I had a court appearance this morning but had to wait for several other cases to go before the judge first. One case in particular caught my attention. As best I understand it, a landlord and tenant had a dispute over a commercial lease. The parties had made promises to each other to extend the lease, but had never actually done so. Eventually, the landlord evicted the tenant, who filed suit.
The tenant was a bar that had live music and held big events. The tenant also made significant improvements to the building, which were never reimbursed. The tenant’s suit was based on the fact that he had relied on the landlord’s promise to extend the lease, and he lost out on income because of the broken promise. The parties were in front of the judge today to, first, argue whether or not the tenant had brought his suit within the statute of limitations (in legal parlance: whether or not the tenant’s claim had prescribed)and, second, whether the landlord should personally be named in the suit.
Both parties operated as Louisiana Limited Liability Companies. Both were small, closely held businesses, which were probably only owned by one or two people. The landlord asked the judge to strike his name personally from the pleadings, arguing that his LLC was the one who was liable, not him personally. In response, the tenant argued that the landlord had made several representations and had referred to the company by his own name several times, and therefore should be at least partially personally liable.
The judge granted the tenant’s motion, and ordered that his name be removed from the proceedings. This is a win for the landlord, because now only the LLC is involved in the litigation, and the business owner is no longer personally involved. Even though that could change down the line if discovery reveals that the business owner was commingling or otherwise ignoring corporate formalities, he’s at least safe for the moment.
Moral of the story? When you’re doing business, make sure you’re doing business as your business, not in your personal name.