In an abominable decision that better be overturned quickly, the Second Circuit Court of Appeal of Louisiana affirmed a trial court's conclusion that a contractor, John Cash, who owned an LLC was personally liable for the faulty construction of a "water feature" on the lawn of an art center because he personally designed and helped to install the feature. It is not clear from the opinion if Cash is the sole owner of the LLC or how much work he personally did on the project; the opinion makes references to a supervisor and other employees on the job site.
The court's conclusion was not based on an alter ego theory or any traditional piercing factors or even on the basis that it was necessary to avoid a fraud or injustice. It was based on the fact that Cash "was engaged in his profession while building the water feature and was not acting solely in his capacity as a member of the limited liability company."
Louisiana Statutes Annotated Section 12:1320(B) says "Except as otherwise specifically set forth in this Chapter, no member, manager, employee, or agent of a limited liability company is liable in such capacity for a debt, obligation, or liability of the limited liability company."
That sounds fair enough. Now read LSA Section 12:1320(D): Nothing in this Chapter shall be construed as being in derogation of any rights which any person may by law have against a member, manager, employee, or agent of a limited liability company because of any fraud practiced upon him, because of any breach of professional duty or other negligent or wrongful act by such person, or in derogation of any right which the limited liability company may have against any such person because of any fraud practiced upon it by him.
Again, not a surprise if "professional" means a doctor, a lawyer, an architect or any of the other generally understood professions. But in this case, Cash was "a licensed horticulturist, landscape contractor and irrigator."
The court of appeals concluded that Cash was "engaged in his profession" and therefore personally liable under the exception created in 12:1230(D). The dissenting judge saw it differently. Concerned that the majority opinion might destroy the liability shield. This case was a breach of contract claim against the LLC to whom Cash owed a duty, not a tort claim against him personally.
In a nutshell, the majority saw the case as a tort claim (negligence) and the dissenter viewed the case as a breach of contract of claim (failure to satisfy contract). What do you want to bet the LLC has no assets?
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