Opinion
Civil Action. No. 05-6665 Section: "I"/2.
June 7, 2006
ORDER AND REASONS
Before the Court is a motion to dismiss filed on behalf of defendant, Glenn E. Diaz, the managing member of MetalPro Industries, L.L.C., seeking dismissal of plaintiffs' claims against him individually pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, defendant's motion to dismiss is GRANTED.
Background Facts
This case arises out of business losses allegedly sustained by plaintiffs, HWB, Inc. ("HWB") and Kolo Technical, Inc. ("Kolo"), as a result of defendants' refusal to release possession of property owned by HWB. In May 2003, plaintiffs allegedly agreed to lend a machine, the Prototype Stacker, to MetalPro Industries, L.L.C. ("MetalPro"), on terms that (1) MetalPro may use the machine indefinitely and free of charge; (2) defendants must care for and preserve the machine; and (3) upon plaintiffs' request, defendants must release or return the machine in good condition to plaintiffs.In August 2005, plaintiffs requested that MetalPro release the Prototype Stacker, and plaintiffs then dispatched an agent who attempted to retrieve the Prototype Stacker from MetalPro. Plaintiffs allege that Diaz refused to release MetalPro's possession of the Prototype Stacker. As a result of such refusal, plaintiffs allege the following claims against MetalPro and Diaz: (1) patent infringement, (2) conversion, and (3) negligence and delict. Diaz, alone, moves to dismiss these claims against him on the basis that Louisiana law precludes the liability of a member of a limited liability company ("LLC") for the liabilities of the LLC.
Id. at ¶ 14.
Id. at ¶¶ 11, 13-14.
Plaintiffs allege each of these claims against both Diaz and MetalPro. Id. at ¶¶ 20-21, 31-33, 35-37. Plaintiffs also allege claims of breach of contract and breach of contract of deposit against MetalPro only. Id. at ¶¶ 25, 28.
See Rec. Doc. No. 10, defendant's motion to dismiss, pp. 1-2.
Law and Analysis
I. Standard for a Motion to Dismiss Pursuant to Rule 12(b)(6)A district court cannot dismiss a complaint, or any part of it, for failure to state a claim upon which relief can be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957); Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995). However, this Court will not look beyond the factual allegations in the pleadings to determine whether relief should be granted. See Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999). In assessing the complaint, a court must accept all well-pleaded facts in the complaint as true and liberally construe all factual allegations in the light most favorable to the plaintiff. Spivey, 197 F.3d at 774; Lowry v. Tex. AM Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). "However, '[i]n order to avoid dismissal for failure to state a claim, a plaintiff must plead specific facts, not mere conclusory allegations. . . .'" Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992) (quoting Elliott v. Foufas, 867 F.2d 877, 881 (5th Cir. 1989)) (alteration in original). "[T]he complaint must contain either direct allegations on every material point necessary to sustain a recovery . . . or contain allegations from which an inference fairly may be drawn that evidence on these material points will be introduced at trial." Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995) (internal quotation and citation omitted). Accordingly, "[d]ismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief." Id. (internal quotation and citation omitted); Blackburn, 42 F.3d at 931 (internal quotation and citation omitted).
II. Individual Liability of a Member-Manager of a Limited Liability Company
Louisiana limited liability company law provides that "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." La.Rev.Stat. Ann. § 12:1320(B) (West 2006). However, the language "in such capacity" implies that the law may not protect an LLC member against personal liability for his own tortious conduct. See 8 GLENN G. MORRIS WENDELL H. HOLMES, LOUISIANA CIVIL LAW TREATISE, Business Organizations § 44.06 (2005). Indeed, the statute provides such an exception, allowing individual liability of "a member, manager, employee, or agent of a limited liability company [on the basis of] fraud[,] . . . breach of professional duty[,] or other negligent or wrongful act. . . ." La.Rev.Stat. Ann. § 12:1320(D).
La.Rev.Stat. Ann. § 12:1320 provides:
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 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.
In a leading case, a Louisiana appeals court held that a "wrongful act" per § 12:1320(D) must, so as not to eliminate the veil of protection afforded to the members of an LLC, be construed as referring only "to acts done outside one's capacity as a member, manager, employee, or agent of the limited liability company." Curole v. Ochsner Clinic, L.L.C., 811 So. 2d 92, 97 (La.App. 4th Cir. 2002) (finding plaintiff's allegations against an individual officer of an LLC insufficient to support a finding of liability since plaintiff did not set forth facts showing that the individual acted outside of his capacity as an officer of the LLC). Accordingly, a member of an LLC may be liable for his individual negligent or wrongful conduct only if such conduct is done outside of his capacity as a member of the LLC. Curole, 811 So. 2d at 97.
