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.