Maryland Businesses Take Note: The "Limited Liability" in a Limited Liability Company Is Not Absolute, and Is Getting Less Limited

Contrary to popular belief, a limited liability company (LLC) does not offer absolute protection.  As with corporate officers and agents, members and managers of LLCs can be personally liable for wrongful acts they commit, even when acting on behalf of the LLC.  The protection a LLC does offer was further diminished by Maryland’s highest court when it decided that a member of a LLC may be personally liable for lead paint injuries suffered by children who occupied a dwelling that the LLC owned.

The good news, if there is any in the case, is that the holding appears limited to the specific context:  housing in Baltimore City.  To be liable, the individual must have a duty as an “owner” of the dwelling and personally participate in the action, or inaction, causing the injury, in this case failing to remediate lead paint.

The bad news here is that the LLC, and the manager held liable as an individual, had no intention of allowing people to occupy the dwelling and, in fact, took action to prevent people from living in the house.  The individuals living in the dwelling, holdover occupants following a tax sale of the property, were evicted.  The court, however, held that the LLC, as the new owner of the property, and its member, had a duty to remediate lead paint even though the occupants of the dwelling were not lawful occupants.

Members of LLCs that actively manage the operations of the LLC must be vigilant to ensure that they do not commit any injurious actions, or omit required actions, on behalf of the LLC.  Failure to remediate lead paint  has been added to the list of exceptions to limited liability, but no one knows what the next cause of action will be and how that will limit the LLC protection further.

If you have any questions, please contact Lee Lundy via email or by telephone at 410.752.9705.

Source: Allen v. Dackman, Court of Appeals of Maryland.

This alert has been prepared by Tydings for informational purposes only and does not constitute legal advice.