615 B.R. 449
Bankr. W.D. La.2020Background:
- Redguard manufactured blast‑resistant buildings and contracted with ISM (an LLC owned by Micah Areno) as a dealer; Areno signed dealership agreements on ISM’s behalf.
- ISM stopped operations in 2016 owing Redguard $351,257.25 for unpaid rentals under a dealership/lease agreement.
- Redguard filed an adversary proceeding in Areno’s Chapter 7 bankruptcy seeking to hold Areno personally liable (and the Debt nondischargeable under §§ 523(a)(4), (a)(6)) by alleging alter‑ego/veil‑piercing and embezzlement.
- Areno moved for summary judgment, arguing Louisiana law (La. R.S. § 12:1320) limits member liability to the statute’s enumerated exceptions and therefore common‑law veil‑piercing doctrines cannot apply to LLCs.
- The bankruptcy court made an Erie prediction: it concluded Ogea and Nunez do not abrogate veil‑piercing for LLCs, noted Louisiana courts of appeal and treatises endorse applying corporate veil‑piercing principles to LLCs, and denied Areno’s motion because factual disputes remain.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alter‑ego/piercing doctrines apply to LLCs so a member can be held personally liable for company debts | Yes — Redguard: veil‑piercing applies to LLCs; Areno used ISM as an alter ego and diverted funds, supporting personal liability and nondischargeability | No — Areno: La. R.S. §12:1320(B),(D) provides the exclusive, narrowly construed exceptions (fraud, breach of professional duty, negligent/wrongful act); common‑law veil‑piercing is displaced | Denied MSJ. Court predicted Louisiana Supreme Court would allow veil‑piercing doctrines to apply to LLCs; Ogea/Nunez do not foreclose doctrine; factual issues preclude summary judgment |
Key Cases Cited
- Ogea v. Merritt, 130 So. 3d 888 (La. 2013) (interpreted La. R.S. §12:1320, reading limited liability as a presumption with statutory exceptions and noting courts may pierce an LLC’s veil in appropriate circumstances)
- Nunez v. Pinnacle Homes, LLC, 180 So. 3d 285 (La. 2015) (applied Ogea and clarified the ‘‘professional’’ exception; upheld narrow construction of statutory exceptions)
- Riggins v. Dixie Shoring Co., Inc., 590 So. 2d 1164 (La. 1991) (articulated Louisiana corporate veil‑piercing/alter‑ego doctrine and factors to consider)
- Charming Charlie, Inc. v. Perkins Rowe Assocs., L.L.C., 97 So. 3d 595 (La. App. 1 Cir. 2012) (held corporate veil‑piercing principles apply to LLCs and articulated the alter‑ego/corporate‑footing tests)
- An Erny Girl LLC v. BCNO 4 LLC, 257 So. 3d 212 (La. App. 4 Cir. 2018) (post‑Ogea appellate decision applying veil‑piercing to an LLC and citing Ogea)