J. Kent Holland, J.D.
ConstructionRisk, LLC
An individual who is a licensed contractor is not deemed a “professional” that owes an independent duty of care outside of the contractual obligations of the limited liability company (LLC) that signed a contract with a homeowner. Such an individual cannot be found personally liable for the defective work he performed through the LLC. A trial court held the individual was liable to the homeowner for constructing a new home at an insufficient elevation to satisfy permit requirements concerning flood elevations. The dispute was not over whether the homeowner could recover from the LLC, but whether she could also recover from the individual. She argued that the individual lost the protection of the limited liability afforded by an LLC because he was a professional with an independent duty to her and that he performed negligently, thereby causing her damage. The appellate court reversed the judgment and held the facts did not support piercing the corporate veil. Nunez v. Pinnacle Homes, LLC, 2015 WL 5972529 (Louisiana 2015).
The state legislature did not define the term professional as used in various statutes. But looking at the meaning of the word “professional” within the law of business entities, the court explained that construction contractors are not deemed professionals, which in Louisiana, are generally firms such as medicine, dental, accounting, chiropractic, nursing, architectural, optometry, psychology, veterinary medicine and architectural engineering professions.
The trial court held the individual contractor personally liable on the basis that he was an individually licensed contractor and not merely a member of a licensed contracting firm. This was specifically reversed by the appellate court, holding that the lower courts erred in imposing personal liability on the individually licensed contractor as a “professional.”
The four factors considered by the court in determining whether to hold a member of an LLC personally liable were the following:
“1) Whether a member’s conduct could be fairly characterized as a traditionally recognized tort; 2) whether a member’s conduct could be fairly characterized as a crime, for which a natural person, not a juridical person, could be held culpable; 3) whether the conduct at issue was required by, or was in furtherance of, a contract between the claimant and the LLC; and 4) whether the conduct at issue was done outside the member’s capacity as a member.”
On the first factor, the court found that the individual owed no duty to the homeowner outside the obligations of his contract through the LLC. A showing of poor workmanship arising out of the contract entered into by the LLC, in and for itself, is insufficient to establish a “negligent or wrongful” act. On the second factor, the court found no evidence that the actions could constitute a crime. On the third factor, the court found no evidence that the individual’s acts or failures to act did not arise in performance of the contract on behalf of the LLC. And on the fourth factor, the court found that the record established that the individual’s acts and failures to act fell within the context of his membership in the LLC and were not undertaken in a personal capacity. For these reasons, the judgment was reversed and judgment rendered for the individual contractor.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 18, No. 4 (April 2016).
Copyright 2016, ConstructionRisk, LLC