Opinion ID: 2537806
Heading Depth: 1
Heading Rank: 8

Heading: Judgment Against the Members/Shareholders Individually and Joint and Several Liability

Text: [¶54] The Mossbrooks claim that the district court erred in failing to rule on its claim that Wyoming.com was the proper defendant in this action and the individual members, now shareholders, have no liability. The Mossbrooks raised the issue as an affirmative defense in their answer and raised it again over the course of the proceedings. From the record presented, it does not appear that the district court ruled on the issue although it did deny a related motion Mr. Lieberman filed for an order prohibiting the Mossbrooks from being indemnified by the company for any judgment. [6] [¶55] Generally, neither limited liability company members nor corporate shareholders are individually liable for the acts of the company or the corporation. Section 17-15-113 provides: Neither the members of a limited liability company nor the managers of a limited liability company managed by a manager or managers are liable under a judgment, decree or order of a court, or in any other manner, for a debt, obligation or liability of the limited liability company. Section 17-16-622(b) of the Wyoming Business Corporation Act provides: Unless otherwise provided in the articles of incorporation, a shareholder of a corporation is not personally liable for the acts or debts of the corporation except that he may become personally liable by reason of his own acts of conduct. [¶56] However, when evidence is presented that adherence to the fiction of the separate corporate existence would sanction a fraud or promote injustice, courts will disregard the separate identity and hold shareholders individually liable to third parties for damages caused by the corporation's acts. Miles v. CEC Homes, Inc., 753 P.2d 1021, 1023 (Wyo. 1988). We have concluded that the equitable remedy of piercing the veil is also available in the context of limited liability companies, although the factors justifying piercing the veil may be different than in the corporate setting. Kaycee Land and Livestock v. Flahive, 2002 WY 73, ¶ 4, 46 P.3d 323, 328-29 (Wyo. 2002). [¶57] Ordinarily, when a party seeks to pierce the corporate or limited liability company veil, the company is named in the complaint. See, for example, Y-O Invs., Inc. v. Emken, 2006 WY 112, 142 P.3d 1127 (Wyo. 2006); Kaycee Land and Livestock, 2002 WY 73, 46 P.3d 323; Jackson Hole Trader's, Inc. v. Joseph, 931 P.2d 244 (Wyo. 1997). Moreover, evidence must be presented showing that piercing the veil is necessary to prevent fraud or injustice. Here, the issue of piercing the veil was never raised by Mr. Lieberman or addressed by the district court and yet a judgment was entered finding the Mossbrooks individually liable to Mr. Lieberman for nearly $1,000,000. The district court entered the judgment against them individually despite finding in their favor on Mr. Lieberman's claims for breach of fiduciary dutybad faith, intentional wrongful diversion of assets and punitive damages. The district court also entered the judgment despite expressly finding that Mr. Lieberman's conduct was egregious, the Mossbrooks' conduct was not egregious, Wyoming.com was justified in terminating him and what followed was a battle of unreasonable expectations on the part of both parties concerning the economic consequences of [Mr. Lieberman's] actions.  (emphasis in original). There simply is nothing in the record to support a determination that the separate identity of Wyoming.com or the corporation should have been disregarded and the members or shareholders held individually liable. [¶58] Having reached that conclusion, we are left to decide where that leaves this case. Given its lengthy history, we are not inclined to reverse and remand for further proceedings in what already has been unnecessarily protracted litigation. W.R.C.P. 21 provides: Misjoinder of parties is not ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just. F.R.C.P. 21, which contains the same language, has been held to allow the dismissal or addition of parties to an action even after the trial has concluded and the judgment has been entered and appealed. Charles Alan Wright, Arthur R. Miller, Mary K. Kane, FEDERAL PRACTICE AND PROCEDURE: Civil, § 1688.1 (3d ed. 2001). In Mullaney v. Anderson, 342 U.S. 415, 417, 72 S. Ct. 428, 430, 96 L. Ed. 458 (1952), the Court allowed the addition of parties after the case reached the Supreme Court. The Court noted that the addition of the parties earlier would not have affected the course of the litigation and dismissing the petition and requiring the plaintiffs to start over in district court would entail needless waste and runs counter to effective judicial administration. Id. [¶59] W.R.A.P. 17.02 provides: If substitution of a party in the appellate court is necessary . . . for any reason other than death, substitution shall be effected in accordance with the procedure prescribed in Rule 17.01. (emphasis added). These rules clearly contemplate the addition and substitution of parties at any stage in the action. Adding Wyoming.com at this point prejudices no one. The course of this litigation would not have been different if Wyoming.com had been named as a defendant, as it should have been, from the beginning. Having concluded that no grounds exist for piercing the corporate veil, the members can have no individual liability for the acts of Wyoming.com. [¶60] Section 17-15-142(a) of the Wyoming Limited Liability Company Act provides in pertinent part that when a merger takes effect: (i) The separate existence of every domestic limited liability company that is a party to the merger . . . ceases; (ii) The title to all real estate and other property owned by each domestic limited liability company party to the merger is vested in the surviving . . . corporation without reversion or impairment; (iii) The surviving domestic . . . corporation obtains all liabilities of each domestic limited liability company party to the merger; (iv) A proceeding pending . . . against any domestic limited liability company party to the merger may be continued as if the merger had not occurred, or the surviving domestic . . . corporation may be substituted in the proceeding for the domestic limited liability company whose existence ceased. Pursuant to this provision, Wyoming.com, the corporation, is liable to Mr. Lieberman for the corrected judgment amount and must be added as a party defendant/appellee to this action on remand. [¶61] Our determination that the corporation is liable to Mr. Lieberman makes it unnecessary for us to address the Mossbrooks' claim that the district court improperly held them jointly and severally liable. The shareholders have no liability to Mr. Lieberman, jointly and severally or otherwise. This outcome also makes it unnecessary for us to address the Mossbrooks' claim that Michael J. Ford, individually, was not a proper defendant. Neither he nor the trust established in his name is liable to Mr. Lieberman for the corrected judgment.