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Trial Lawyers of America. October 2004.
Countryman v. Farmers Coop. Association
The Iowa Supreme Court held that the manager of a limited liability company (LLC) could be held personally liable if it participated in the company's tortious conduct while performing managerial duties.
Here, plaintiffs sued an LLC propane supplier and a farmers' cooperative for deaths and injuries caused by a gas explosion. The cooperative was a member of the LLC and provided managerial services, but the two businesses operated as separate entities and maintained separate finances. The cooperative moved for summary judgment, arguing the limited liability structure shielded it from liability for the LLC's tortious acts. Plaintiffs contended the cooperative participated in any tortious conduct through the management decisions that were made in consumer safety matters. The trial court granted the cooperative summary judgment.
Reversing, the state high court noted that in general, under the Iowa Limited Liability Company Act (ILLCA), Iowa Code Ann. §§ 49OA.601 et seq., managers of limited liability companies are not personally liable for a company's actions based solely on their positions as managers. However, they can be held personally liable if the ILLCA expressly provides for the person to be liable or the person participates in tortious conduct. The court found that the statute's imposition ofliability for tortious conduct is consistent with general agency principles that corporate officers can be liable for their torts even when committed in their capacity as officers. The court explained that agency law has long recognized that a person's status as an agent for a company confers no immunity with respect to the person's own tort liability.
The court rejected the cooperative's argument that the liability of an LLC manager for tortious conduct is limited to conduct committed outside the manager's position. This approach conflicts with the corporate model and agency principles on which the liability of LLC managers is based and is not apparent from the plain language of the statute, the court said. A manager who takes part in the commission of a tort is liable even if the manager acts on behalf of the company, and the ILLCA docs not preclude liability merely because the conduct occurs in the person's role as a manager.
The court also rejected defendant's argument that the court's approach would impose liability simply because someone is a manager, which conflicts with the statute. In the statute, the phrase "solely by reason of being a ... manager" refers to liability based on management status and does not distinguish between conduct that may be independent from the position. Therefore, it is not inconsistent to protect a manager from vicarious liability while imposing liability for participating in tortious conduct.
Copyright Association of Trial Lawyers of America Oct 2004
Provided by ProQuest Information and Learning Company. All rights Reserved
Countryman v. Farmers Coop. Association
The Iowa Supreme Court held that the manager of a limited liability company (LLC) could be held personally liable if it participated in the company's tortious conduct while performing managerial duties.
Here, plaintiffs sued an LLC propane supplier and a farmers' cooperative for deaths and injuries caused by a gas explosion. The cooperative was a member of the LLC and provided managerial services, but the two businesses operated as separate entities and maintained separate finances. The cooperative moved for summary judgment, arguing the limited liability structure shielded it from liability for the LLC's tortious acts. Plaintiffs contended the cooperative participated in any tortious conduct through the management decisions that were made in consumer safety matters. The trial court granted the cooperative summary judgment.
Reversing, the state high court noted that in general, under the Iowa Limited Liability Company Act (ILLCA), Iowa Code Ann. §§ 49OA.601 et seq., managers of limited liability companies are not personally liable for a company's actions based solely on their positions as managers. However, they can be held personally liable if the ILLCA expressly provides for the person to be liable or the person participates in tortious conduct. The court found that the statute's imposition ofliability for tortious conduct is consistent with general agency principles that corporate officers can be liable for their torts even when committed in their capacity as officers. The court explained that agency law has long recognized that a person's status as an agent for a company confers no immunity with respect to the person's own tort liability.
The court rejected the cooperative's argument that the liability of an LLC manager for tortious conduct is limited to conduct committed outside the manager's position. This approach conflicts with the corporate model and agency principles on which the liability of LLC managers is based and is not apparent from the plain language of the statute, the court said. A manager who takes part in the commission of a tort is liable even if the manager acts on behalf of the company, and the ILLCA docs not preclude liability merely because the conduct occurs in the person's role as a manager.
The court also rejected defendant's argument that the court's approach would impose liability simply because someone is a manager, which conflicts with the statute. In the statute, the phrase "solely by reason of being a ... manager" refers to liability based on management status and does not distinguish between conduct that may be independent from the position. Therefore, it is not inconsistent to protect a manager from vicarious liability while imposing liability for participating in tortious conduct.
Copyright Association of Trial Lawyers of America Oct 2004
Provided by ProQuest Information and Learning Company. All rights Reserved