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Turner v. Andrew - 413 S.W.3d 272 (Ky. 2013)

Rule:

A limited liability company is a hybrid business entity having attributes of both a corporation and a partnership. Limited liability companies are creatures of statute controlled by Ky. Rev. Stat. Ann. ch. 275. Ky. Rev. Stat. Ann. § 275.010(2) states unequivocally that a limited liability company is a legal entity distinct from its members.

Facts:

On April 16, 2007, defendant Coy Turner was driving a feed-truck owned by his employer, defendant M & W Milling, when a movable auger mounted on the feed-truck swung loose into oncoming traffic, striking and seriously damaging a dump truck owned by plaintiff Billy Andrew. The damaged truck was one of seven dump trucks owned by Andrew and operated by "Billy Andrew, Jr. Trucking, LLC." The LLC, of which Andrew was the sole member, was formed fifteen months prior to the accident. Andrew filed suit against Turner and M & W Milling (M&W) in January 2008 claiming personal property damage to the truck as well as the loss of "income derived from the use of said motor vehicle owned by [Andrew] and used in the conduct of [Andrew's] business." The LLC was not named as a plaintiff in the lawsuit.

After several months of failing to respond to discovery requests and a court-ordered request for production,  M&W filed a motion to dismiss the claim pursuant to CR 37.02(2)(c) on the basis that Andrew failed to comply with discovery requests and the order to compel. No ruling was made on the motion, nor on the two motions for summary judgment filed by M&W. About a month later, M&W filed a motion in limine to exclude any evidence of lost business income attributable to the out-of-service truck as well as any evidence of property damage to the truck, which argued that the LLC was the only party that could pursue the lost income claim as the real party in interest. The trial court granted the motion. Thereafter, M&W moved for a judgment on the pleadings pursuant to CR 12.03, arguing that no evidence can be introduced at the trial of this matter to support the entry of a judgment for monetary damages against it. The trial court granted final judgment in favor of M&W. The Court of Appeals reversed the trial court's judgment, concluding that Billy Andrew could properly pursue the lost business claim in his own name because he is the sole owner of the LLC.  Defendants Turner and M&W sought discretionary review from the Supreme Court of Kentucky.

Issue:

Could an LLC’s sole member pursue the lost business claim in his own name because he is the sole owner of the LLC?

Answer:

No.

Conclusion:

The Supreme Court of Kentucky held that the only proper party to bring suit for lost business income to the trucking business operated by the LLC was the LLC.  Ky. Rev. Stat. Ann. § 275.010(2) stated unequivocally that a limited liability company was a legal entity distinct from its members. According to the Court, the LLC and its solitary member, Billy Andrew, were not legally interchangeable. Moreover, the Court averred that an LLC was not a legal coat that one slips on to protect the owner from liability but then discards or ignores altogether when it is time to pursue a damage claim. The Court held that on remand, if it was determined that the LLC was the one conducting the trucking business on April 16, 2007, then the defendant would be entitled to summary judgment as a matter of law. TheCourt reversed the decision of the Court of Appeals in part, vacated in part, and remanded the matter to the state circuit court for additional proceedings.

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