Leon v. Diversified Concrete, LLC et al
Filing
79
ORDER & REASONS. It is ORDERED that Defendants Ryan and Bradley Rogers' 75 Motion for Summary Judgment is GRANTED. Plaintiffs' claims under Louisiana Revised Statute 12:1163 against Defendants Ryan Rogers and Bradley Rogers, personally, are hereby DISMISSED WITH PREJUDICE. Signed by Judge Carl Barbier. (gec)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PEDRO LEON
CIVIL ACTION
VERSUS
NO: 15-6301
DIVERSIFIED CONCRETE,
LLC, ET AL.
SECTION: “J”(5)
ORDER & REASONS
Before the Court is Defendants Ryan and Bradley Rogers’
(Defendants) Motion for Summary Judgment (R. Doc. 75) and a reply
thereto
filed
by
Plaintiff,
Pedro
Leon
(R.
Doc.
76).
Having
considered the motion and legal memoranda, the record, and the
applicable law, the Court finds that the motion should be GRANTED.
FACTS AND PROCEDURAL BACKGROUND
Plaintiff brought this collective action suit under the Fair
Labor Standards Act (FLSA) against his former employer Diversified
Concrete,
LLC
(Diversified),
and
Diversified’s
members,
Ryan
Rogers and Bradly Rogers. Plaintiff alleges that he and other
laborers were not paid overtime wages for time worked in excess of
forty hours per week. (R. Doc. 1.) On May 5, 2016, Plaintiff
amended his complaint to add violations of Louisiana Revised
Statute § 23:1163. (R. Doc. 30.) Plaintiff alleges that Defendants
unlawfully deducted workers’ compensation premiums from his and
other laborers’ paychecks. Id. On May 13, 2016, this Court granted
Plaintiff’s
Motion
for
Conditional
1
Class
Certification
for
Plaintiff’s proposed FLSA class. (R. Doc. 33.) On October 26, 2016,
this
Court
granted
Plaintiff’s
motion
to
certify
a
class
of
employees from whom Defendants allegedly deducted wages to pay
toward workers’ compensation premiums. (R. Doc. 74.) Defendants
now ask this Court to dismiss Defendants Ryan Rogers and Bradley
Rogers from this lawsuit. (R. Doc. 75.) In short, Defendants argue
that, as members of Diversified Concrete, LLC, Ryan and Bradley
Rogers
cannot
be
held
personally
liable
for
Diversified’s
violations of Louisiana Revised Statute § 23:1163. Id. Defendants’
Motion for Summary Judgment is now before the Court on the briefs
and without oral argument.
PARTIES’ ARGUMENTS
1.
Ryan
Defendants’ Arguments
and
Bradley
Rogers
argue
that
they
cannot
be
held
personally liable for any alleged violations of Louisiana Revised
Statute § 23:1163, because Diversified Concrete, LLC is a separate
and distinct juridical person from its members. (R. Doc. 75-2 at
4.) Defendants argue that the company, not Ryan and Bradley Rogers
personally, entered into agreements with its workers to provide
labor to complete construction projects. Id. Further, Defendants
argue that the company, not Ryan and Bradley Rogers personally,
deducted wages to pay toward workers’ compensation premiums. Thus,
Defendants argue that they cannot be held personally liable for
the debts, obligations, or liabilities of the company. Id. at 5.
2
For these reasons, Defendants argue that Plaintiffs’ claims under
Louisiana Revised Statute § 23:1163 against Ryan and Bradley
Rogers, personally, should be dismissed. Id.
2.
Plaintiffs’ Arguments
Plaintiff argues that the plain wording of Louisiana Revised
Statute
§
23:1163
“contemplates
and
provides
for
personal
liability.” (R. Doc. 76 at 1.) Plaintiff further argues that the
deposition
testimony
of
Diversified’s
employee,
Kelli
Jakes,
proves that Ryan and Bradley Rogers made the decision to deduct
workers’ compensation premiums from their hourly employees’ pay.
