LLC Act Specifically Provides Immunity from Personal Liability for an LLC’s Breach of Contract

LLC Act Specifically Provides Immunity from Personal Liability for an LLC’s Breach of Contract

In a recent decision from the Kentucky Court of Appeals, it reaffirmed the rule that the members of an LLC are not liable for its debts and obligations. In this instance, even where the member of an LLC allegedly caused it to breach an agreement to which it was a party, no personal liability attached. Pulaski Properties, Inc. v. Haney, No. 2018-CA-000341-MR, 2019 WL 5092461 (Ky. App. Oct. 11, 20).

In this case, Pulaski Properties, Inc. (“PPI”) alleged that Acton, the managing member of Lake Cumberland Investments, LLC (“LCI”) should be held personally liable for the breach of a contract between LCI and PPI. As recited in the decision of the Court of Appeals, it was alleged that “Acton effectively and legally is LCI for all purposes pertaining to the agreement with [PPI.]” (bracketed language in original) and that “[b]y failing to cause LCI to honor the agreement by the simple expedient of making the conveyance in his capacity as manager, yet personally accepting and keeping part of the consideration thereof, he should indeed be liable for breach of contract.” 2019 WL 5092461,*3. In response, the court relied upon KRS § 275.150, it affording the members, managers and other constituents and representatives of an LLC limited liability from its debts and obligations, the court ultimately holding “Thus, KRS 275.150 specifically provides immunity from personal liability for members/managers of an LLC in instances such as this.” Id., *4.

In addition, the court found that there could be no breach of contract for which Acton could be liable because the alleged agreement did not satisfy the requirements of the Statute of Frauds.