Cancelled LLC Can Be Sued, But Cannot Sue

Chadwick Farms Owners Assoc. v. FHC, LLC, 139 Wash. App. 300, 160 P.3d 1061 (2007)

This case presents a similar set of facts to Maple Court.  Condominium developer FHC, LLC was administratively dissolved on March 24, 2003.  On August 18, 2004, Chadwick Farms Homeowner’s Association filed suit against FHC, alleging construction defects.  Seven months later, on March 24, 2005, FHC was administratively cancelled because it failed to reinstate during the two-year dissolution period.  Two months after cancellation, FHC filed third party claims against its subcontractors, and in August 2005 moved for summary judgment against Chadwick on the ground that it was no longer a legal entity.

The Court of Appeals (Division 1) held that:

(1) The survival statute enacted in 2006 (RCW 25.15.303) applied retroactively.  The survival statute permits claims against a dissolved limited liability company, so long as the claim is filed within three years of dissolution.

(2) FHC’s failure to reinstate itself after administrative dissolution was fatal to its ability to counterclaim against its subcontractors.  Once the secretary of state cancelled FHC’s certificate of formation, LLC was no longer a legal entity and therefore lacked standing to prosecute its third party claims.

(3) The survival statue applies only to claims which are brought against a dissolved limited liability company.  Therefore, for one year following its cancellation (until the end of the three-year survival statute period), FHC could be sued but could no longer sue.