Id. at 2. Further, Plaintiff argues that Louisiana jurisprudence
does not shield owners of companies who improperly deduct workers’
compensation
because
premiums
Bradley
from
Rogers
individual
personally
liability.
supervised
Id.
Finally,
Diversified’s
employees during construction projects, set their work schedules,
and handled their timesheets, Plaintiff argues that Defendant’s
motion for summary judgment should be denied.
LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R.
Civ. P. 56(c)); Little v. Liquid Air Corp., 37 F.3d 1069, 1075
3
(5th Cir. 1994). When assessing whether a dispute as to any
material fact exists, a court considers “all of the evidence in
the record but refrains from making credibility determinations or
weighing
the
evidence.”
Delta
&
Pine
Land
Co.
v.
Nationwide
Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All
reasonable inferences are drawn in favor of the nonmoving party,
but
a
party
cannot
defeat
summary
judgment
with
conclusory
allegations or unsubstantiated assertions. Little, 37 F.3d at
1075. A court ultimately must be satisfied that “a reasonable jury
could not return a verdict for the nonmoving party.” Delta, 530
F.3d at 399.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir.
1991). The nonmoving party can then defeat the motion by either
countering with sufficient evidence of its own, or “showing that
the moving party’s evidence is so sheer that it may not persuade
the reasonable fact-finder to return a verdict in favor of the
moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in the
4
record is insufficient with respect to an essential element of the
nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden
then shifts to the nonmoving party, who must, by submitting or
referring to evidence, set out specific facts showing that a
genuine issue exists. See id. at 324. The nonmovant may not rest
upon the pleadings, but must identify specific facts that establish
a genuine issue for trial. See, e.g., id. at 325; Little, 37 F.3d
at 1075.
DISCUSSION
The Court shall first address whether the plain language of
Louisiana Revised Statute § 23:1163 contemplates and provides for
personal liability for members of a limited liability company. The
fundamental
question
in
all
cases
involving
statutory
interpretation is legislative intent. City of DeQuincy v. Henry,
2010-0070, p. 3 (La. 3/15/11); 62 So. 3d 43, 46. Further, the
interpretation of any statutory provision begins with the language
of the statute itself. In re Succession of Faget, 10-0188, p. 8
(La. 11/30/10); 53 So. 3d 414, 420. The Louisiana Supreme Court
dictates that “when a provision is clear and unambiguous and its
application does not lead to absurd consequences, its language
must be given effect, and its provisions must be construed so as
to give effect to the purpose indicated by a fair interpretation
of the language used.” Arabie v. CITGO Petroleum Corp., 2010-2605,
p. 5 (La. 3/13/12); 89 So. 3d 307, 312-13 (quoting McGlothlin v.
5
Christus St. Patrick Hosp., 2010-2775 (La. 7/1/2011); 65 So. 3d
1218, 1228-29 (citations omitted)). Unequivocal provisions are not
subject to judicial construction and should be applied by giving
words their generally understood meaning. Id.
Louisiana Revised Statute § 23:1163 provides:
A. It shall be unlawful for any employer, or his agent
or representative, to collect from any of his employees
directly or indirectly either by way of deduction from
the
employee’s
wages,
salary,
compensation,
or
otherwise, any amount whatever, or to demand, request,
or accept any amount from any employee, either for the
purpose of paying the premium in whole or in part on any
liability or compensation insurance of any kind whatever
on behalf of any employee or to reimburse such employer
in whole or in part for any premium on any insurance
against any liability whatever to any employee or for
the purpose of the employer carrying any such insurance
for the employer’s own account, or to demand or request
of any employee to make any payment or contribution for
any such purpose to any other person.
B. Nothing herein shall be construed to prevent any
employer from carrying his own insurance towards his own
employees; nothing herein shall apply to an employer
qualified under the laws of this state to engage in the
liability insurance business. In addition, nothing
herein shall be construed to prevent an independent
contractor who is a sole proprietor and who has elected
by written agreement not to be covered by the provisions
of this Chapter in accordance with R.S. 23:1035 from
entering into a contract with his principal pursuant to
which the independent contractor is responsible for
securing insurance or self-insurance for the benefits
provided pursuant to this Chapter or to reduce payments
to the independent contractor for coverage of the
independent contractor or his employees pursuant to a
contract, nor shall it be a violation of this Section if
a principal has agreed to provide workers’ compensation
insurance to all contractors working under a contract
with the principal and for the cost of this coverage to
be a consideration in the contract between the principal
and the contractors.
