October 17, 2017

October 16, 2017

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Nevada Supreme Court Holds Member-Managers Were Not Proper Parties To Negligence Claim Against LLC

In an opinion issued yesterday, the Nevada Supreme Court addressed the extent to which a member of a limited liability company is protected in a negligence based tort action against the LLC.  Gardner v. Henderson Water Park, LLC, 133 Nev. Adv. Op. 54 (2017).  The plaintiffs in the case are the parents of a boy who suffered severe injuries in a wave pool at a water park.  In addition to naming the LLC, the plaintiffs named its two managing members. The District Court granted summary judgment to the managing members and the parents appealed.  The Supreme Court upheld the District Court’s order in a very brief opinion by Justice Mark Gibbons.

On appeal, the plaintiffs argued that they were pursuing a direct claim against the member-managers for their own tortious conduct in negligently operating the water park.  The Supreme Court, reviewing the District Court’s order de novo, cited NRS 86.371 that provides:

Unless otherwise provided in the articles of organization or an agreement signed by the member or manager to be charged, no member or manager of any limited-liability company formed under the laws of this State is individually liable for the debts or liabilities of the company.

The Supreme Court also cited NRS 86.381 that provides:

A member of a limited-liability company is not a proper party to proceedings by or against the company, except where the object is to enforce the member’s right against or liability to the company.

Noting that these statutes to not shield members from liability for personal negligence, the Supreme Court found that the plaintiffs had failed to allege that the member-managers were personally negligent.  In particular, the Supreme Court found that the plaintiffs failed to specify how any individual act or omission by the member-manager’s contributed to their son’s injuries.  Therefore, the plaintiffs impermissibly sought to hold the member-managers liable for the negligence of the water park solely by virtue of their status as member-managers.

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Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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