United States District Court, W.D. Louisiana, Alexandria Division
DEE D. DRELL, Chief District Judge.
Before the Court is Plaintiffs' "Motion To Reinstate December 20, 2011 Judgment [Doc. No. 182], and Convert November 26, 2014 Judgment on Liability [Doc. No. 357] to a Final Money Judgment." (Doc. 359). For the following reasons, Plaintiffs' motion is DENIED in part and GRANTED in part.
The motion before the Court is part of difficult litigation that has been ongoing since 2009. The facts of the case are detailed in various prior rulings (see, e.g., Doc. 82), so we will not discuss them exhaustively here. Essentially, this case arises out of a failed real estate investment venture. Plaintiffs attempted to purchase ownership interests in a limited liability company (LLC) called SaiNath, L.L.C. (SaiNath), which was to own and operate the Sai Hotel and Convention Center in Alexandria, Louisiana. Although Plaintiffs transferred funds in order to accomplish this end, SaiNath never received ownership of the hotel. Instead, another LLC, namely K.A.P. Enterprises, L.L.C. (K.A.P.), wholly owned by Dr. Arun Karsan and Versha Patel Karsan (the Karsans), maintained ownership. The Karsans never transferred the property. The money in SaiNath's account was used by the Karsans not to purchase the Hotel and Convention Center, but to pay for its mortgage and upkeep. Moreover, the Plaintiffs were never made record members of SaiNath - the Karsans were and are the sole members and managers of that LLC. We previously found that Plaintiffs were entitled to the return of the full amount of the money they invested in SaiNath, but because there are multiple defendants, there was question as to whether Versha Patel Karsan, Arun Karsan, K.A.P., and SaiNath were all liable. We ultimately held that they were liable individually, jointly, and in solido in our ruling on December 20, 2011. (Doc. 181).
In July 2014, the United States Court of Appeals for the Fifth Circuit remanded the case for consideration of one part of our holding on liability. Although the Fifth Circuit upheld our ruling that K.A.P. and SaiNath were liable to the Plaintiffs, it remanded our decision that the Karsans were also personally liable so that we could consider the application of the Louisiana Supreme Court's recent decision in Ogea v. Merritt, 130 So.3d 888 (La. 2013), to that determination. Plaintiffs' motion seeks, in part, for us to "reinstate" our conclusions in that remanded ruling. However, because the case was remanded to us, plaintiffs' request is somewhat inappropriately made. The more appropriate approach is to issue a revised ruling. Plaintiffs also seek conversion of our December 2014 Judgment on liability (Doc. 357) into a final money judgment. That request, as particularized, is also inappropriate, as we will explain. Although "conversion" is inappropriate, the issuance of a correct money judgment is not. Thus the motion will be denied in part and granted in part.
II. Law and Analysis
A. Application of Ogea
In Ogea v. Merritt, the Louisiana Supreme Court considered the applicability of Louisiana Revised Statute § 12:1320 in determining when a member of an LLC is personally liable to third parties. 130 So.3d 888. That statute reads, in full:
A. The liability of members, managers, employees, or agents, as such, of a limited liability company organized and existing under this Chapter shall at all times be determined solely and exclusively by the provisions of this Chapter.
B. Except as otherwise specifically set forth in this Chapter, no member, manager, employee, or agent of a limited liability company is liable in such capacity for a debt, obligation, or liability of the limited liability company.
C. A member, manager, employee, or agent of a limited liability company is not a proper party to a proceeding by or against a limited liability company, except when the object is to enforce such a person's rights against or liability to the limited liability company.
D. Nothing in this Chapter shall be construed as being in derogation of any rights which any person may by law have against a member, manager, employee, or agent of a limited liability company because of any fraud practiced upon him, because of any breach of professional duty or other negligent or wrongful act by such person, or in derogation of any right which the limited liability company may have against any such person because of any fraud practiced upon it by him.
La. Rev. Stat. § 12:1320. It is subsection (D) of the statute that provides for exceptions to the statutory rule of limited liability for members of LLCs. That subsection provides for exceptions when a member of an LLC perpetrates a fraud, breaches a professional duty, or commits a "negligent or wrongful act." Significantly, although subsection (A) places liability considerations under the statute and suggests exclusivity of remedy, subsection (D) is an effective savings clause for existing remedies (i.e., jurisprudential remedies) in cases where fraud is found and the jurisprudence otherwise applies.
In Ogea, the Supreme Court clarified that the negligent or wrongful act exception should be ...