Court Opinion

ID: 9614328
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:24:24.753627+00
Date Added: 2024-06-11T18:03:35.191211
License: Public Domain

NEWBY, Justice.
This case presents the issue of whether the exclusivity provision of the Workers’ Compensation Act protects the member-manager of a limited liability company (“LLC”) with respect to an employee’s injuries arising out of employment with the LLC. We hold that the exclusivity provision applies when a member-manager is conducting the business of an employer LLC. Accordingly, we reverse the Court of Appeals.
*632I. BACKGROUND
This action arises from injuries sustained by plaintiff Lennie Hamby (“Hamby”) while working for defendant Terra-Mulch Products, L.L.C. (“Terra-Mulch”). Hamby was hurt when he fell into an auger pit while processing wood chips at Terra-Mulch’s plant in Conover, North Carolina. Hamby and his wife (“plaintiffs”) sued Terra-Mulch, Profile Products, L.L.C. (“Profile”), Roy D. Hoffman (“Hoffman”), and Electric Service Group, Inc. (“ESG”).
Plaintiffs allege ESG was negligent in its performance of contracted electrical work, rendering certain safety equipment inoperable. Profile, Terra-Mulch, and Hoffman filed cross-claims against ESG alleging breach of contract and breach of warranty and seeking contribution in the event plaintiffs recovered damages.
Plaintiffs allege Hoffman, a plant manager and Hamby’s co-employee, “breached his duty of care” by “engag[ing] in misconduct which was willful and wanton” and “demonstrat[ing] a manifest indifference to and reckless disregard for the rights and safety” of the plant workers, directly and proximately causing Hamby’s injury.
In their complaint, plaintiffs describe Terra-Mulch as “a wholly-owned subsidiary of Profile Products” and assert that “Profile Products controls and directs Terra-Mulch with respect to operation of the business” and “dominates and controls Defendant Terra-Mulch and is the alter ego of Defendant Terra-Mulch.” Plaintiffs allege that Profile and Terra-Mulch collectively failed to provide a safe work site for the inherently dangerous work performed by Hamby and that they thus “engaged in misconduct which was grossly negligent, willful and wanton, and substantially certain to lead to death or serious injury with respect to operation of the plant.”
Pursuant to Rule 56 of the North Carolina Rules of Civil Procedure, ESG moved for summary judgment on all claims and cross-claims. Profile, Terra-Mulch, and Hoffman also moved for summary judgment on all claims asserted against them on grounds that plaintiffs’ exclusive remedy is for workers’ compensation benefits under Chapter 97 of the North Carolina General Statutes and thus the North Carolina Industrial Commission has exclusive jurisdiction over the claims at issue. In support of their motion, these defendants submitted, inter alia, the affidavit of Stephen Ade, Vice President and Chief Financial Officer for Profile, in which he stated: “Terra-Mulch Products, L.L.C. has at all relevant times been a limited liability com*633pany the sole member and manager of which has been Profile Products, L.L.C.” The “Single Member Operating Agreement of Terra-Mulch Products, LLC,” dated 24 August 1999 and adopted by Profile, designates Profile as the “sole member” of Terra-Mulch and further states, under the paragraph labeled “Management”: “All decisions relating to the management, conduct and control of the business of the Company shall be made by the Member.”
On 6 June 2005, the trial court heard arguments on all defendants’ summary judgment motions. By orders filed on 23 June 2005, the trial court granted summary judgment for Terra-Mulch and Hoffman, but denied summary judgment for Profile and ESG. Profile appealed to the Court of Appeals, which, in a divided opinion, dismissed Profile’s appeal as interlocutory because Profile “failed to show a substantial interest which would be lost if this appeal is dismissed.” Hamby v. Profile Prods., L.L.C., 179 N.C. App. 151, 158, 632 S.E.2d 804, 809 (2006). Specifically, the majority found that plaintiffs were actually alleging a gross negligence claim based on Woodson v. Rowland, 329 N.C. 330, 407 S.E.2d 222 (1991) against employer Terra-Mulch; a willful, wanton, and reckless negligence claim based on Pleasant v. Johnson, 312 N.C. 710, 325 S.E.2d 244 (1985) against co-employee Hoffman; and an ordinary negligence claim against “third party” Profile. Hamby, 179 N.C. App. at 157, 632 S.E.2d at 808. Because the claims were different as to each defendant, the majority concluded that there was no risk of inconsistent verdicts. Id. The dissent contended that “[a]s the sole member-manager of Terra-Mulch, Profile could only be found liable to plaintiffs in the superior court under a Woodson claim, which plaintiffs acknowledged does not exist” and thus the exclusivity provision of the Workers’ Compensation Act protected Profile. Id. at 165, 632 S.E.2d at 813 (Tyson, J., dissenting). As such, the dissent would have allowed the interlocutory appeal and reversed the trial court’s denial of Profile’s motion for summary judgment. Id. at 165-66, 632 S.E.2d at 813.
