Does a new LLC statute invalidate actions taken under the prior law? Blanch v. Farrell Explained

In Blanch v. Farrell, the Utah Court of Appeals addressed whether the implementation of Utah’s New Limited Liability Company Act invalidated actions properly taken under the prior statute. The case arose from a dispute among LLC members over the authority to sell company assets during winding up.

Background and Facts

Five equal members owned a dissolved LLC that held real property and irrigation company shares. In October 2015, four members executed a written consent under the Old Act authorizing the sale of assets as part of winding up the company. The Old Act required only a two-thirds vote for actions outside the ordinary course of business. Claude Blanch, the fifth member, objected and filed suit seeking to block the sale and partition his twenty percent interest. He argued that the New Act, which became effective January 1, 2016, required unanimous consent for such actions, thereby invalidating the written consent.

Key Legal Issues

The court addressed two primary questions: (1) whether the written consent executed under the Old Act remained valid after the New Act became effective, and (2) whether Blanch properly preserved his various challenges to the consent’s validity. The case turned on statutory interpretation of the transition provisions between the two acts.

Court’s Analysis and Holding

The court of appeals affirmed the dismissal, holding that the written consent remained valid despite the New Act’s implementation. The court found no language in the New Act indicating that its broad application on January 1, 2016, had the effect of invalidating previous actions taken by limited liability companies. Since the consent was properly executed under the Old Act’s two-thirds requirement in October 2015, it continued to authorize the asset sale. Additionally, the court found that Blanch failed to preserve most of his arguments challenging the consent’s validity, including claims about defective amendments, lack of notice, and invalid signatures.

Practice Implications

This decision reinforces that preservation of error remains critical in appellate practice—unpreserved arguments will be waived regardless of merit. For business litigation, the case clarifies that properly executed corporate actions under prior statutes are not automatically invalidated by subsequent legislative changes absent express retroactive language. Practitioners should carefully analyze transition provisions when new business statutes take effect and ensure all arguments are properly presented to the trial court.