Personal Liability of an LLC Member – Can an Informal Contract Create Liability?

It seems intuitive that people have an obligation to avoid potentially harmful conditions that are open and obvious. Nevertheless, treatment of open and obvious conditions in Louisiana law has proved tricky because many cases did not apply a uniform analytical framework. In Farrell v. Circle K Stores, Inc. and the City of Pineville, the Louisiana Supreme Court recently offered needed guidance on the appropriate analysis for open and obvious conditions.

The plaintiff stopped at a gas station and decided to walk her dog in a nearby grassy area. To get to the grassy area, Farrell had to cross a pool of water that was “approximately the length of a tractor-trailer.” Farrell attempted to jump across the narrowest part of the pool, but slipped and fell. She sued for damages arising from her injuries. The defendants moved for summary judgment on the grounds that the condition was open and obvious. The trial court and court of appeal denied the defendants’ motion. However, the Louisiana Supreme Court reviewed the matter and reversed.

In finding that the condition was open and obvious, the court began its analysis by outlining the elements that a plaintiff must establish to recover for damage arising from a defect under Louisiana Civil Code articles 2315, 2316, 2317 and 2317.1:

• That the defendant owed plaintiff a duty to conform its conduct to a specific standard;
• That the defendant breached the duty owed;
• That the defendant’s conduct was the cause-in-fact of the plaintiff’s injuries;
• That the defendant’s conduct was the legal cause of the plaintiff’s injuries; and,
• That the plaintiff suffered damages.

The court also highlighted the requirement under La. R.S. 2317.1 that plaintiff show the defendant knew or should have known of the condition before the injury occurred.

The court noted that some courts had assessed whether a condition was open and obvious in the context of whether the defendant owed the plaintiff a duty, while other courts had assessed whether a condition was open and obvious in the context of whether the defendant had breached the duty that was owed. In Farrell, the court found a duty was owed under the code articles referenced above. It clarified that whether a condition was open and obvious should be considered during analysis of whether the duty was breached, pursuant to Louisiana’s “risk/utility” test. This test requires consideration of whether the condition presented an unreasonable risk of harm, which considers whether the condition had any social utility; the likelihood and magnitude of harm the condition presented; the cost of preventing the harm; and the nature of the plaintiff’s conduct, including whether plaintiff’s conduct was socially useful or inherently dangerous.

Specifically, whether a condition is open and obvious should be considered in determining the likelihood of harm and magnitude of harm to an objectively reasonable person. The court further advised that the specific nature of the condition should be considered, such as its location and size. In contrast, a plaintiff’s particular and subjective knowledge of the condition is not relevant in determining whether defendant has breached a duty.

The Farrell court applied this analysis to the facts. It found that the pool served no useful purpose. No evidence existed regarding the cost to eliminate the risk. With respect to Farrell’s conduct, the court found that walking a dog was not dangerous by nature and may have an important social function, but this did not weigh heavily in the analysis. However, with respect to whether the condition as open and obvious, the court considered the location of the pool at the edge of the parking lot, the size of the pool, and the fact that it was apparent to all who encountered it. Thus, the condition was open and obvious, and the likelihood of and magnitude of the harm was minimal.

The court concluded that these factors collectively showed the condition was not unreasonably dangerous. The defendants did not breach their duty to plaintiff, and summary judgment should have issued for the defendants. In so holding, the Supreme Court provided clarifying guidance on analysis of open and obvious conditions under Louisiana law.

Case Reference:

Farrell v. Circle K Stores, Inc. and the City of Pineville, 2022-000849 (La. 3/17/23), --- So.3d ----, 2023 WL 2550503.

If you are a property owner, stop and think about the “what ifs” before you enter into a lease with a property manager or lessee. For example, what if an invitee of the property that you own is hurt while on and/or because of a condition on the property? Who is responsible?

A property owner may be able to transfer its potential liability to a property manager or lessee of the property if the lease contains an indemnification provision. However, not all indemnification provisions are enforceable, and these critical provisions are often litigated.

