## Facts

- In February 2001, beauticians Rosa Connors and Jennifer Kiman formed Howe Elegant, LLC (Howe), a Connecticut salon business.
- Connors and Kiman were Howe’s only members, and Howe had six additional commission-based workers.
- Connors, Kiman, and the other workers each brought their own clients to Howe.
- After an argument in February 2005, Connors and Kiman decided to end their business relationship but could not agree on dissolution terms.
- In March 2005, Connors told Kiman she would start a new salon, Sona Bella Salon and Spa, LLC (Sona Bella).
- Howe’s commission workers told Connors they intended to join her at Sona Bella, and those workers began speaking with their customers about switching to Sona Bella.
- While still working at Howe, Connors:
  - used Howe’s customer information to mail information about Sona Bella to Connors’s customers and to the customers of other Howe workers,
  - copied Howe’s appointment book, and
  - sold a gift certificate for Sona Bella from Howe’s salon.
- On May 19, 2005, Kiman changed the locks to the salon premises and refused to give Connors a key.
- Kiman stopped operating from the premises under the Howe name and began operating as Jennifer Lee, LLC.
- Kiman assumed the lease, took control of Howe’s bank account, transferred about $23,000 to a new account, and used the funds to pay Howe obligations, including a small-business loan obtained for Howe.
- Connors sued Kiman and Howe, asserting breach of contract and multiple tort and statutory theories based on the lockout and alleged transfers of Howe assets and business relationships.
- Kiman and Howe counterclaimed, alleging Connors breached fiduciary duties (and related obligations) by diverting customers and using Howe information for Sona Bella.
- After a bench trial, the court addressed whether Connors had standing to bring tort-based claims in her individual capacity and whether Connors breached fiduciary duties to Howe.

## Issues

1. Whether Connors, as an LLC member, had standing to assert tort and similar claims in her individual capacity when the alleged harm was primarily to Howe’s business and assets.
2. Whether Connors breached fiduciary duties owed to Howe by using Howe’s customer information and appointment records and by soliciting business for a competing salon while still associated with Howe.
3. How the court should account for the parties’ competing conduct when determining appropriate relief in connection with the breakdown of the LLC relationship.

## Decision

- The court treated claims seeking recovery for loss to Howe’s business, assets, and goodwill as claims belonging to the LLC, not to Connors personally, and limited Connors’s ability to pursue those theories in her individual capacity.
- The court found Connors breached fiduciary duties to Howe by using Howe’s customer information and business records (including the appointment book) and by diverting business activity to Sona Bella while still working at Howe.
- The court resolved the parties’ competing claims in a manner consistent with winding up and accounting for the LLC’s rights and obligations, taking into account that both members engaged in self-help affecting the company’s operations.

## Legal Principles

- A member generally lacks standing to recover individually for harms that primarily injure the LLC (such as loss of company assets, customers, sales, or general business reputation); those claims belong to the entity and must be pursued on the entity’s behalf.
- In a member-managed LLC, members owe fiduciary duties to the LLC, including loyalty-based obligations not to divert company business or misuse company property for personal gain.
- Using company customer information, scheduling materials, or other internal records to solicit existing customers for a competing venture while still a member can constitute a breach of fiduciary duty.
- Where both sides engage in conduct affecting the LLC’s operations and property, the court may limit individual recovery and structure relief through entity-focused remedies such as accounting and winding up.

## Conclusion

Connors v. Howe Elegant, LLC holds that tort-style claims alleging depletion of an LLC’s assets and damage to its business are, in substance, claims of the LLC rather than of an individual member, and it further holds that an LLC member breaches fiduciary duties by using the LLC’s customer information and appointment records to divert business to a competing salon while still associated with the LLC.


Connors v. Howe Elegant, LLC, 2009 WL 242324 (2009)