Kaycee Land and Livestock v. Flahive

Supreme Court of Wyoming · Corporations

CorporationsLimited Liability CompaniesPiercing the VeilLLClimited liabilitypiercing the veilcorporate veilequity

Facts

Flahive Oil & Gas is a Wyoming limited liability company that currently has no assets. Kaycee Land and Livestock contracted with Flahive Oil & Gas LLC to allow use of the surface of its real property, and Kaycee alleges the LLC caused environmental contamination to that property. Roger Flahive was the managing member of the LLC at all relevant times. Kaycee seeks to pierce the LLC veil and hold Roger Flahive individually liable, and there is no allegation of fraud.

Issue

In the absence of fraud, is piercing the veil or disregarding the entity of a Wyoming limited liability company an available remedy under the Wyoming Limited Liability Company Act, in the same general way courts may pierce a corporate veil?

Rule

Under Wyoming law, the equitable remedy of piercing the veil is available against a limited liability company under the Wyoming Limited Liability Company Act. Fraud is not a prerequisite; the doctrine may apply when members or managers fail to treat the LLC as a separate entity and adherence to the entity fiction would result in injustice, fundamental unfairness, or inequity, though the inquiry is fact intensive and LLC-specific factors may differ from corporate ones.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Casper, Wyoming, Red Bluff Hauling LLC signed a contract to remove debris from a ranch owned by Elena Mora. The LLC has no remaining assets, and Elena alleges its sole member, Trent Wilcox, routinely paid his home mortgage from the LLC account and treated company equipment as his personal property; she does not allege fraud.

Under Wyoming law, which is the most accurate statement about Elena's attempt to hold Trent personally liable?

Explanation. The majority held that Wyoming courts may apply the equitable remedy of veil piercing to LLCs and that fraud is not a prerequisite. The key inquiry is whether members failed to treat the LLC as a separate entity and whether adherence to the entity fiction would result in injustice, fundamental unfairness, or inequity. Corporate-style annual meeting requirements are not dispositive because LLC formalities differ. (Derived from Kaycee Land and Livestock v. Flahive (n.d.).)