978-0134004006 Chapter 39 Case

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Chapter 39

Limited Liability Companies and Limited Liability Partnerships

VI. Answers to Critical Legal Thinking Cases

39.1 Limited Liability

Yes. The plaintiffs who sued Bone are required to pay the legal fees he incurred while fighting the

plaintiffs’ lawsuit. Limited liability law provides that the owners and managers of a limited liability

company (LLC) do not have personal liability for the debts and obligations of the LLC. North Carolina

General Statutes Section 57C-3-30 provides “(a) A person who is a member or manager, or both, of a

limited liability company is not liable for the obligations of a limited liability company solely by reason

39.2 Liability of Members

Only Microhard.com, LLC is liable. Harold, Jasmine, Caesar, and Yuan, the owners Microhard.com,

LLC, are not liable. Heather, the LLC’s employee who caused the accident is personally liable to Singer,

the pedestrian she negligently injured. An LLC is liable for any loss or injury caused to anyone as a result

of a wrongful act or omission by a member, a manager, an agent, or an employee of the LLC who

39.3 Member-Managed LLC

Big Apple, LLC and Jennifer are liable to the injured pedestrian. Martin and Edsel, the other owners of

Big Apple, LLC are not personally liable. The LLC was a member-managed LLC and not a manager-

and was acting within the scope of LLC business when she caused the accident. However, Martin, and

Edsel are not personally liable for the accident because they are protected by the LLC shield from

personal liability.

39.4 Manager-Managed LLC

by Chelsea. In a member-managed LLC, all of the member-owners are agents of the LLC and can bind

the LLC to contracts. However, in this case the LLC is a manager-managed LLC, whereby only the

personally liable for that lease, however.

39.5 Duty of Loyalty

Yes, Ally is liable. Members of a member-managed LLC owe a fiduciary duty of loyalty to the LLC. This

You, LLC, she has breached her duty of loyalty to Movers & You, LLC. Ally is liable for any damages

caused to Movers & You, LLC.

39.6 Duty of Care

negligent conduct, Jonathon is not liable to the LLC for the loss caused to the LLC. However, if his

conduct was grossly negligent conduct, then he is liable to the LLC for the loss caused to the LLC. It

seems that forgetting to put out flashing signs to warn pedestrians of an extremely dangerous condition

amounts to gross negligence. If Jonathon engaged in grossly negligent conduct by not putting out the

Jonathon.

VII. Answers to Ethics Cases

39.7 Ethics Case

collected $1 million. There is still $9 million of unpaid judgment. Angela, Yoko, Cherise, and Serena, as

owner members of the LLC, are not personally liable for any of the judgment. One of the reasons for

forming and operating as an LLC is to shield the owners from personal liability. And that is what happens

here. So the injured Catherine can recover $800,000 liability insurance from Allied and can recover the

outweighs the reason for holding the owners personally liable. The ethical thing for owners of LLCs to do

is to acquire sufficient liability insurance to pay most claims. That way, injured parties will be

compensated for injuries and the owners will not be subject to personal liability.

39.8 Ethics Case

any damages her breach of loyalty causes the LLC. In this case, there is no question that Melony acted

unethically. Not only the law but also ethical principles were violated by her actions. She owed a

fiduciary duty to her co-owners to not reveal secrets to any other party. She acted unethically by

breaching this duty of trust.