II. ANALYSIS
Profile’s appeal from the trial court’s denial of its motion for summary judgment is interlocutory because the trial court’s order “does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy.” Veazey v. City of Durham, 231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950). An interlocutory order is immediately appealable if the trial court certifies that: (1) the order represents a final judgment as to one or more claims in a multiple claim lawsuit or one or more parties in a multi*634party lawsuit, and (2) there is no just reason to delay the appeal. N.C.G.S. § 1A-1, Rule 54(b) (2005). Here, the trial court did not certify this appeal for review. Absent a Rule 54(b) certification, an interlocutory order may be reviewed if it will injuriously affect a substantial right unless corrected before entry of a final judgment. Harris v. Matthews, 361 N.C. 265, 269, 643 S.E.2d 566, 569 (2007) (citing Goldston v. Am. Motors Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990)).
This Court has recognized that a substantial right is affected if the trial court’s order granting summary judgment to some, but not all, defendants creates the possibility of separate trials involving the same issues which could lead to inconsistent verdicts. See Bernick v. Jurden, 306 N.C. 435, 439, 293 S.E.2d 405, 408 (1982). Profile argues that if the case continues without its appeal being heard, plaintiffs’ claims against Terra-Mulch will proceed before the Industrial Commission while plaintiffs’ claims against Profile will proceed in civil court, even though the facts and issues before each tribunal would be the same. Specifically, Profile argues that its liability is inseparable from that of Terra-Mulch because Profile was conducting Terra-Mulch’s business. Plaintiffs assert, and the Court of Appeals agreed, that the issues in each proceeding would be different because plaintiffs alleged different claims against Terra-Mulch and Profile: gross negligence as to the former and ordinary negligence as to the latter.
Preliminarily, we note that plaintiffs did not cross-assign error to the trial court’s grant of summary judgment for Terra-Mulch on grounds that the exclusive remedy plaintiffs have against Terra-Mulch is under the Workers’ Compensation Act. Plaintiffs’ complaint, amended three times, asserts all claims against Terra-Mulch and Profile jointly, and none of these claims allege ordinary negligence as to those defendants. Before the trial court, the Court of Appeals, and this Court, plaintiffs have argued that Profile’s liability is based on ordinary negligence, not gross negligence. The pivotal question presented by this case is whether, as a matter of law, plaintiffs are able to assert an ordinary negligence claim in civil court against Profile, the member-manager of the employer Terra-Mulch. To answer that question and, in so doing, determine whether the trial court’s order creates the risk of inconsistent verdicts, we must decide whether Profile, like Terra-Mulch, is entitled to the protection of the exclusivity provision of Chapter 97.
*635The concept of exclusivity is found in two sections of the Workers’ Compensation Act. N.C.G.S. § 97-9 requires employers to secure payment of compensation to their employees in accordance with the Act and states: “[Wjhile such security remains in force, [the employer] or those conducting his business shall only be liable to any employee for personal injury or death by accident to the extent and in the manner herein specified.” N.C.G.S. § 97-9 (2005). A subsequent section of Chapter 97 specifically excludes other rights and remedies against the employer:
If the employee and the employer are subject to and have complied with the provisions of this Article, then the rights and remedies herein granted to the employee, his dependents, next of kin, or personal representative shall exclude all other rights and remedies of the employee, his dependents, next of kin, or representative as against the employer at common law or otherwise on account of such injury or death.
Id. § 97-10.1 (2005). In discussing the exclusivity provision of Chapter 97, this Court has explained:
[T]he North Carolina Workers’ Compensation Act was created to ensure that injured employees receive sure and certain recovery for their work-related injuries without having to prove negligence on the part of the employer or defend against charges of contributory negligence. See, e.g., Pleasant v. Johnson, 312 N.C. 710, 712, 325 S.E.2d 244, 246-47 (1985). In exchange for these “limited but assured benefits,” the employee is generally barred from suing the employer for potentially larger damages in civil negligence actions and is instead limited exclusively to those remedies set forth in the Act. Id.; Woodson, 329 N.C. at 338, 407 S.E.2d at 227.
Whitaker v. Town of Scotland Neck, 357 N.C. 552, 556, 597 S.E.2d 665, 667 (2003).