6
C. Whoever violates any provision of this Section shall
be fined not more than five hundred dollars, or
imprisoned with or without hard labor for not more than
one year, or both.
D. In addition to the criminal penalties provided for in
Subsection C of this Section, any person violating the
provisions of this Section shall be assessed civil
penalties by the workers’ compensation judge of not less
than five hundred dollars and not more than five thousand
dollars payable to the employee and reasonable attorney
fees. Restitution shall be ordered up to the amount
collected from the employee’s wages, salary or other
compensation. The award of penalties, attorney fees, and
restitution shall have the same force and effect and may
be satisfied as a judgment of a district court.
As explained in this Court’s previous Order and Reasons (R. Doc.
74), prior to June 24, 2004, § 23:1163 was only a criminal statute.
See 2004 La. Sess. Law Serv. Act 416 (H.B. 821); see also Chevalier
v. L.H. Bossier, Inc., No. 95-2075, pp. 5-6 (La. 7/2/96); 676 So.2d
1072, 1076. In Chevalier, the Louisiana Supreme Court held that a
violation of § 23:1163, “a criminal provision containing a clear
and explicit penalty provision, [provided] no basis, in and of
itself, for recovery by claimant of compensation benefits [for the
defendant’s] violation of the statute.” Id. However, in 2004, §
23:1163 was amended and section (D) was added to authorize civil
penalties and restitution for the unlawful collection of workers’
compensation premiums from employees. The plain language of §
23:1163 (D) makes clear that § 23:1163(A)-(C) are strictly criminal
7
provisions. 1 Because this is a civil suit, the pertinent language
for this Court to interpret is § 23:1163 (D) which provides that
“any person violating the provisions of [§ 23:1163] shall be
assessed civil penalties. . . .” La. Rev. Stat. § 23:1163(D)
(emphasis added).
“[A]s a general proposition, the law considers a [limited
liability
company]
and
the
member(s)
comprising
the
[limited
liability company], as being wholly separate persons.” Oega v.
Merritt, 2013-1085, p. 6 (La. 12/10/13); 130 So. 3d 888, 894-95
(emphasis added) (citing La. Civ. Code art. 24). The liability of
a limited liability company’s members and managers is governed by
Louisiana Revised Statute § 12:1320, which provides:
. . . (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. . . . (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
1
§ 23:1163(A) provides that it shall be “unlawful” to deduct from employees’
wages for workers’ compensation premiums. Further, § 23:1163(C) provides that
“whoever violates any provision of this Section shall be fined not more than
five hundred dollars, or imprisoned with or without hard labor for not more
than one year, or both.” La. Rev. Stat. § 23:1163(C) (emphasis added). Thus,
section (C) speaks only of criminal penalties. Finally, the addition of §
23:1163(D) in 2004 clarified that § 23:1163(C) is a criminal penalty provision,
and that section (D) is the relevant provision for civil penalties in a civil
suit. La. Rev. Stat. § 23:1163(D) (“In addition to the criminal penalties
provided for in Subsection C of this Section . . .”); see also Young v. Gulf
Coast Carpets, 2004-854, p. 8 (La. App. 3d Cir. 11/17/04); 888 So.2d 1074, 1081
(“[A plaintiff’s] remedy for the wrongful deduction of workers’ compensation
benefits lies in a separate non-workers’ compensation civil suit.”).
8
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. Thus, in general, members of a limited
liability company are not liable for the debts, obligations, or
liabilities of the limited liability company. La. Rev. Stat. §
12:1320(B). However, § 12:1320(D) is the exception to the general
protection afforded to members of a limited liability company in
instances of fraud, breach of a professional duty, or negligent or
wrongful acts. La. Rev. Stat. § 12:1320(D); Oega, 130 So. 3d at
897. Plaintiff has not argued, nor does the Court find, that the
fraud
exception
Specifically,
to
limited
Plaintiff
liability
has
not
applies
argued
in
that
this
case.
