April 02, 2018

MONTH-IN-BRIEF: Corporations, LLCs & Partnerships

Lawrence A. Goldman, Tarik Haskins

Limited Liability Companies

Texas Supreme Court Holds Member/Manager of an LLC Personally Liable for a State Regulatory Violation

By Elizabeth S. Miller, Baylor

In State v. Morello, the State of Texas sued an individual member/manager of a limited liability company for violations of the Texas Water Code based on the individual’s role in the LLC’s failure to satisfy the compliance plan accompanying its hazardous waste permit. The court of appeals relied on the liability protection provided to members and managers of LLCs under the Texas Business Organizations Code and concluded that the State had not shown that the alleged failures to satisfy the compliance plan constituted the type of “tortious or fraudulent” acts for which corporate officers can be held personally liable when they participate in or perform such acts as agents of a corporation. The supreme court acknowledged the liability protection provided to members and managers of LLCs under the Texas LLC statute but stated that the individual was personally liable based on both the language of the Texas Water Code and the individual’s own actions, which subjected the individual to liability regardless of whether the individual was acting as an agent of the LLC.

Tarik Haskins

Partner; Morris, Nichols, Arsht & Tunnell LLP

Tarik is a partner in the Commercial Law Counseling Group. His practice covers a range of commercial transactions including mergers and acquisitions, secured financings, joint ventures, and business counseling.

Lawrence A. Goldman

Counsel, Gibbons P.C.

Larry, a member of the Corporate Department of Gibbons P.C., counsels middle market and smaller public company clients on a broad array of corporate and transactional matters, focusing on mergers and acquisitions (domestic and cross-border); capital formation and finance; governance; private placements and securities law compliance; distressed business restructuring and the corporate aspects of bankruptcy reorganization; and the organization and governance of joint ventures. He has substantial experience representing audit committees and other special board committees in corporate governance and internal investigation matters. He is a frequent speaker nationally on corporate matters, with a particular emphasis on the organization and operation of businesses as limited liability companies or other alternative entities. He is the author of The New Jersey Limited Liability Company Forms and Practice Manual and has been engaged as an expert witness on alternative entity governance and other corporate issues in litigation arising from transactional matters. Larry is a graduate of Colgate University, Boston University School of Law, and New York University School of Law (LL.M Taxation).