In defending the indemnity claims, the subcontractors jointly argued that Roosevelt’s cancellation, on September 23, 2004, ended its legal existence and effectively deprived it of maintaining the indemnity claims.  The subcontractors further argued that, since the construction manager’s indemnity claims were derivative of Roosevelt’s claims, the construction manager was also barred from pursuing indemnity.

The Court of Appeals agreed, holding that Roosevelt’s third party claims were lost upon its cancellation and that the construction manager’s participation in the 2005 homeowners’
settlement was purely "voluntary" and, as such, could not form the basis for its indemnity claims.