Many entrepreneurs and investors often elect to set up fictitious companies such as corporations or limited liability companies because of the many protections that such entities afford. For example, the law generally recognizes that a fictitious company, like a limited liability company (“LLC”), is distinct and separate from the individual members that belong to and manage such company. Thus, the actions taken by a LLC generally are not considered actions taken by the individual member. And, most notably, the liabilities incurred by such company generally do not befall upon the individual members.
The Nevada Supreme Court recently affirmed the such broad protections in Peter Gardner v. Henderson Water Park, 133 Nev. Adv. Op. No. 54 (August 3, 3017). In Gardner, the Nevada Supreme Court was asked to consider whether a member of a LLC is protected when someone sues the LLC for personal injuries allegedly sustained on property owned by the LLC. The plaintiffs in Gardner alleged that their son was severely injured in the wave pool at a local water park, which was owned and operated by a LLC. The plaintiffs sued the LLC and its managing members, claiming that the LLC and its members were jointly responsible. The plaintiff did not allege any individual negligence by members, but sought to make them liable because of their membership in the LLC. The Nevada Supreme Court disagreed with the plaintiffs. Answering the question posed, the Nevada Supreme Court held that members of a LLC “are not liable solely by virtue of being managing members.” Gardner, 133 Nev. Adv. Op. No. 54 at p. 4.
This important decision illustrates not only the broad benefits of doing business as a fictitious entity but may also be a cautionary tale about considering the proper parties to a lawsuit before embarking on costly litigation against the wrong parties. At Black & LoBello, we are mindful of litigation economics and work with our clients to manage costs and make informed decisions.
Maximiliano D. Couvillier III is Black & LoBello’s Managing Partner and practices in commercial and corporate matters, real estate, intellectual property, and appeals. Max focuses on maximizing his clients’ interests and pursuits. A community leader, Max serves on various Boards who seek his counsel, including being President of The Legal Aid Center of Southern Nevada.