By its plain language, N.C.G.S. § 97-9 extends exclusivity protection beyond the employer to “those conducting [the employer’s] business.” N.C.G.S. § 97-9. We have noted that this phrase should be liberally construed and that “[o]ne must be deemed to be conducting his employer’s business, within the meaning of this statute, whenever he, himself, is acting within the course of his employment, as that term is used in the Workmen’s Compensation Act.” Altman v. Sanders, 267 N.C. 158, 161, 148 S.E.2d 21, 24 (1966) (citing Essick v. City of *636Lexington, 232 N.C. 200, 60 S.E.2d 106 (1950)). Previously, this Court has found certain individuals and entities, though distinct from the employer, still within the scope of the Act’s exclusivity provision. See, e.g., Woodson, 329 N.C. 330, 407 S.E.2d 222 (sole shareholder and chief executive officer of the corporate employer); Abernathy v. Consol. Freightways Corp., 321 N.C. 236, 362 S.E.2d 559 (1987) (injured worker’s co-employees); Bryant v. Dougherty, 267 N.C. 545, 148 S.E.2d 548 (1966) (employer’s workers’ compensation insurance carrier); McNair v. Ward, 240 N.C. 330, 82 S.E.2d 85 (1954) (employer’s general manager); Essick v. City of Lexington, 232 N.C. 200, 60 S.E.2d 106 (1950) (treasurer and superintendent of the employer’s plant).
The decisive question then, whether Profile was conducting the business of Terra-Mulch, requires us to consider the nature of a limited liability company (“LLC”) as a business entity and the role of its member-manager. An LLC is a “statutory form of business organization . . . that combines characteristics of business corporations and partnerships.” Russell M. Robinson, II, Robinson on North Carolina Corporate Law § 34.01, at 34-2 (rev. 7th ed. 2006) [hereinafter Robinson]. Similar to statutes enacted in other states, the North Carolina Limited Liability Company Act provides for the formation of a business entity combining the limited liability of a corporation and the more simplified taxation model of a partnership. Id. § 34.01, at 34-2 to -3. These state laws provide default rules, most of which can be varied by the parties forming an LLC. Id. As such, the “LLC is primarily a creature of contract,” allowing for great flexibility in its organization. Id. § 34.01, at 34-3. However, as its name implies, limited liability of the entity’s owners, often referred to as “members,” is a crucial characteristic of the LLC form, giving members the same limited liability as corporate shareholders. Id. § 34.03[3], at 34-15. Furthermore, LLC member-managers have authority comparable to corporate directors and officers combined. Id. § 34.04, at 34-18. As a corporation acts through its officers and directors, so an LLC acts through its member-managers, which can be natural persons or business entities. See Del. Code Ann. tit. 6, §§ 18-101(10), (11), (12), 18-402 (2005); N.C.G.S. §§ 57C-1-03(13), (14), (17), 57C-3-20 (2005).
Both Profile and Terra-Mulch are LLCs formed under Delaware law. The North Carolina LLC Act states that the liability of a foreign LLC’s managers and members is governed by the laws of the state under which the LLC was formed. N.C.G.S. § 57C-7-01 (2005). Under-Terra-Mulch’s operating agreement, Profile is its sole member and is *637exclusively charged with management of Terra-Mulch’s business. As such, the liability of Profile in its role as Terra-Mulch’s member-manager is governed by Delaware law.
The Delaware Limited Liability Company Act is similar to North Carolina’s LLC statute. It vests management of an LLC in its managers. Del. Code Ann. tit. 6, § 18-402; accord N.C.G.S. § 57C-3-20(b). In turn, “each member and manager has the authority to bind the [LLC].” Del. Code Ann. tit. 6, § 18-402; accord N.C.G.S. § 57C-3-23 (2005) (“[T]he act of every manager ... for apparently carrying on in the usual way the business of the limited liability company of which he is a manager[] binds the [LLC]. . . .”). Under Delaware law, the third-party liability of LLC member-managers is as follows:
(a) 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 Lability of the limited liability .company solely by reason of being a member or acting as a manager of the limited liability company.
(b) Notwithstanding the provisions of subsection (a) of this section, under a limited liability company agreement or under another agreement, a member or manager may agree to be obligated personally for any or all of the debts, obligations and liabilities of the limited liability company.
Del. Code Ann. tit. 6, § 18-303 (2005); accord N.C.G.S. § 57C-3-30(a) (2005).1
*638Under these statutes, absent an agreement to the contrary, member-managers are specifically shielded from liability when acting as LLC managers. Thus, when a member-manager acts in its managerial capacity, it acts for the LLC, and obligations incurred while acting in that capacity are those of the LLC. Accordingly, when a member-manager is managing the LLC’s business, its liability is inseparable from that of the LLC.
