Valinote v. Ballis
United States Court of Appeals for the Seventh Circuit
295 F.3d 666 (2002)
Valinote and Ballis (parties) were the only two members of a failing LLC; under the operating agreement's buy-sell clause, Ballis named a negative price for Valinote's interest, effectively having Valinote forgive a debt the LLC owed him in exchange for exiting, making Ballis sole owner. The LLC later defaulted on a bank debt both members had personally guaranteed, and the bank collected from both; Valinote sued Ballis to be reimbursed for his share of the guarantee payment, relying on an agreement provision allocating guarantee costs among "members" according to ownership share, even though Valinote was no longer a member when the bank collected. The district court held Ballis didn't have to indemnify Valinote, and Valinote appealed.
Whether members of a limited liability company may be held liable for the debts or liabilities of the company only to the extent of their investments or explicit contractual agreements.