Am I Personally Liable for a Construction Company’s Damages?

Introduction

Louisiana has adopted the limited liability act, which allows anyone to create a limited liability company (LLC), which if acted in accordance therewith, can completely reduce any personal exposure of its owners.

The purpose of forming an Louisiana limited liability company is to limit your liability, after all, it’s in the name!  However, the establishment of an LLC does not create immunity for its members.  Certain actions can avail an LLC member to personal liability which can lead to catastrophic consequences.

Can I Be Held Personally Liable?

The short answer is yes, but Louisiana applies limited liability protection in a very broad manner. In 2015, the Supreme Court of Louisiana heard two different arguments for why a contractor should be held personally liable for the actions of his construction LLC.  The first is that since a contractor is individually licensed he is a professional which subjects him to a higher duty in accordance with the Louisiana Revised Statutes.

The Court listed several professions which are encompassed in the professional category including some healthcare careers, architectural, accounting, and engineering professions.  Contractors were noticeably absent, and there is no indication that the legislature ever intended for licensed contractors to owe a separate duty to their customers as members of a contractor LLC.

The second basis comes for personal liability comes from LA R.S. 12:1320(D), requiring a negligent or wrongful act by the contractor rendering him individually liable.  The Supreme Court gives us four factors to consider whether an act is negligent or wrongful.

1. Whether the conduct could be fairly characterized as a traditionally recognized tort
2. Whether the conduct could be fairly characterized as a crime
3. Whether the conduct at issue was required by, or was in furtherance of the contract between the parties
4. Whether the conduct at issue was done outside the members capacity as a member

In Nunez v. Pinnacle Homes, LLC, the Supreme Court held that a contractor could not be held personally liable because poor workmanship is not sufficient to establish a negligent or wrongful act.

What Does This Mean For Me?

It is imperative that any actions taken as member of an LLC are in furtherance of the contract between the LLC and the other party.  Further, your actions must be taken within your capacity as member.

Should you have any questions or you would like to discuss this issue in further detail, please do not hesitate to contact us to schedule a free consultation.