Opinion ID: 1387290
Heading Depth: 1
Heading Rank: 3

Heading: Substantive Concerns

Text: Profile is chartered in Delaware, and therefore the outcome of the case hinges on the application of that state's law. The majority misinterprets the Delaware statute such that virtually any conduct by an LLC member is immunized. This radical expansion of the LLC immunity shield is, in my view, not mandated by the statute itself, and is contrary to our precedent. The Delaware statute states only that liability may not be predicated solely on membership in an LLC. See Del.Code Ann. tit. 6, § 18-303(a) (2005)(Except as otherwise provided by this chapter, the debts, obligations and liabilities of a limited liability company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the limited liability company, and no member or manager of a limited liability company shall be obligated personally for any such debt, obligation or liability of the limited liability company solely by reason of being a member or acting as a manager of the limited liability company.) (emphasis added). The majority's opinion appears to disregard the word solely, which appears twice in the relevant statute. As we have held [i]n the absence of contrary indication, it is presumed that no word of any statute is a mere redundant expression. Each word is to be construed upon the supposition that the Legislature intended thereby to add something to the meaning of the statute. Lafayette Transp. Serv., Inc. v. Cty. of Robeson, 283 N.C. 494, 500, 196 S.E.2d 770, 774 (1973) (citations omitted). The Delaware Court of Chancery itself, when interpreting the same statute has not read it to confer the same sweeping immunity on member-managers as our Hamby opinion. The Delaware Court observed that Section 18-303(a) protects members and managers of an LLC against liability for any obligations of the LLC solely by reason of being or acting as LLC members or managers. But, [the] phrase, `solely by reason of being a member [ ] does imply that there are situations where LLC members and managers would not be shielded by this provision.'. Pepsi-Cola Bottling Co. of Salisbury, Md. v. Handy, No. 1973-S, 2000 WL 364199, at  (Del.Ch. Mar. 15, 2000) (Mem.). Other states, following Delaware's lead, have similarly interpreted the statute's plain meaning to shield LLC members from liability premised exclusively on their membership, but not from liability on the basis of their actions. See e.g., Weber v. U.S. Sterling Sec., Inc., 282 Conn. 722, 732, 924 A.2d 816, 824 (2007). Federal courts have arrived at the same conclusion. See e.g., Equipoise PM LLC v. Int'l Truck & Engine Corp., ___ F.3d ___, 2006 WL 1594077, at  (N.D.Ill. June 5, 2006) (No. 05 C 6008). Commentators have taken an identical view. See 2 R. Franklin Balotti, Jesse A. Finkelstein, Martin I. Lubaroff & Paul M. Altman, Balotti and Finkelstein's Delaware Law of Corporations and Business Organizations § 20.7 (2007); Practicing Law Inst., Organization and Operation of the Limited Liability Company: Substantive Issues 937 PLI/Corp. 149, 191 (1996). It is noteworthy that in the only two prior cases interpreting the statute, North Carolina courts have demonstrated a grasp of the key distinction between imposing liability on the basis of a member-manager's actions versus mere membership. In State ex rel. Cooper v. NCCS Loans, Inc., 174 N.C.App. 630, 624 S.E.2d 371 (2005), the Court of Appeals held that where an individual repeatedly set up business entities to evade state usury laws, the trial court was correct in looking beyond the corporate (LLC) form to the substance of the transactions in order to restrain the individuals behind conduct. The majority holding here as applied to NCCS would have effectively subordinated the state's usury laws to the corporate LLC form. In Page v. Roscoe, LLC, 128 N.C.App. 678, 686-87, 497 S.E.2d 422, 428 (1998), the only case other than NCCS construing the LLC immunity statute, our Court of Appeals upheld Rule 11 sanctions against an attorney whose pleadings against an LLC member were premised solely on the defendant's LLC membership, and not his actions. It is precisely this pivotal membership-action distinction that the majority obfuscates. Here, plaintiff noted that pursuant to undisclosed agreements between Profile and employer Terra-Mulch, Profile had undertaken certain responsibilities regarding the employer's operations, including safety. Alleged negligence in performing those operations, and not Profile's mere status as an LLC member-manager, is the basis for plaintiff's current action. Under the status versus actions scheme of immunity outlined above therefore, Profile is not entitled to the blanket immunity the majority awards it. The Court of Appeals, including the majority in this case, has recognized this distinction between status and actions, as have virtually all other jurisdictions. Strong public policy reasons favor that we follow their lead and not obliterate it. On substantive grounds therefore, I would uphold the Court of Appeals decision.