In the instant case, Terra-Mulch’s operating agreement vests full managerial powers in its member-manager Profile and does not alter Profile’s limited liability. Thus, under the applicable law and agreement, Profile manages Terra-Mulch’s business with limited liability for actions it takes as manager. Plaintiffs do not appear to aver anything other than that Profile managed Terra-Mulch. In their complaint, plaintiffs allege that Profile “controlled] and directed]” the business affairs of Terra-Mulch and do not distinguish their allegations against, nor the actions of, Terra-Mulch and Profile, claiming both were grossly negligent and caused Hamby’s workplace injury. Plaintiffs now argue that Profile should be treated as a third party, liable for its ordinary negligence in managing Terra-Mulch’s safety program. However, Profile’s management of this part of Terra-Mulch’s business is no different from its handling of other aspects of Terra-Mulch’s business. Indeed, maintenance of a safe workplace is a duty of every employer, see, e.g., N.C.G.S. § 95-129(l)-(2) (2005). Finally, while plaintiffs assert that Terra-Mulch is a wholly-owned subsidiary of Profile, this matter does not affect our analysis. By their nature, members of an LLC own the LLC. See, e.g., Robinson § 34.03[1], at 34-10. Profile’s status as owner of Terra-Mulch does not change the fact that it manages Terra-Mulch, and is thereby conducting Terra-Mulch’s business. In summary, plaintiffs’ forecast of evidence shows that Profile did nothing other than conduct Terra-Mulch’s business within the meaning of the pertinent statutes.
In addition to our statutory analysis, we find support in our case law for the conclusion that Profile was conducting Terra-Mulch’s business. As noted, we have recognized that the exclusivity protection under Chapter 97 extends to entities other than the employer. Specifically, we have found that exclusivity applies to officers of a corporation. See Woodson, 329 N.C. at 347-48, 407 S.E.2d at 232-33. In Woodson, the plaintiff sought to recover from the president and sole shareholder of her corporate employer in his individual capacity. Id. at 347, 407 S.E.2d at 232. We concluded that since the president and sole shareholder “was acting in furtherance of corpo*639rate business,... any individual liability on his part must be based on the same standard as that applied to the corporation.” Id.
We find the analysis of Woodson equally applicable to a member-manager of an LLC in this context. As one conducting the employer’s business and able to bind the employer, the liability of a member-manager is the same as that of the LLC employer it manages. As a final observation, we note that the trial court granted summary judgment in favor of Terra-Mulch employee Hoffman as to plaintiffs’ Pleasant claim against him. Just as Hoffman as an individual was conducting his employer’s business, Profile as a business entity was doing the same and is entitled to the protection of the Workers’ Compensation Act’s exclusivity provision.
III. DISPOSITION
For the reasons stated, we hold that, as the member-manager of Hamby’s émployer Terra-Mulch Products, L.L.C., Profile was “conducting [the employer’s] business” within the meaning of the Workers’ Compensation Act and is thus entitled to the exclusivity provided by statute. We find that the trial court’s interlocutory order denying summary judgment for Profile is reviewable because Profile’s liability for actions taken while managing Terra-Mulch is inseparable from the liability of Terra-Mulch, and thus the trial court’s denial of summary judgment for Profile while granting summary judgment for Terra-Mulch creates a risk of inconsistent verdicts. Accordingly, we reverse the Court of Appeals’ dismissal of Profile’s appeal. We further conclude the trial court erred in denying Profile’s motion for summary judgment because the denial was premised on plaintiffs’ assertion of a third-party ordinary negligence claim against Profile, a claim that, as a matter of law, plaintiffs could not bring against Profile. Therefore, we remand this case to the Court of Appeals for further remand to the trial court for entry of summary judgment in favor of Profile.
REVERSED AND REMANDED.
Justice HUDSON did not participate in the consideration or decision of this case.

. North Carolina’s third-party liability statute, N.C.G.S. § 57C-3-30(a), is substantially similar to that of Delaware, Del. Code Ann. tit. 6, § 18-303(a). Both statutes state that members or managers cannot be held liable for the obligations of an LLC “solely by reason of’ being members or managers or participating in management of an LLC. Del. Code Ann. tit. 6, § 18-303(a); N.C.G.S. § 57C-3-30(a). The North Carolina statute also states that members .or managers may be held personally liable for their “own acts or conduct.” See N.C.G.S. § 57C-3-30(a). However, this language appears to simply clarify the earlier principle: the liability of members or managers is not limited when they act outside the scope of managing the LLC. For example,
personal guaranties executed by LLC members or managers are binding[,] ... a member or manager can be a co-maker of an LLC obligation!,] . . . [and] a member or manager charged with collecting and paying over income tax withholding and other so-called “trust fund taxes” may be held liable for the failure to do so.
H. Bryan Ives, HI, North Carolina Limited Liability Companies 93 (1994).