311 So.3d 532
La. Ct. App.2020Background
- Mathes Brierre Architects (Mathes) contracted with Karlton/ISG (a Florida LLC formed for the Algiers Crossing development) under a 2007 architectural services agreement; members of Karlton/ISG were ISG Co. and J.S. Karlton Co. (the Members).
- Mathes performed work from 2006–2008; unpaid invoices and a later 2013 invoice together formed the claimed debt (district court found Mathes owed $944,669.23 after a deduction).
- A $600,000 promissory note and mortgage related to the Project were later released; prescription and various entity transactions occurred years after the Project stalled.
- Mathes sued in 2015 for breach of contract, invoices, and sought to hold Members personally liable (pleading alter-ego/piercing theories and alleging misrepresentations/wrongful conduct).
- After a bench trial the district court awarded damages and costs against Karlton/ISG and held the Members solidarily liable; on appeal the concurring/dissenting judge would affirm the award against the LLC but reverse the imposition of solidary liability on the Members.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LLC members may be held personally liable for debts of Karlton/ISG (piercing the veil/alter-ego) | Mathes: Members used the LLC to shield assets, diverted the Note/mortgage, made misrepresentations, and therefore should be held jointly and severally liable under equitable principles and statutory exceptions | Karlton/ISG/Members: La. R.S. 12:1320 preserves limited liability; statutory exceptions in 12:1320(D) are exclusive; Ogea controls analysis for LLC member liability | Concurrence: Affirmed judgment against Karlton/ISG but would reverse the district court's imposition of solidary liability on ISG Co. and J.S. Karlton Co., holding plaintiff did not prove statutory or equitable grounds to pierce LLC veil |
| Whether Mathes proved breach and amounts owed and whether it failed to mitigate by delaying invoicing/demand | Mathes: Invoices and agreement support the amount claimed; no unreasonable mitigation duty that required immediate litigation | Karlton/ISG: Mathes unreasonably waited (~5 years) to assert claims, so damages should be mitigated/reduced | Concurrence: District court's factual findings on amounts and mitigation were reasonable; affirmed $944,669.23 award against Karlton/ISG |
| Whether trial court's award of costs was proper | Mathes: Costs were properly taxed against defendant | Karlton/ISG: Court abused discretion in awarding $61,366.34 in costs | Concurrence: Court did not abuse discretion; affirmed award of costs against Karlton/ISG |
| Choice of law applicability to member liability (Louisiana vs. Florida law) | Mathes: Louisiana law governs (parties and court applied it) | Defendants: Foreign-LLC law (Florida) should govern; 12:1342 may point to foreign law for internal affairs | Concurrence: Parties and court applied Louisiana law and contract contained Louisiana choice; even under Florida law, La. R.S. 12:1320(D) arguments remain relevant — concurrence applies Louisiana/Ogea framework on de novo review |
Key Cases Cited
- Ogea v. Merritt, 130 So.3d 888 (La. 2013) (establishes statutory-framework/Ogea four‑factor approach for when an LLC member may be liable for a member's "negligent or wrongful act")
- Riggins v. Dixie Shoring Co., Inc., 590 So.2d 1164 (La. 1991) (jurisprudential piercing doctrine—alter ego and corporate footing doctrines and Riggins factors for disregarding corporate separateness)
- Rosell v. ESCO, 549 So.2d 840 (La. 1989) (standard on appellate review of factual findings and deference to trial court credibility determinations)
- Peacock v. Thomas, 516 U.S. 349 (U.S. 1996) (piercing the corporate veil is a means to hold persons liable on an underlying cause of action, not a standalone claim)
- Nunez v. Pinnacle Homes, 180 So.3d 285 (La. 2015) (explains legislature's intent to limit member liability under La. R.S. 12:1320 and that statutory exceptions are narrowly defined)
- Sun Drilling Prod. Corp. v. Rayborn, 798 So.2d 1141 (La. App. 4 Cir. 2001) (discusses fraud elements and need to prove intent and reliance in fraud-based claims)