## Facts

- Colborne Foodbotics, LLC obtained a $225,202 arbitration award against Boulder Partnership, LLC.
- Michael Weinstein and Kenneth Major were the only members of Boulder Partnership and the only shareholders of the LLC’s two corporate managers, Business Mechanic, Inc. and Manymajors Managements, Inc.
- The managers authorized a distribution of Boulder Partnership’s assets to the members (Weinstein and Major).
- Colborne alleged the distribution rendered the LLC insolvent and unable to pay the arbitration award.
- Colborne sued (1) the members for accepting an allegedly unlawful distribution under § 7-80-606, C.R.S., and (2) the managers for common-law breach of fiduciary duty allegedly owed to creditors upon insolvency.
- The trial court dismissed both claims; the court of appeals reversed; the Colorado Supreme Court granted review.

## Issues

1. Whether an LLC creditor may sue LLC members directly under § 7-80-606, C.R.S., to recover an unlawful distribution that allegedly rendered the LLC insolvent.
2. Whether managers of an insolvent LLC owe a common-law fiduciary duty to the LLC’s creditors comparable to the duty recognized for directors of insolvent corporations.

## Decision

- The Colorado Supreme Court reversed the court of appeals and ordered reinstatement of the trial court’s dismissal.
- The Court held § 7-80-606 makes members liable for unlawful distributions to the LLC, not to the LLC’s creditors, so a creditor lacks a direct statutory claim against members under that provision.
- The Court held managers of an insolvent LLC do not owe the LLC’s creditors a common-law fiduciary duty analogous to the duty corporate directors may owe creditors upon corporate insolvency.
- The Court concluded creditor claims of this type require express statutory authorization, which was absent.

## Legal Principles

- Under § 7-80-606, C.R.S., liability for an unlawful distribution runs to the LLC; the statute does not create a direct cause of action for creditors against members.
- Courts will not extend corporate creditor-remedy doctrines to LLCs when the LLC statute does not incorporate them; LLC and corporate statutory schemes are distinct.
- Managers of an insolvent LLC do not, by virtue of insolvency alone, owe common-law fiduciary duties to the LLC’s creditors; any such creditor rights must arise from express statutory authority (or other legally recognized sources outside a court-created duty).

## Conclusion

The Colorado Supreme Court held that an LLC creditor may not sue members directly for unlawful distributions under § 7-80-606 and may not sue LLC managers for a common-law fiduciary duty to creditors based solely on the LLC’s insolvency, absent express statutory authorization.


Weinstein v. Colborne Foodbotics, LLC, 302 P.3d 263 (Colo. 2013)