Defendants
misrepresented or suppressed the truth with the intention of either
obtaining an unjust advantage or to cause a loss or inconvenience.
See La. Civ. Code art. 1953. Moreover, Plaintiff has not argued,
nor does the Court find, that the professional duty exception
applies in this case. See Oega, 130 So. 3d at 898-99 (listing
dental,
optometry,
accounting,
chiropractic,
psychology,
veterinary
nursing,
medicine,
and
architectural,
architectural
engineering professions as examples of professions subject to the
“professional
duty”
exception).
Thus,
if
the
“negligent
or
wrongful act” exception does not apply to impose personal liability
on Ryan and Bradley Rogers, Plaintiffs’ claims against them,
personally, must be dismissed.
9
The Louisiana Supreme Court developed a four-factor test to
determine whether a member of a limited liability company is
subject to personal liability under the “negligent or wrongful
act” exception. Id. at 900. The four factors include:
1) whether
a
member’s
conduct
could
be
fairly
characterized as a traditionally recognized tort;
2) whether
a
member’s
conduct
could
be
fairly
characterized as a crime, for which a natural person,
not a juridical person, could be held culpable;
3) whether the conduct at issue was required by, or was
in furtherance of, a contract between the claimant
and the LLC; and
4) whether the conduct at issue was done outside the
member’s capacity as a member.
Id. Courts are to “evaluate each situation on a case-by-case basis
and consider each of the four factors when determining whether the
general rule of limited liability must yield to the exception for
a members’ ‘negligent or wrongful act.’” Id. at 905.
The first factor is whether Ryan and Bradley Rogers’ conduct
can be fairly characterized as a traditionally recognized tort.
“[I]f a traditional tort has been committed against any cognizable
victim(s), that situation weighs in favor of the ‘negligent or
wrongful act’ exception and in favor of allowing the victim(s) to
recover against the individual tortfeasor(s).” Id. at 901. Oega
described
the
“oft-commented
example”
of
a
traditionally
recognized tort where a contractor commits a personal injury while
driving. Id.
at
905.
compensation
premiums
Deducting
is
vastly
10
wages
to
pay
different
toward
than
the
workers’
example
provided in Oega. 130 So. 3d. at 901. Accordingly, the Court finds
that
deducting
“traditionally
workers’
recognized
compensation
tort,”
and
premiums
that
this
is
not
factor
a
weighs
against a finding of personal liability.
The second factor is whether a member’s conduct could be
fairly characterized as a crime, for which a natural person, not
a juridical person, could be held culpable. Id. at 900-01. The
plain language of Louisiana Revised Statute § 23:1163(A) makes
clear that it is “unlawful for any employer or his agent or
representative” to collect from his employees’ wages to pay for
workers’
compensation
premiums.
La.
Rev.
Stat.
§
23:1163(A).
Accordingly, this factor weighs in favor of finding personal
liability. Oega, 130 So. 3d at 902.
The third factor is whether the member’s conduct was in
furtherance of a contract between the claimant and the limited
liability company. Id. at 904. The court in Oega made clear that
“if the reason a member is engaged in the conduct at issue is to
satisfy
a
contractual
obligation
of
the
[limited
liability
company], then the member should more likely qualify for the
protections of the general rule of limited liability in [Louisiana
Revised Statute § 12:1320(B)].” Id. at 904. It is clear that the
conduct
at
issue—deducting
wages
to
pay
towards
workers’
compensation premiums—was in furtherance of Diversified’s, not
Ryan and Bradley Rogers’ personal, obligation to provide workers
11
compensation benefits to its workers. Accordingly, this factor
weighs against a finding of personal liability. Id. at 904, 906.
