Nevada Supreme Court Addresses Limited Liability of LLC Members; They Really Have It

Nevada Supreme Court Addresses Limited Liability of LLC Members; They Really Have It

      In a recent decision from the Nevada Supreme Court, it considered the argument that the two members of an LLC that operated a water park at which the plaintiff had been injured should, potentially, be liable to that plaintiff. Based upon the limited liability provision of the Nevada LLC Act, that assertion was rejected. Gardner v. Henderson Water Park, LLC, No. 71652, 2017 Nev. LEXIS 72, 2017 WL 3309660 (Nev. Aug. 3, 2017).

      Henderson Water Park LLC operated the Cowabunga Bay Water Park in Nevada. Henderson Water Park was in turn owned by West Coast Water Parks, LLC and Double Ott Water Holdings, LLC (collectively the “member-LLCs”). After the plaintiff’s child was injured at the park, his parents brought suit against both Henderson Water Park and the member-LLCs, alleging negligence claims against the members “because of the Water Park’s inadequate staffing of lifeguards.” The member-LLCs moved for summary judgment on the basis that they were not proper parties to the action, which motion was granted. The Gardeners then brought this appeal. As characterized by the Supreme Court:

[T]he Gardeners argue that the District Court erred in concluding that [the Nevada LLC Act] shield[s] the member-LLCs from suit because the Gardeners seek to pursue a direct claim against the member-LLCs for the member-LLCs’ own tortious conduct in negligently operating the waterpark.

      That assertion the Nevada Supreme Court would reject. The court began its analysis with:

Members of an LLC enjoy the benefit of limited liability, which refers to the fact that a member is not personally responsible for the LLC’s liabilities solely by virtue of being a member. See 1 Larry E. Ribstein & Robert R. Keatinge, Ribstein & Keatinge on Limited Liability Companies § 1.5 (2016).

      The court went on to note that while a member is not protected from responsibility for their own negligence, the plaintiffs had failed to identify any duty owed to the plaintiffs by the members. “However, the Gardeners do not allege any conduct by the member-LLCs that is separate and apart from the challenged conduct of the Water Park – i.e., the Gardeners do not specify how any individual act or omission by the member-LLCs contributed to L.G.’s injuries.” In consequence:

[T]he Gardners impermissibly seek to hold the member-LLCs liable for the alleged negligence of the Water Park solely by virtue of the member-LLCs being managing members of the Water Park.

      On that basis, the decision of the trial court granting summary judgment was affirmed.