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William Mitchell Law Review

Publication Information

31 William Mitchell Law Review 411 (2004-2005)

Abstract

The quest for limited liability in business enterprises and transactions has been a driving force in the development of business organization law for centuries. The historical development of corporations and limited partnerships evidences this primary goal. The recent development of the modern forms of limited liability partnerships and limited liability companies proves that this quest continues unabated. In addition, parties to significant business transfer transactions have long sought by construct and contract to apportion and limit their respective legal responsibilities and liabilities. Counterbalancing this inexorable trend toward limited liability has been the penchant of common law jurisprudence to define its limits. Common law theories of piercing the corporate veil and successor liability, among others, have been developed and expanded by the courts as equitable restraints on the strength of business limited liability protections, making these protections more akin to presumptions than unassailable principles. … This article seeks to make sense of the recipe and the ultimate concoction that is Johns v. Harborage I, Ltd. (collectively “Johns”). The legal substance of the case involves the use by business parties of devices to limit their liabilities. Part II describes the development of limited liability entities (“LLEs”), and the use of limited liability transactions, such as those employed by the defendants in Johns, as well as exceptions to the applicable presumptions of limited liability. Part III parses the facts and history of the multiple Johns decisions. Part IV explains and explores the rulings in Johns in light of the legal and equitable principles surrounding the evolution of business limited liability and its exceptions.

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