The final factor is whether the conduct at issue was done
outside the member’s capacity as a member of the limited liability
company. Plaintiff argues that both Ryan and Bradley Rogers decided
to
deduct
workers’
compensation
premiums
from
their
hourly
employees’ pay. (R. Doc. 76 at 2.) Further, Plaintiff asserts that
“Bradley Rogers personally supervised Diversified employees in the
field, set their work schedules, and handled their timesheets.”
Id. Defendants argue that Ryan and Bradley Rogers never personally
collected money from Plaintiffs’, or any other workers’, pay.
Rather, the company “takes the money from the worker and pays the
premium. It is the company that is acting and it is the company,
and the company alone [,] that should owe whatever may be due for
violating the statute.” (R. Doc. 75-2 at 5.) In examining this
factor, the Louisiana Supreme Court explained:
The Civil Code suggests an example of when a person might
act outside the capacity of a member of an LLC and,
thereby, undertake a “personal duty,” the negligent or
wrongful breach of which could subject the member to
personal liability. For example, in a purely personal
capacity, a member might become a “mandatary” for the
claimant. See La. C.C. art. 2989 (“A mandate is a
contract by which a person, the principal, confers
authority on another person, the mandatary, to transact
one or more affairs for the principal.”). If a member
becomes a mandatary and breaches the member’s duties to
the principal, such a situation would weigh in favor of
finding that the member acted outside the capacity of an
LLC and, therefore, may be personally liable for the
breach. See La. C.C. art. 1757 (“Obligations . . . also
12
arise directly from the law, regardless of a declaration
of will, in instances such as wrongful acts [and] the
management of the affairs of another. . . . ”).
More typical than a member becoming a mandatary for the
claimant, according to commentators, is the situation in
which an individual fails to act “inside” the structure
of the business entity when confecting a contract. “[I]n
a small business setting . . . it is fairly common for
shareholders to act in representative capacities on
behalf of their closely-held corporations (as officers,
agents or employees) without formally disclosing to the
third party that [it] is this capacity in which they are
acting.” [] Consequently, the individual is considered
“an undisclosed agent personally liable for the
contracts that he negotiates on his principal's behalf.”
Id.; see also Id., § 44.06 (reasoning the same rule
should apply to members of an LLC). While this situation
directly implicates contract law, it is nevertheless an
example of acting “outside” the structure of an LLC.
Because this situation implicates the law of mandate in
the Civil Code and because of the prevalence in the
jurisprudence of the distinction of acting “inside” or
“outside” of the LLC, we adopt the “inside/outside”
inquiry as one of the factors to be considered.
Oega, 130 So. 3d at 904-05 (internal citations omitted).
The deposition testimony of Ms. Kelli Jakes reveals that the
decision
to
deduct
workers’
wages
to
pay
toward
workers’
compensation premiums was made by Ryan and Bradley Rogers in their
official capacity as members of the company. See (R. Doc. 76-1 at
4.) Specifically, Ms. Jakes testified that the decision was a group
decision that included Ms. Jakes, and was based on the belief that
deducting
such
premiums
was
“the
normal
business
operating
practice.” Id. at 4. In other words, the members of the company,
acting “inside the structure of the business entity,” made a
13
business decision to deduct these premiums. Accordingly, this
factor weighs against finding personal liability.
In conclusion, the Court finds that Plaintiffs’ § 23:1163
claims against Defendants Ryan and Bradley Rogers, personally,
should be dismissed. The Court has not found, nor have the parties
cited, a single case where a member of a limited liability company
was held personally liable under Louisiana Revised Statute §
23:1163, and the facts of this case do not warrant a finding of
personal liability. Ryan and Bradley Rogers were acting in their
official capacity as members of Diversified Concrete, LLC when
they decided to deduct wages to pay toward workers’ compensation
premiums.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Defendants Ryan and Bradley Rogers’
Motion for Summary Judgment (R. Doc. 75) is GRANTED. Plaintiffs’
claims
under
Louisiana
Revised
Statute
§
12:1163
against
Defendants Ryan Rogers and Bradley Rogers, personally, are hereby
DISMISSED WITH PREJUDICE.
New Orleans, Louisiana this 5th day of December, 2016.
____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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