Background
Justin Freeman, an attorney, formed the Law Office of Justin C. Freeman, LLC as a single-member limited liability company in September 2015. Freeman represented client Chanda Gonzalez in a personal injury matter. J. Xavier Pryor, initially Freeman’s associate, left in March 2016 to start his own law firm but continued work on the Gonzalez case in June 2016. The parties allegedly agreed orally to split attorney’s fees equally if Pryor tried the case to verdict, or pay a reasonable fee if it settled pre-trial. The case settled in October 2016 for $750,000, leaving $165,000 in attorney’s fees to be divided. Pryor’s firm issued a check to Freeman for $82,500 (the claimed 50% share), which Freeman refused to cash.
In February 2021, Freeman sued Pryor and the Pryor office in his individual capacity (not on behalf of the LLC) for breach of contract, conversion, unjust enrichment, and quantum meruit. Defendants moved to dismiss for lack of standing, arguing Freeman could not sue individually because any injury flowed to the LLC, not Freeman personally. The trial court denied the motion, finding Freeman had standing under the exception created by the Connecticut Supreme Court’s decision in Saunders v. Briner. After trial, Freeman moved to add the Freeman office as a plaintiff; the court granted this amendment. Despite finding no breach of contract, the trial court rendered judgment for the Freeman office for $82,500.
The Court’s Holding
The Connecticut Appellate Court reversed, holding that Freeman lacked standing to bring a direct action in his individual capacity. Under Connecticut law, a member of an LLC generally cannot sue individually to recover for injuries to the company; the member must bring a derivative action on behalf of the company. The Saunders exception permits a single-member LLC member to sue directly only if the trial court finds: (1) it will not unfairly expose the company or defendants to a multiplicity of actions; (2) it will not materially prejudice creditors’ interests; and (3) it will not interfere with fair distribution of recovery among interested parties. Freeman failed to meet this test because he provided no evidence that allowing him to recover individually would not materially prejudice the Freeman office’s creditors—including the Pryor office itself, which had a pending claim against the Freeman office.
The court further held that the trial court’s post-trial amendment adding the Freeman office as a plaintiff did not cure Freeman’s lack of standing. The amendment did not comply with Connecticut General Statutes § 52-109, which permits amendments to correct the naming of the wrong plaintiff only if the action was commenced in the wrong person’s name “through mistake.” Freeman did not claim, and the court did not find, that such a mistake occurred. Because the trial court lacked subject matter jurisdiction over the entire proceeding due to Freeman’s initial lack of standing, the post-trial amendment could not restore jurisdiction.
Key Takeaways
- A single-member LLC member asserting a direct action for company injury must affirmatively demonstrate that allowing the direct action will not materially prejudice the company’s creditors.
- Post-trial amendments adding an LLC as a party cannot cure a standing defect that existed at the pretrial motion to dismiss stage.
- Trial courts must make specific findings under § 52-109 to justify amendments that change the identity of a party, beyond mere convenience or conforming to proof.
- Connecticut protects LLC creditors by requiring members to proceed derivatively and ensuring recovery benefits the company, not the individual member.
Why It Matters
This decision reinforces that Connecticut courts take seriously the structural protections afforded to LLC creditors. By preventing Freeman from suing individually and then adding the LLC as an afterthought, the court ensured that any recovery would inure to the benefit of the Freeman office and its creditors, rather than enriching Freeman personally while his company’s debts remained unsatisfied. This reflects a policy judgment that sole-member LLCs, despite their structural similarity to proprietorships, retain separate legal status that creditors may rely upon.
For practitioners, the opinion underscores that the Saunders exception is genuinely narrow and requires trial courts to conduct a rigorous analysis of creditor interests before permitting direct actions. Moreover, the court’s holding that jurisdictional defects cannot be cured by post-trial amendments means that defendants must challenge standing at the pretrial stage to preserve the issue effectively. The decision also clarifies that § 52-109 amendments changing party identity require more than proof at trial—they require a finding that the original pleading named the wrong party through mistake.