Cortez v. Nacco Material Handling Group

Supreme Court of Oregon · 2014 · Corporations

CorporationsLLC member liabilityEmployer's Liability LawWorkers' compensation exclusive remedyORS 63.165ORS 656.018ORS 654.305LLC

Facts

Plaintiff worked for Sun Studs, LLC, a lumber mill whose sole member and managing member was Swanson Group, Inc. Swanson set general policies, supplied a safety manual template, delegated day-to-day safety responsibility to Sun Studs' mill manager and HR director, and retained oversight authority, including authority to require corrective action if safety violations were observed. Plaintiff was seriously injured when a forklift driven through a dark corridor struck him, and he then sued Swanson for negligence and under the ELL. Plaintiff's theory was that Swanson failed to provide or require safer conditions such as lighting, marked walkways, visibility gear, and alarms.

Issue

Does ORS 63.165(1) immunize an LLC's member-manager from personal liability for its own negligent management decisions, or only from vicarious liability for the LLC's obligations? If not immune under ORS 63.165(1), was the summary judgment record sufficient to support plaintiff's negligence and ELL claims, and did pre-2013 ORS 656.018 extend workers' compensation exclusive-remedy immunity to LLC members?

Rule

ORS 63.165(1) immunizes LLC members and managers only from vicarious liability for the debts, obligations, and liabilities of the LLC; it does not immunize them from personal liability for their own actionable acts or omissions. When an LLC member-manager acts in a corporate-style supervisory role, Oregon applies the corporate officer standard: liability for subordinate torts requires knowledge of the tortious conditions or participation in creating them. Under the ELL, liability may be imposed on a person or entity that retains the right to control the manner or method in which the risk-producing activity is performed. Before the 2013 amendment, ORS 656.018(3) did not extend exclusive-remedy immunity to LLC members.

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In Eugene, Oregon, Cascade Barrel Works, LLC operates a cooperage. Its sole member-manager, Alder Peak Holdings, requires the plant to use a specific floor-cleaning chemical even after Alder Peak's operations director receives internal reports that the chemical leaves a slick residue on walkways; an employee later slips and is injured.

If the employee sues Alder Peak personally for negligence, what is the strongest argument against dismissal based on ORS 63.165(1)?

Explanation. The majority held that ORS 63.165(1) protects LLC members and managers from vicarious liability for the LLC's debts, obligations, and liabilities, but not from personal liability for their own actionable conduct. Here, Alder Peak allegedly made its own unsafe management decision after receiving reports of danger, so the statute does not categorically bar the claim. (Derived from Cortez v. Nacco Material Handling Group (n.d.).)