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LIABILITY OF MEMBERS OF A LIMITED LIABILITY COMPANY, PRECLUSION OF FRAUD AND NEGLIGENT MISREPRESENTATION CAUSES ACTION WHICH DUPLICATE BREACH OF CONTRACT ALLEGATIONS, AND CRITERIA FOR A RICO MAIL FRAUD CAUSE OF ACTION DISCUSSED IN SOME DEPTH.

In an action against a limited liability company alleging breach of contract and fraudulent inducement relating to the design, construction and marketing of a condominium, the Second Department included substantial discussions of, inter alia, the liability of members of limited liability companies, including the criteria for piercing the corporate veil in this context, the preclusion of fraud and negligent misrepresentation causes of action which are duplicative of breach of contract allegations, and the criteria for a RICO mail fraud cause of action. With respect to the liability of members of limited liability companies, the court explained:

 

… [A] member of a limited liability company will not be held liable for the liabilities of the company solely by reason of being a member of the company or acting in such capacity or participating in the conduct of the business of the company (see Limited Liability Company Law § 609[a]). “[M]embers of limited liability companies, such as corporate officers, may be held personally liable if they participate in the commission of a tort in furtherance of company business” … . * * *

A member of a limited liability company “cannot be held liable for the company’s obligations by virtue of his [or her] status as a member thereof” … . “[A] party may seek to hold a member of an LLC individually liable despite this statutory proscription by application of the doctrine of piercing the corporate veil” … .

To state a cause of action under the doctrine of piercing the corporate veil, the “plaintiff must allege facts that, if proved, indicate that the shareholder exercised complete domination and control over the corporation [or LLC] and abused the privilege of doing business in the corporate [or LLC] form to perpetrate a wrong or injustice'” … “Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to LLC formalities, inadequate capitalization, commingling of assets, and the personal use of LLC funds” … . Board of Mgrs. of Beacon Tower Condominium v 85 Adams St., LLC, 2016 NY Slip Op 00692, 2nd Dept 2-3-16

 

CORPORATION LAW (LIABILITY OF MEMBERS OF LIMITED LIABILITY COMPANIES)/LIMITED LIABILITY COMPANIES (LIABILITY OF MEMBERS)/PIERCING THE CORPORATE VEIL (LIMITED LIABILITY COMPANIES)/CONTRACT LAW (PRECLUSION OF DUPLICATIVE FRAUD AND MISREPRESENTATION CAUSES OF ACTION)/MAIL FRAUD (RICO PLEADING REQUIREMENTS)/RICO (CIVIL, MAIL FRAUD PLEADING REQUIREMENTS)

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