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A Better Partnership
May 11, 2017

COA: Individual’s membership in and seasonal operation of LLC not enough to establish that he personally “conducts business” in LLC’s county for venue purposes

A LLC Member's seasonal operation of that LLC is insufficient to establish that the Member personally conducts business in the LLC's domicile county, said the Michigan Court of Appeals in Estate of Armour v. Hall, No. 331800.
 
In July 2013, Rodney Hall (Hall), a resident of New Mexico, and James Armour II (Armour) were in a motor vehicle collision in Lake County. Armour subsequently died, and his wife Joanne Dawley (Dawley), a resident of Wayne County, sued Hall for various tort claims on her own behalf and on behalf of Armour’s estate.
 
Dawley filed her action in Wayne County. Hall immediately moved to transfer venue to Lake County, the site of the collision, or Mason County, purportedly where he conducted business on behalf of Barothy Lodge, a resort property in that county. Wayne County Circuit Court granted his motion, transferring venue to Mason County.
 
After some discovery, it became clear that Hall was merely one member of the limited liability company (LLC) that owned Barothy Lodge. According to Hall’s testimony, for five to six months a year he “runs” the resort, dealing with contractors on-site, “guest-related issues,” and any “fires to put out.” The resort also has full-time managers who live and work there year-round.
 
Dawley moved to return the lawsuit to Wayne County, arguing that Hall did not conduct business in Mason County. Mason Circuit Court denied the motion, concluding that Hall’s actions on behalf of the LLC constituted his conducting business within the county for venue purposes. The Court of Appeals granted Dawley’s request for interlocutory appeal.
 
As a threshold matter, the court rejected Hall’s initial argument that Mason Circuit Court’s did not have jurisdiction to hear Dawley’s motion to transfer. The court held that Hall had mischaracterized Dawley’s motion as an “appeal” of the Wayne County transfer order, citing case law for the proposition that upon transfer, the transferee court has full jurisdiction as if the action had been originally brought in that court.
 
Regarding the main issue on appeal, the court turned first to the statute governing venue for tort cases. MCL 600.1629 provides four prioritized criteria for determining whether venue is proper in a given county. The court and the parties agreed that no county satisfied the first three criteria and thus turned to the fourth, which provides in relevant part that “a county that satisfies the criteria under section 1621 or 1627 is a county in which to file and try an action.”
 
The court then applied those cross-referenced sections to the case. First, it found that section 1627 would place venue in “the county in which all or a part of the cause of action arose,” which would have been Lake County. Since neither party, in arguing whether to transfer the action out of Mason county, asked to have the matter transferred to Lake County, the court ruled out the possibility and turned to section 1621.
 
MCL 600.1621 establishes a priority for venue that favors the county in which a defendant resides, has a place of business, or conducts business. If none of those criteria are met, then the statute places proper venue in the county in which a plaintiff resides or has a place of business. Thus, the court turned to whether Hall’s ownership in the LLC and his activities on its behalf constitute conducting business for purposes of venue in Mason County.
 
As to ownership, the court cited a previous case in which it ruled that a medical center organized as a limited liability company did not conduct business in the county where it held limited liability membership interests in two healthcare clinics, thus respecting the separate legal personhood of the entities from their owners. As to Hall’s management activities, the court concluded that Hall acted as an agent on behalf of the LLC; applying principles of agency law, those actions are therefore attributed to the LLC, not to Hall. Since Hall never argued that the LLC form should be disregarded or presented evidence to that effect, the court held that Hall did not conduct business in Mason County.
 
The court thus reversed the Mason Circuit Court’s decision and remanded with orders to transfer venue to Wayne County. Without any further analysis or explanation, Judge Borrello issued an opinion concurring “in result only.”

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