Arizona Attorney General Tom Horne sued a Phoenix-area firearms dealer for consumer fraud in a lawsuit filed in Maricopa County Superior Court.  The defendants in the lawsuit are Lancaster Arms, LLC, owned by co-defendants Chester Durda and his wife Marsha.  The AG alleges that the LLC and its member Chester Durda defrauded consumers by failing to provide promised merchandise and services to dozens of customers between February of 2009 and September of 2011.

The Attorney General’s press release states:

“Protecting consumers is one of the most important jobs of this office,” Horne said. “Businesses such as the one named in this lawsuit cannot be allowed to make promises to customers and not deliver on those promises. The problem is made even worse when, as in this case, some customers made advance payments with the expectation that they would get either merchandise or services in return, and instead they got nothing. The legal action requests that the court order the business to make restitution, pay penalties, and prevent it from defrauding additional consumers.”

According to the complaint, Lancaster Arms claimed to consumers, some of whom worked in law enforcement and the military, and to some weapons dealers, on the internet and through personal contact by Chester Durda, that the company sold weapons, parts and accessories and that it provided weapon kit assembly services to consumers who sent their kits to the company. Additionally, Lancaster Arms represented that some of its weapons were subject to its “Limited Life Time Warranty”. The lawsuit alleges that Lancaster Arms failed to ship merchandise that consumers had paid for, failed to repair weapons under warranty, and failed to provide refunds. The lawsuit also alleges that Lancaster Arms failed to assemble weapons kits sent to it by consumers and failed to return the un-assembled kits to the consumers or to provide them with refunds. The complaint asks the court to enter an injunction prohibiting the defendants from engaging in any further unlawful acts, require the defendants to restore money and property to consumers, order the payment of civil penalties of up to $10,000 per violation, and to reimburse the State’s court costs and other related expenses.

The lesson to be learned from this lawsuit is that assuming that Mrs. Durda did not have any involvement with the LLC or the alleged unlawful activities she was named as a defendant because the plaintiff wants to be able to collect damages from her community property.  When spouses own an interest in an LLC as community property there always the risk that the non-active spouse could be named as a defendant in a lawsuit for this reason.  If this is a concern and the non-involved spouse wants to protect his or her assets from liabilities arising from the active spouse’s involvement with the LLC, then the active spouse should own all of the LLC as separate property and the non-active spouse would not own any of the LLC.

See my article called “How Do I Acquire an Ownership Interest in an Arizona LLC as Separate Property?

Read the Complaint.