The Curole court's interpretation of § 12:1320(D) comports with the purpose of the law, as stated by Morris and Holmes, that "[t]he statute seems designed to say that LLC participants . . . are not supposed to be held liable in connection with an LLC's operations, no matter how the plaintiff's lawyer [presents the facts]." 8 MORRIS HOLMES, LOUISIANA CIVIL LAW TREATISE, Business Organizations § 44.06 (2005).
Accepting all facts in plaintiffs' complaint as true and construing all factual allegations in the light most favorable to the plaintiffs, this Court cannot conclude that plaintiffs have alleged sufficient facts to support their claims against Diaz. Plaintiffs' complaint does not directly allege facts that Diaz acted outside of his capacity as managing member of MetalPro; in fact, plaintiffs (1) explicitly state that they dealt with Diaz in his capacity as a managing member of MetalPro, and (2) imply that Diaz was authorized to use the Prototype Stacker in the same capacity as was MetalPro. Furthermore, the claims which plaintiffs allege against Diaz arise from acts which plaintiffs attribute indiscriminately to "MetalPro and Diaz" or "Diaz and MetalPro" — implying that the parties acted together and failing to suggest how Diaz acted in a capacity exceeding that of MetalPro. Likewise, the claim of patent infringement is founded on plaintiffs' information and belief that both "MetalPro and Diaz" intend to use or sell the machine and does not suggest that Diaz intended to act outside the capacity of his position as a managing member of MetalPro. Accordingly, plaintiffs allege claims against Diaz in a manner that does not create an inference that plaintiffs intend to introduce evidence that Diaz acted outside of his capacity as a managing member of MetalPro.
Id. at ¶ 11.
Id. at ¶ 12.
Id. at ¶¶ 20-21, 31-33, 35-37.
Id. at ¶¶ 20-21.
Plaintiffs broadly argue that Diaz is "liable in his individual capacity for his individual infringing conduct and his individual tortious conduct." Although plaintiffs are correct in asserting that § 12:1320(D) allows a member of an LLC to be liable in an individual capacity, plaintiffs' conclusion that "individual conduct" necessarily establishes individual liability does not follow from § 12:1320(D). In order to establish liability in an individual capacity, the individual's negligent or wrongful conduct must be performed outside of that individual's capacity as a member of the LLC. 811 So. 2d at 97.
See Rec. Doc. No. 13, plaintiffs' opposition memorandum, p. 3 (emphasis in original).
Plaintiffs seek to distinguish their case from Curole on the basis that the plaintiff in Curole attempted to "pierce the corporate veil" of the defendant LLC, whereas HWB and Kolo do not. While it is true that the defendant in Curole attempted (unsuccessfully) to pierce the LLC veil, this fact is irrelevant to the Court's holding that § 12:1320(D) requires an individual act outside of one's capacity as a member of an LLC. 811 So. 2d at 96-97 (stating that § 12:1320(D) is an inherent limitation of the "veil," not a provision which allows the "veil" to be pierced).
Based on the foregoing reasons, plaintiffs have not alleged facts sufficient to support a finding or fair inference that Diaz acted outside of his capacity as a managing member of MetalPro in a manner that subjects him to liability in an individual capacity pursuant to § 12:1320(D). Construing the complaint broadly and in favor of plaintiffs, the Court concludes that dismissal of plaintiffs' claims against Diaz individually is proper. Accordingly,
The Court notes, but does not address substantively, that § 12:1320(C) may provide an independent basis for dismissing plaintiffs' claims against Diaz, even if plaintiffs had alleged that Diaz acted outside of his capacity as a member of MetalPro. See La.Rev.Stat. Ann. § 12:1320(C); 8 MORRIS HOLMES, LOUISIANA CIVIL LAW TREATISE, Business Organizations, § 44.06 (stating that § 12:1320(C) precludes bringing claims against an LLC and any of its members in a single lawsuit).
IT IS ORDERED that plaintiffs' claims against defendant, Glenn E. Diaz, are DISMISSED for failure to state a claim upon which relief can be granted.