Does Utah's LLC Act preempt common law claims between members? OLP v. Burningham Explained

The Utah Supreme Court’s decision in OLP v. Burningham clarifies a fundamental question about the scope of Utah’s Revised Limited Liability Company Act: whether the statute displaces common law remedies available to disputing LLC members. The court’s holding preserves important legal options for practitioners representing clients in LLC disputes.

Background and Facts

Richard Wilson and Wayne Burningham formed OLP, LLC to purchase and operate an anti-reflective optical lens coating machine. They contributed equal cash amounts and orally agreed to share equal control, ownership, and profits. When disputes arose over how to divide clients and profits between OLP and Burningham’s separate company, Intermountain Coatings, Wilson filed suit alleging breach of fiduciary duty, repudiation, and breach of contract. Burningham argued that all disputes should be resolved exclusively under the LLC Act’s dissolution provisions.

Key Legal Issues

The case presented three critical questions: whether the LLC Act’s comprehensive nature preempts common law claims between members; whether common law repudiation claims can proceed independently of statutory dissolution; and whether factual issues underlying both legal and equitable claims were properly submitted to the jury rather than resolved through judicial accounting.

Court’s Analysis and Holding

The court rejected the argument that the LLC Act displaces common law claims. Analyzing the Act’s plain language and structure, the court found no explicit preemption of common law remedies. The Act specifically limits certain claims while protecting others, indicating the legislature intended to retain common law causes of action. The court also declined to adopt the historic partnership law “exclusivity rule” requiring equitable accounting before pursuing legal claims, noting this rule was a “relic of partnership law” unnecessary for limited liability companies.

Practice Implications

This decision provides significant strategic flexibility for practitioners. LLC members may now choose between pursuing common law claims for damages or seeking dissolution under the LLC Act’s equitable procedures. When legal and equitable claims involve the same operative facts, courts must submit legal issues to the jury first, with the jury’s factual determinations binding the court on parallel equitable issues. This ruling preserves traditional contract and tort remedies while maintaining the LLC Act’s specialized procedures for dissolution and winding up.