Turner v. Andrew
413 S.W.3d 272 (2013)
Rule of Law:
A limited liability company (LLC) is a legal entity distinct from its members, and therefore, only the LLC itself has standing to bring a claim for lost business income, even if the LLC has only a single member.
Facts:
- In January 2006, Billy Andrew, Jr. formed "Billy Andrew, Jr. Trucking, LLC," of which he was the sole member.
- Andrew individually owned seven dump trucks which were operated by his LLC for its trucking business.
- On April 16, 2007, a truck driven by Coy Turner, an employee of M & W Milling Co., Inc., was involved in a collision.
- A movable auger on Turner's truck swung loose and struck a dump truck owned by Andrew.
- The damaged truck was one of the vehicles used by the LLC in the operation of its business.
Procedural Posture:
- Billy Andrew, Jr. filed suit in Adair Circuit Court (trial court) against Coy Turner, Jr. and M & W Milling Co., Inc., claiming personal property damage and lost business income.
- After Andrew repeatedly failed to comply with discovery requests, the trial court granted M & W's motion to compel.
- The trial court later granted M & W's motion in limine to exclude any evidence of Andrew's damages due to his continued failure to comply with discovery orders.
- Subsequently, the trial court granted M & W's motion for a judgment on the pleadings, dismissing Andrew's entire case.
- Andrew appealed to the Kentucky Court of Appeals.
- The Court of Appeals (intermediate appellate court) reversed the trial court's judgment, holding that Andrew, as the sole owner, could properly pursue the claims in his own name.
- M & W Milling Co., Inc. (appellant) was granted discretionary review by the Supreme Court of Kentucky (highest court).
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Issue:
Does a sole member of a limited liability company (LLC) have standing to sue in his individual capacity for business losses sustained by the LLC?
Opinions:
Majority - Justice Abramson
No. A sole member of a limited liability company (LLC) lacks standing to sue in his individual capacity for business losses sustained by the LLC. Kentucky law establishes that an LLC is a legal entity distinct from its members, regardless of the number of members. The court reasoned that statutory provisions, specifically KRS 275.010(2) and KRS 275.155, mandate that the LLC is the proper party to bring a proceeding on its own behalf. Citing Miller v. Paducah Airport Corp., the court analogized to the corporate form, holding that a sole owner and the entity are not legally interchangeable. An LLC is not a 'legal coat' that can be worn for liability protection and then discarded when a member wishes to pursue a damage claim individually. The doctrine of 'reverse piercing' the corporate veil was deemed inapplicable as it is reserved for rare instances involving strong public policy, which are not present here. Therefore, Andrew's claim for lost business income rightfully belonged to the LLC, and he could not pursue it in his personal capacity.
Analysis:
This decision solidifies the legal principle that a limited liability company is a distinct legal entity that cannot be disregarded for litigation purposes, even in the case of a single-member LLC. It reinforces the formality required to maintain the corporate/LLC structure, preventing owners from selectively ignoring the entity's separateness to their advantage. This precedent serves as a crucial reminder for practitioners to correctly identify the real party in interest in commercial litigation, as failure to name the proper entity (the LLC) as the plaintiff for business-related claims is fatal to those claims. The ruling emphasizes consistency in applying the benefits and burdens of the LLC business form.
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