The court in Petch v. Humble, 41,301 (La.App. 2 Cir. 8/23/06) 2006 WL 2422914, –So.2d– considered the limited scope of liability for members of a limited liability company. The plaintiffs in that case, property owners, sued a limited liability company that owned neighboring property and three members of the limited liability company. Plaintiffs claimed defendants negligently failed to obtain a stormwater permit before beginning to develop a subdivision and in failing to employ a stormwater pollution prevention plan, which allegedly resulted in damage to plaintiffs’ property.
In addressing the scope of the member’s alleged liability, the court first noted the statutory limitation of liability under LSA-R.S. 12:1320:
A. The liability of members, managers, employees, or agents, as such, of a limited liability company organized and existing under this Chapter shall at all times be determined solely and exclusively by the provisions of this Chapter.
B. 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.
C. A member, manager, employee, or agent of a limited liability company is not a proper party to a proceeding by or against a limited liability company, except when the object is to enforce such a person’s rights against or liability to the limited liability company.
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.
The court then rejected plaintiffs’ contention that because the members of the limited liability company had the authority to act on behalf of it, and it acted negligently, the members were negligent in their individual capacities. “This interpretation ultimately removes the entire limitation on liability which the entity is designed to afford and renders LSA-R.S. 12:1320 practically meaningless.” The court noted that the phrase "or other negligent or wrongful act by such person" in paragraph D of the statute must refer to acts that are either done outside one’s capacity as a member of a limited liability company or which while done in one’s capacity as a member also violates some personal duty owed by the individual to the injured party. “In other words, some duty owed by the individual defendant to the plaintiff outside his capacity as a member must have been breached.” The court dismissed plaintiffs’ claim, holding that they had made no allegations as to any specific conduct on the part of the individual defendants from which such a breach could be inferred.