The Eastern District Court of Louisiana recently enforced an indemnification provision, granting summary judgment to a landowner who sought indemnification from its property lessee in Avila v. Village Mart, LLC, Civ. A. No. 20-1850, 2021 WL 4439579 (E.D. La. 9/28/21). In the case, a shopping center leased retail space to a men’s store. Before the store opened, a painter was injured when he fell from a ladder. The owner of the shopping center argued that the lessee owed a defense. It argued indemnity applied because the plaintiffs’ claims arose out of the lessee’s buildout construction, over which the owner did not have any care, custody, or control.

In response, the lessee argued that the owner was not entitled to indemnification because the plaintiffs’ claims did not “arise out of or were connected with Tenant’s use, occupancy, management or control of the Leased Premises.” The lessee claimed that it was not using, occupying, managing, or controlling the leased space because the only permitted use of the space was to sell menswear, and the space was not being used for this purpose at the time of the accident.

Louisiana courts often apply a “but for” causation test to such “arising out of” language in indemnity provisions. Avila, 2021 WL 4439579, at *5, citing Kan. City S. Ry. Co. v. Pilgrim’s Pride Corp., No. 06-03, 2010 WL 1293340, at *6 (W.D. La. Mar. 29, 2010), and Perkins v. Rubicon, Inc., 563 So.2d 258, 259-60 (La. 1990). The court observed the lessee’s arguments contradicted language in the lease that allowed the lessee to use and occupy the store before it opened to the public. The lease also explained that the lessee was responsible for certain construction work and identified specific dates to begin work and to open the store. Thus, the lease contemplated use and occupancy before the store was open to the public. The court found that the lessee’s possession of the space and its construction obligations under the lease established its use and occupancy of the space. The court stated:

Given the broad language in the indemnity agreement – ‘arising out of or connected with’ – [the plaintiffs’] injuries, resulting from his work as a subcontractor painting the premises leased by [the retail space lessee,] are connected to [its] use and occupancy of the premises. … Because [the retail space lessee] was in possession of the space, and had assumed responsibility for the buildout and for contractors and subcontractors working on the buildout, the Court finds that the plaintiffs’ liability theories fall within the scope of the indemnity provision in the lease. Avila, 2021 WL 4439579, at *6.

The enforceability of indemnity provisions such as the one examined in Avila will continue to be litigated. In the meantime, Avila reminds us of the importance of sound indemnity language to anticipate the “what ifs.”

By Brian Butler

Many do not realize modern vehicles are always ready to record critical driving information. As with airplanes, most passenger vehicles are now equipped with Event Data Recorders (EDR), or "Black Boxes." This information may be critical after an accident to show what happened, and who was at fault.

EDRs may record pre-event data for five seconds before and one second after an accident, possibly including vehicle speed, engine speed, percent throttle, change in velocity, and whether the brakes were applied. The make and model of the vehicle will determine what data is available. If you want this data, you must act quickly because it will be “overwritten” at some point if the vehicle continues in use.

It is also important to retain a competent expert to download the data. In Laborde v. Shelter Mutual Insurance Co., 82 So. 3^rd 1237 (La. 3/9/2011), the trial court excluded the printout of data downloaded from a Black Box because of the boxes "chain of custody" and the method the information downloaded. It is important that your legal team knows how to obtain and preserve this evidence.

Data from Black Boxes can be useful in many ways. In some cases, it may help to prove that the accident involved a low impact or to show that no brakes were applied. In other cases, it may harm your position, but the data is almost always relevant. There are costs in downloading and interpreting the data. But in the right case, the secrets kept in the Black Box may be the only way to reveal the truth.

Brian has been doing defense work for the last 28 years. He has handled all types of defense matters over his career, but in recent years his practice has been focused in serious injury or damage cases and has worked extensively with experts involving complex cases, fire cases, and forensic work.